Growth Slower Than Expected In Premium Bill Pay, Balances High
Just a year after introducing its MoneyHQ product, Online Resources is reporting it has seen a 9% adoption rate among bill pay users within the first six months. Just as importantly, the company notes, uses of the product have significantly higher deposit balances-but it also acknowledges there is still room for significant growth.
MoneyHQ, which is an account aggregator that is positioned by many ORCC client financial institutions as a premium service offering, has been implemented by 170 of 550 ORCC clients that are eligible to offer the solution, according to Matthew Lawlor, chairman and CEO. The company has 800 clients overall.
Lawlor acknowledged rollout has been somewhat slower than planned when he first spoke with The Credit Union Journal at BAI's Retail Delivery Show in Las Vegas in 2004. But the good news, he said, can be found in the fact that there has been a more than 100% increase in deposit account balances (over the control group) among customers/members at the institutions that have deployed MoneyHQ. There has been a 50% adoption rate among eligible financial institution clients. Most institutions charge $4.95 per month for the service, although some, especially credit unions, have offered it at no cost. ORCC provides marketing support materials, but Lawlor said each individual institution positions the service in its own way.
ORCC further reported that among MoneyHQ users there is an average of four accounts and that the average total balance across aggregated accounts is $48,000. Lawlor suggested one reason balances are higher may have to do with the money transfer feature that is embedded in MoneyHQ and which provides real-time debit and, for merchants, same day remittance.
"The MoneyHQ users are consolidating their relationships and deepening their relationships," he said. "The bill payer does that very well."
History of Adoption Curves
ORCC has examined the adoption curves of the Internet and online banking and Lawlor believes MoneyHQ is about to ride the same quickly cresting wave (see chart, facing page). He recalled the days when experts predicted there would always be a 33% wall in ATM adoption (that is that no more than one-in-three consumers would ever use ATMs) and "we blew through that. This is a classic adoption curve. I read of that same 33% wall in Internet banking."
"The one thing we have been saying is I think the government role in leading the way in online security is a great thing," continued Lawlor. "It's just too important for the government not to take the lead. We support two-factor authentication."
Lawlor noted that in the early 1970s the emerging world of credit cards was initially plagued by fraud issues that stymied both expansion and adoption. When the government stepped in with Reg E, including the $50 consumer liability, adoption rates skyrocketed.
"Internet banking is moving into the mass market, but it has got to be bulletproof," Lawlor said. "Bill pay is going to go through the roof."
Lawlor said ORCC is projecting by mid-2007 it can double the current users of bill pay. Seven percent of Internet banking users used bill pay in 2004, a figure that has increased to 9% this year.
Lawlor acknowledged one has to be careful when using statistics. After all, 9% of Internet banking users may use bill pay, but only 9% of customers/members are using Internet banking. "So 9% of 9% is less than 1% now." But as Internet banking moves up the adoption curve, even if the 9% bill pay penetration rate remains static, the overall number of users will increase sharply when the Internet banking adoption rate rises to 20%, for instance.
Lawlor said credit unions have been part of an adoption rate themselves. "Credit unions were first on the Internet, but they have always lagged banks in deploying bill pay," observed Lawlor. "But now we're seeing a major swing toward bill pay. A lot of credit unions love MoneyHQ. They see the advantages."
As for credit unions that are offering the service free, Lawlor said, "maybe they knew before we did that balances go up and the relationship deepens when you add bill pay."
Lawlor said he expects the MoneyHQ service to continue to evolve as it has over the past year. "What we saw in the beginning was a higher churn rate than we would have liked in MoneyHQ," he said. "Some of that was the product itself. We have made it simpler. Also in the beginning there were a lot of 90-day free trials. Today the churn rates are much lower. The more relationships they have the more likely they are to stick with you."
Online Resources' MoneyHQ performs four primary functions: it pulls account statements and offers bill presentment; it aggregates third party financial institutions, it offers the ability to transfer funds between accounts, and it has e-mail Alert capabilities. Like MoneyHQ itself, bill presentment is just beginning its ride up the adoption cycle. Lawlor said there remain some challenges in presenting bills from small, local clients, but that ORCC and MoneyHQ are able to present all the bills a CheckFree can. Rather, he said the bigger concerns remain on the consumer side.
"Ninety-one percent (of consumers) haven't adopted bill pay, which is slow, and that's a concern, but it's addressable," Lawlor said.
Lawlor believes that as the adoption cycle moves forward that some of the more advanced functionality of MoneyHQ will become part of the standard bill pay product as the service becomes more commoditized, and that new features will then be added to the premium MoneyHQ.
Meanwhile, in a separate development, Lawlor said Online Resources is also seeing growth in the area of web-based collections. "Many people want to pay (bills) and are embarrassed when they don't," he explained. "They hate being dinged by collectors."
ORCC, which has approximately 3.9-million users of its end-products, has developed a web-based application that brings a little comfort to an otherwise uncomfortable situation.
"If you have a payment problem you can log onto this address, and it allows the consumer to work out any debt (with the creditor) in a very private way," he said.