by Jim Salters
Expedited Bill Payment Heating Up for Banks
For years, bank-offered bill pay has been a net cost to banks. However,
banks and their service providers have been increasingly looking for ways to
shift those payments from a net cost, to a source of revenue.
Generally speaking, there are two ways to do this:
- Shift ACH and paper-check-based payments to credit, debit, and prepaid
cards (for which billers pay acceptance fees)
- Offer expedited/emergency payments as a for-fee service (for which
consumers pay a fee)
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A number of vendors and presenters were talking about the expedited payment
opportunity at the show. At NACHA 2008, I caught up with several of the
leading players in this space.
Online Resources announced their expedited bill pay solution this week,
which offers same-day payments to “several hundred” billers. In their booth
demo, a 2-3 day payment was free, and the option to make a same-day payment
included a charge for $9.95 (although banks could set their own prices). I
asked Sheila Narayan, EVP of Banking Payment Services, what differentiates
their solution from others. She believes Online Resources is the first
integrated solution, with expedited options included right alongside
traditional payment options. They also offer an expedited payments API,
which could allow a bank or other provider to use ORCC’s capabilities
without necessarily running their hosted solution. This gives banks and
walk-in providers flexibility in how they access the expedited service, and
extends the reach of their solution. Among early bank adopters, the first
60 days has seen customers select expedited options 1% of the time, with
more than 7% of that volume from repeat customers.
I also talked to David Shapiro and Pat Frazier from Western Union about
their emerging bank-based bill payment offering. In the fall, Western Union
announced its first foray into bank-based bill payment through its
partnership with Yodlee. Western Union is an interesting new entrant into
this space, in part because it has one of the largest biller networks
available (over 4,000 billers), and because they believe they have the
largest network of billers that they can reach with same-day payments.
While long a player in the walk-in bill payment space, their move into
bank-based bill payment is timely, given the increased interest and adoption
of expedited payments. Western Union could become an interesting additional
back-end option for existing bill pay vendors, as well as those banks who
run in-house operations (like Citi, Wells, WaMu, and others).
Lastly, I spoke with Jeff Lewis, president of Metavante’s ePayment Solutions
group. Metavante announced its expedited bill payment solution in the fall,
and since then is seeing impressive adoption. For those banks who have
turned it on, they are seeing expedited volume grow by 10% per month.
Given the growing adoption of Metavante’s Monitise mobile solution, I was
curious about Jeff’s thinking on how Metavante could leverage mobile banking
to grow expedited payment volumes for its banks. In my opinion, actionable
“emergency” bill pay alerts are one of the first potentially killer
applications for mobile banking. This type of alert doesn’t just extend
online banking to the mobile, but exploits a unique capability of the mobile
channel to provide a new valuable customer service. And it could generate
meaningful revenue for the bank! In theory, a bank would send an alert to a
customer’s mobile device with not just a reminder, but the ability to pay
the amount right then, and deliver the payment same-day or next-day to avoid
late fees, finance charges, and other consequences.
To do this effectively, the bank needs to know the payee, the due date, and
the amount due. However, stubbornly low adoption of bill presentment makes
this a challenge. Metavante, however, is approaching this challenge with a
creative solution. They are analyzing customers’ payment histories to find
bills whose amounts don’t change (e.g. car payments) to create the alerts
and avoid the limitations of bill presentment. Ultimately, this could lead
to more opportunities to offer customers expedited bill payment alerts, and
generate more revenue for its bank customers.
After years as a net cost, bill pay is slowly becoming a source of revenue
for banks through expedited and card-based bill payments. While an
interesting trend in its own right, the intersection with mobile banking
makes this opportunity even more important to banks. Done well, effective
implementation and integration of expedited bill pay and mobile banking with
actionable alerting could be a killer application that drives higher
adoption of both mobile banking and revenue-generating expedited bill
payments. This is definitely a space to keep an eye on!