Contrary to many third-party payment providers' practice of pushing customers to lower-cost payment rails, Regalii wants its end users to pay their bills with credit cards.
The goal of this arrangement is, of course, to make money for banks.
“To route transactions through ACH costs banks money; to route the payment through the card rails makes the bank money,” said Edrizio De La Cruz, co-founder and CEO of New York-based Regalii. “Our API allows banks to move consumers to cards from ACH, turning the cost into a profit benefit.”
It also makes the card networks money, one likely reason why Mastercard brought Regalii into its Start Path Global program. Through the mentorship program Mastercard will give Regalii operational support, plus open up access to its network of partners that Regalii can try to sell its white-label bill management platform into.
Regalii’s API, or application programming interface, sits inside a bank or service provider’s online or mobile application, showing consumers their bills and alerting them of due dates, all within the provider’s current ecosystem. It also aggregates the end user's bill payment history.
The company had to build some of that infrastructure for real-time personal financial management from the ground up, according to De La Cruz. And this attracted Mastercard’s attention, De La Cruz said.
“By helping Regalii tap into our global network of partners, we can together create newer tech-based or social media-based services and solutions that will transform the financial industry,” said Amy Neale, vice president of Mastercard’s Start Path Global program, in an April 19 press release.
The revenue-generating model of Regalii will definitely appeal to issuers, said Sarah Grotto, debit director at Mercator Advisory Group, but some party will have to take on the expense of using card rails.
And that could be Regalii, other processors, the biller or even consumers, she said.
“Maybe the biller is fine with paying something because they know the transaction is guaranteed,” Grotto said. “And there’s room to charge an underbanked consumer for that service, but not much. If it gets too expensive you’ll turn away the consumer.”
Lowering transaction costs for merchants and consumers is the main reason many third-party payment providers, from LevelUp to Dwolla, were encouraging consumers to input their bank credentials and pay through ACH.
Edrizio said consumers will not be dinged with extra charges for using cards to pay billers using its platform. And the cost of transactions is softened by using the Mastercard Send Network for all domestic payments, which is cheaper than pushing payments through as just a regular merchant transaction.
International bill payments will be sent in a closed-loop system. And even though Regalii’s initial focus was on remittance, De La Cruz said cross border bill pay is a small portion of the company’s revenue.
But both avenues make Regalii an enticing company, Grotto said.
“There’s interest in bill pay because it’s just one of those critical transactions that, if you’re able to provide a good experience, you have a pretty loyal customer,” she said. “And in remittance, there’s a ton of organizations, both established as well as a slew of fintechs, that are all looking at improving international money flow.”
With the latter focused on bill pay, there’s less risk because the recipient of the funds is an established utility provider or biller, Grotto said.
Regalii is also targeting the right market, according to Grotto.
“I can’t say I’ve seen much activity in bill payment innovation happening on the institutional side,” she said. “But institutions need to pay more attention to the bill-pay needs, the needs that are so central to their day-to-day activities, of their customers if they want to continue to play the role of critical provider of financial services.”
Without Mastercard’s help, Regalii has signed 12 of the largest financial institutions in North America. According to De La Cruz, Mastercard will help the company gain many times more institutional customers.
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Corrected April 21, 2017 at 8:15PM: An earlier version of this story mischaracterized the nature of Mastercard's relationship with Regalii, and misstated the title of Mastercard executive Amy Neale.