ore than 100,000 consumers a day are enrolling directly with recurring billers to manage their accounts online. Unfortunately, the number of customers who also agree to "pay" electronically significantly lags behind the number who enroll to "view" their accounts online. This trend points to a new market opportunity for credit and debit card issuers because billers need to register these consumers for "electronic" payment to achieve the full benefit of completely servicing customers electronically.

Electronic payment registration is first required to reach what is known in the billing industry as PTO, or paper turn-off. Billers can't turn off the paper statement without first gaining the customer's agreement to pay electronically. The reason is because it would create a costly exception item if the customer sent in a paper check without a preciously printed remittance stub with Optical Character Recognition (OCR).

Another important reason for gaining the customer's commitment to electronic payment is that active, regular use of online account management (OAM) is virtually guaranteed if the customer also commits to making an electronic payment. This "active use" of OAM translates into even greater benefits from reducing contact center calls and increasing customer self-care, dynamic online cross-sell and personalized affiliate marketing.

Nearly all purchases made through the Internet are consummated with card-based payments. This undisputed consumer preference is something that billers are taking advantage of to increase the number of OAM customers who agree to also pay electronically. Payment follows the bill and, because card-based methods dominate purchases on the Internet, billers are now considering or reconsidering the acceptance of credit and debit cards.

Accepting card payments streamlines electronic payment registration processes by simplifying the input request to nothing more than the card number and expiration date, a process that nearly all Internet users have familiarity with and have done online. This is much simpler than prompting a consumer for the routing and transit number that appears in the Magnetic Ink Character Recognition (MICR) line at the bottom of a paper check as well as an account number that may be combined with a check number and the like.

Card-based input is fast, familiar and easier for consumers than MICR line input. In fact, we have worked with billers who now report a significant number of Automated Clearing House (ACH) rejects because consumers are inputting their "check card" numbers as their demand deposit account (DDA) numbers.

Other benefits that accrue to people who use and accept card-based payments for recurring bills:

• Billers get improved cash flow since e-payments typically post to accounts faster than other forms of payment.

• Bank card issuers earn interchange revenue from each card transaction accepted by a biller.

• Card issuers build a loyal customer base and increase card usage.

• All parties avoid the cumbersome and expensive paper trail of checks (i.e., from the consumer to the biller to the Fed to the bank back to the consumer). This can decrease cost per payment process by more than 50%.

With more than 16 billion transactions valued at more than $1.3 trillion, recurring bill payments represent a huge, new market opportunity to increase spending for credit and debit card issuers, merchant acquirers and Independent Sales Organizations (ISOs).

The combination of changing consumer preferences, renewed biller consideration, increased competitive effort, card association promotion, exponential growth in biller-direct OAM and other market forces point to a unique opportunity for the credit and debit card players to refine their positioning and develop a new value proposition for using and/or accepting cards for all of the players in the recurring-bill market.

In our work with issuers, we have seen increases in gross revenue in at least two principal categories - Increased Card Spending and Reduced Churn - although there are many other tangible and intangible benefits that come from linking an automatic recurring bill payment to a card account.

For the top six card issuers in the U.S. alone, we estimate that there is at least $1.2 to $2.6 billion in new net gross revenue potential from just these two areas. However, this new revenue potential hinges on developing a new marketing strategy, organizational structure and coordinated sales plan that leverages the combined efforts of a bank's treasury, cash management, lockbox and commercial bank services with card-based merchant and consumer services as well as retail and home-banking functions.

Most banks have clear, distinct boundaries; their management and organizational structures separate these departments into disparate functional silos. One vivid example is home-banking. Not a single home-banking service in the U.S. offers customers the option to pay their bills with a credit or debit card. Customers can only access this payment option directly from billers accepting card-based payments.

Our experience shows that using an independent third-party facilitator is required to harness the combined synergism across these units. With more than 100,000 customers activating OAM daily, speed to market and swiftly executing a coordinated, cross-functional marketing plan is required to lock in this transaction base in advance of your nonbank competition.

Richard K. Crone is Vice President with the payments strategy firm Dove Consulting. He can be reached at 650-592-4006 or rcrone@consultdove.com