[This is just one of my
series of posts from the NACHA Payments 2008 conference in
How To Turn Your Online
Bill Pay Expense into a Revenue Stream [NACHA
Partner, eCom Advisors
Synopsis from Conference
justified on concepts like stickiness, consumer retention, consumer
satisfaction, increased balances and product cross-selling. Although
these concepts are attractive, most banks are not able to measure the
ROI of EBP. As a result, banks cannot directly associate incremental
revenue to their EBP expense. This session demonstrates how banks can
monetize their EBP expenditure and data. Topics addressed include:
monetization strategies; how to use bill pay cross-sell/up-sell;
identifying unusual behavior for retention; identifying characteristics
of "best customers" that can be utilized to acquire similar customers
in the online channel; and identifying behaviors that can be utilized
to reduce fraud.
Long time readers of this blog know I am a proponent of competing on
analytics (see posts here
I was particularly interested in this session by eCom Advisors'
Peter Gordon on how banks can leverage their consumer bill pay data.
Bankers, pay attention because this is good stuff:
The Bill Pay Challenge
Consumer bill pay is typically a free service offered by banks in the
hope of retaining customers and cross selling. Its matured from a
competitive advantage to table stakes. Banks must continually upgrade
their bill pay services to meet customer expectations, but what is the
ROI from this investment?
Tapping into consumer
bill pay data enables banks to monetize their bill pay investment and
drive further returns through more effective marketing,
enhanced risk management, informed strategic investments, and fraud
Bill pay data contains three valuable elements: 1) Who your customers
pay, 2) how much they spend, and 3) the frequency and timing of the
4 Ways to Unlock the
Value of Bill Pay Data
1. Strategic Marketing
– Marketing departments at banks typically buy data about thiner
customers. yet through bill pay transactions, banks can determine which
of their customers have accounts at other institutions as well as the
type of products they have (mortgages, credit cards, auto loans, etc.).
This data can be used to develop targeted cross sell offers delivered
via the online channel or other means.
2. Risk Management
– Almost all banks are utilizing the same credit bureau data to
evaluate the creditworthiness of their customers. But as many as 25% of
US adults of little or no credit data on file (they are young, they
rent rather than own, etc. Banks can use consumers bill pay data to
develop alternate scoring models based on the timeliness of
their rent payments and other factors and meet the as yet untapped need
of undeserved customers with little or no credit history.
– Economic data is typically published at least a month after the fact,
and often amended later. GDP is published with a two month lag. Yet
savvy bankers have learned to analyze their consumer bill pay data in
real time in order to inform trading decisions for their own investment
portfolio and won big (example: top 5 bank earned $200 million on a
bill pay informed trade). In addition, banks may choose to sell their
data. Aggregated anonymous data (e.g. real time spending habits by
industry or consumer segment) is of significant value to marketers,
economists, and investors.
4. Fraud Mitigation
– Finally, many banks utilize outside sources for fraud monitoring. By
using bill payment data banks can develop models to alert when new,
potentially fraudulent payees are created or when unusual transaction
patterns occur. If the bank's fraud department is currently buying data
from fraud monitoring vendors it may be possible to sell the vendor its
own data in order to reduce the cost of early warning system/negative
Q&A and Tips
If your bank utilizes CheckFree for its bill payment services, it is
possible to get a file (on a weekly or monthly basis) of your
Banks have disparate data sources across the institution. They key to
success (and challenge) is to maintain one master customer record.
This is not rocket science – but banks should take an iterative
approach and learn as they go through pilots and continuous
A data warehouse is not necessary. Banks can get started right away
using a simple data base tool such as Access.