A string of customer wins for Metavante Corp.'s online bill payment service highlights a growing effort on the part of banks to reduce their top-line expenses for the service.
In the past several months the technology subsidiary of the Milwaukee banking company Marshall & Ilsley Corp. has signed deals with Zions Bancorp., Bank of New York Co. Inc., and National City Corp.
All but Bank of New York have switched, or are in the process of doing so, from the bill-pay market's No. 1 provider, CheckFree Corp.
CheckFree's strategy has long been to offer a complete bill-pay package to its banking customers. The Atlanta company's capabilities are well regarded, but observers say other vendors' offerings, though less well rounded, are also less expensive.
Gregory Smith, a research analyst for Merrill Lynch, said in a research note that Metavante "appears to have significant capacity on its platform to offer attractive pricing" and that it will probably use it to "tempt these banks with lower pricing."
Robert Coolbrith, an analyst at the San Francisco e-finance advisory firm Financial DNA LLC, said cost considerations may have prompted some of the defections. "My general sense is that this is a pricing phenomenon."
Though spokespeople for Bank of New York and Cleveland's National City confirmed they are shifting to Metavante by yearend, they declined to say why.
In January, when Zions said it was moving its bill payment business to Metavante, Michael DeVico, the Salt Lake City banking company's executive vice president of technology and operations and its chief information officer, said that "the change was primarily driven by economics."
A spokeswoman for Metavante said executives were not available to discuss its pricing strategies or new customers.
Matt Lewis, CheckFree's senior vice president for client development, argued that as more consumers start paying bills online, they will want fuller and richer services, and will reward the banks that deliver them.
CheckFree has added faster payments, financial planning tools, and other features to serve this more demanding market, he said, and would rather compete on capabilities than on price. "We will not go into a relationship where the price demanded is insufficient to service the relationship at the level we believe is necessary," he said.
Bill-pay is one of the fastest-growing online consumer applications. But as more consumers are paying more of their bills electronically, no-fee bill-pay services have become the norm in retail banking, forcing banks to shoulder the rising costs of supporting the service.
Ronald Averett, the president and chief operating officer of Princeton eCom Corp. in New Jersey, the No. 3 provider of electronic billing and payment services, said that many banks, especially those in the top 50, are "disaggregating" bill payment and presentment.
Rather than turning the entire function over to vendor like CheckFree, he said, a growing number are designing their own customer-facing front ends (or buying them from software vendors) and managing their payments in-house.
"Then all they need is a payments provider" to move the transactions to the billers, Mr. Averett said. "That has really allowed a new pricing model."
"Everybody wants the best price," he said, but "service is still as important a consideration as anything else" for banks.
Mr. Averett said Princeton eCom has also been landing new deals with banks, but he said he could not discuss them until later in the year.
James Van Dyke, the principal and founder of Javelin Strategy and Research in Pleasanton, Calif., noted that CheckFree's complete, turnkey service is quite different from Metavante's offering, which includes online bill payment as part of a wide selection of services.
He said while pricing is important, it is also complicated. He said online bill-pay services offered by different vendors can be quite different, and that looking only at the bottom line is akin to evaluating the price of a car on the cost of its components, "such as the bolts that hold the seats in place."
"Bankers' needs are not standardized yet," he said, and "the worst thing for a banker is to get a mismatch between their strategy and the strategy of their technology provider."
