Bill-Pay adoption Remains Elusive
In the uphill struggle to gain both customers and revenue for banks' online bill-pay features, vendors continue to tweak their offerings with enhanced services. The latest example: Fidelity National Information Services (FIS) last month launched its revamped, turnkey biller-direct service that in addition to expanded services to consumers-think e-bill delivery-also lets corporate bankers package the solution for their own merchant clients in lockbox and commercial cash management services. Fidelity, which has 6,000 client institutions on its bill-pay platform, already has two banks reselling down to the client base, hoping to showcase the profit-center potential of what, to now, has been a me-too albatross for many institutions. "What we anticipate is there will be similar income as there is for banks who offer remote capture to commercial clients," says Preston Thornton, FIS product manager for e-payments.
In the same week, Jack Henry & Associates debuted an enhanced version of its bill-pay product service that brings an expedited-payment feature set that has begun to populate many popular third-party platforms, including market-leader CheckFree, Metavante, Yodlee, and Online Resources. Jack Henry's NetTeller Bill Pay product gains a quick-pay, overnight check delivery service and guaranteed bill-pay arrangements via ACH.
The improvements come as banks continue to struggle with adoption and regular use by their online customers. According to Celent, online bill pay overall is failing to see the "spectacular" growth that many had expected as bank offerings matured. The 40 percent of banking consumers who used it in 2007 is just a notch above the 2005 mark. Biller's own sites continue to have an advantage of more than 50 percent usage, compared to banks' 40 percent. All this six years after Bank of America issued a landmark study that directly linked bill-pay use with a customer's profitability and loyalty, allowing BofA to drop its monthly fee and change the game on how to make bill pay "pay."
Earlier this year, Forrester Research and SunTrust Bank raised the bar further on bill-pay expectations, showing that avid use of bill pay leads to more products, deposits and loyalty.
But getting customers on board is taking more than the bank cutting checks. With FIS Biller Direct, financial institutions will be able to present mortgage, auto and installment loan statements for electronic payment to their customers, according to Thornton. To spread the net as wide as possible, FIS allows numerous payments options, including debit and credit cards, through both the Web site and call-center IVR. "This is an ASP solution that we host out of our Charlotte data center, and we have connections to major payment gateways," says Thornton. This facilitates ACH payments for e-check transactions online, as well.
On the commercial side, Fidelity's approach is attracting banks that are imaginatively packaging and pricing the bill-pay option. If they are servicing clients in certain paper-intensive verticals, namely insurance, property management and healthcare, the banks plan to push Biller Direct as a lockbox option to help reduce pulp on the user end. "Some of our banks have told us they intend to bundle their pricing within an [umbrella] commercial relationship," says Thornton. Thus, they can offer it as an "analysis" product separate from a per-transaction model for bills, he says. "Our early adopting banks are trying some hybrids or multiple-pricing models."
Jack Henry's expedited model isn't the first on the block, of course. But the Monett, MO tech vendor will put its own funds on the line to back client institutions' new guaranteed speedy pay options. If a bank doesn't deliver an expedited payment on time, Jack Henry pays a customer's accrued late fees and penalties. The overnight check service is in partnership with Myriad Systems, a document capture and processing company, which can be used in place of a standard bank bill-pay remittance that takes between five and seven days to post.
Expedited payments, which Javelin Research & Associates recently tabbed a $5 billion revenue opportunity for institutions over the next five years, have long been viewed as a strategy to nab market-share away from the direct-biller sites of utility companies or credit cards.
Banks have been slow to jump on board, though. Despite 30 percent of consumers using expedited payments at least once in the past year, only 25 percent of these payments went through banks, according to Javelin. This is primarily because consumers aren't sure banks will actually post the payment on time. "This perception must be overcome first and foremost if financial institutions hope to realize the revenue stream from expedited payments," wrote Javelin analyst Bruce Cundiff.