Epayment could hit bank profits

Electronic billing and payment systems are threatening retail bank profits, according to a report by research firm, Killen & Associates.

The study found that the global volume of repetitive bills presented by telcos or utility companies to consumers electronically will reach 12 per cent of the worldwide total before 2000. This will cut down on the volume of consumers and small businesses using cheque payment methods which, the research firm claims, accounts for up to 50 per cent of bank profits.

Bob Goodwin, senior vice president at Killen & Associates, said: "If more and more consumers pay their bills directly to the telephone company, the banks will be less involved in the process and will lose their brand names. Portal companies like AOL are now taking payment for telephone calls rather than going through the banks."

The report covers banks in Europe and the US but Goodwin admitted that banks in some European countries are less likely to be affected. "France and Germany don't have a particularly high cheque circulation, and they are cleared quickly, so they stand to lose less. The UK still has quite a high usage of cheques," he said.

But UK banks denied they will lose out. A spokesman for the Royal Bank of Scotland said: "Electronic payment is cheaper per transaction than cheques." And a spokesman for Barclays bank said: "It is a fallacy that we make money through the cheque clearing process. Cheque processing is more expensive than electronic payment systems - it's not something we make money from at all. And the use of cheques has been declining for many years now."

He added: "We welcome anything that speeds up the process for the customer - we were among the first to introduce direct debit cards, PC banking and online banking."