Yodlee Inc., best known for account aggregation technology, plans to introduce an online bill payment and presentment product Tuesday that will put it in direct competition with the two big vendors in the business.
CheckFree Corp. dominates the market, with a market share of about 75%, and Metavante Corp., which bought the Spectrum network this year, says it is gaining speed.
But Yodlee may be in a good position to offer an alternative. It already has more than 100 big financial services clients, including American Express Co., Charles Schwab & Co., Citigroup Inc., J.P. Morgan Chase & Co., and Merrill Lynch & Co.
"We are the 800-pound gorilla in aggregation, and CheckFree is the 800-pound gorilla in bill pay, and we're about to move into their space," Jim Taschetta, Yodlee's chief marketing officer, said in an interview Wednesday.
BillDirect, which the Redwood City, Calif., company will market exclusively to financial services firms, is designed to be used in conjunction with online banking Web sites. It uses Yodlee's aggregation technology to gather information from nearly 2,500 billers. Mr. Taschetta said that will be enough companies to ensure that the average consumer can get seven to nine monthly bills at a bank site.
In contrast, companies such as Bank of America Corp. and Wells Fargo & Co., some of the leaders in bill presentment, offer electronic invoices from fewer than 300 billers, so they can offer the average user just one to three bills a month, he said. Some studies have found that a site that can present six bills to a user will create enough of a critical mass to capture that user's online banking relationship, Yodlee says.
BillDirect will also include several real-time account management features that are now available only through the billers' own sites, Mr. Taschetta said.
Avivah Litan, a vice president and research director with Gartner Inc. of Stamford, Conn., predicted that Yodlee's product "is definitely going to take business away" from CheckFree and Metavante. "It's very bad news for them."
The majority of online bill payments currently are initiated not at bank Web sites but at the billers' sites. The banks were slow to notice that fact, but they are eager to reverse it. Seventy-three percent of new online bill payers are using the so-called "biller direct" model, heading straight to biller sites instead of paying through their bank, according to a January study by Forrester Research Inc. Of those who pay bills through their banks, 61% also pay some at the billers' sites.
There are several reasons for this, not least of which is because most banks charge a fee for bill payment, while the billers always offer the service for free. And though most banks' applications allow customers to pay any biller, far fewer deliver the invoice to the consumer electronically.
The conventional wisdom about EBPP is that consumers would rather view and pay all their bills through their bank's Web site than visit their billers' various sites each month, but many bank sites lack presentment capabilities. Mr. Taschetta argued that eliminating customer fees and increasing the number of bills available should help banks reach their goals. BillDirect is designed to facilitate that, he said.
Many EBPP players say that consumers will use their banks' sites as their primary bill-pay portals as soon as enough monthly statements are collected there.
"Having all that information in one place is very useful," said Stephen Olsen, the executive vice president and general manager of CheckFree's electronic commerce division.
EBPP may be a good way to attract customers, but it is also expensive, Mr. Taschetta said. With BillDirect, Yodlee says it has come up with a way to lower the standard monthly rates by shifting the financial burden from the bank to the biller. Its e-bill delivery and payment product will cost banks about $3 per customer per month, he said.
Customers will continue to view bills and perform account maintenance at the bank site, but when they are ready to pay, the application automatically opens a window connecting them to the biller site.
This window is already linked to the user's account, so there is no need to log on a second time - and no need to remember another password. The biller initiates the transaction and handles any customer service calls regarding the payment.
"Banks will like this, because they don't have to pay for the transaction or for servicing the transaction," said Hill Ferguson, the general manager for Yodlee's EBPP group. "They finally have an option to not pay for bill pay."
Gary Craft, an analyst with Financial DNA LLC in San Francisco, said the BillDirect model is exactly what banks are seeking. "This takes the bank out of the transactional side and makes them just a source of information. I don't think they really want to do the transaction processing," but they are willing to do it, because it attracts the valuable online banking customers.
Yodlee executives said that because BillDirect is based on the company's aggregation technology, it can generate regular customer alerts to make it easier for them to manage their accounts. For instance, to prevent credit card over-limit fees, they could get an alert when they are nearing their credit limit.
"These bells and whistles are attractive," Mr. Craft said. "Everybody comes out ahead with this, except for the legacy third-party payment processors."
