JPMorgan Chase & Co.'s merchant acquiring unit is offering a service designed to help billers save money by managing customers' electronic payments and steering people to cheaper payment channels.
Thanassis G. Mazarakis, the president of Chase Merchant Services, said many billers have built up their payments systems piecemeal, using different vendors to provide multiple payment mechanisms for their customers. BillPay Solutions is for billers that receive recurring payments from customers, and it can consolidate billers' payment services.
"No one is helping with payments strategy," Mr. Mazarakis said in an interview Wednesday in Chicago after a presentation for the new service.
Many companies are trying to shift customers to electronic payment. Mr. Mazarakis said BillPay Solutions, which combines consulting and transaction processing tools, could save some companies several million dollars a year.
What billers want, said Mr. Mazarakis, is to offer customers a host of payment options while encouraging them to use the least expensive options. They especially want them to use automated clearing house transactions and PIN-less debit payments, which use a debit card number to authorize a payment over the telephone or on the Internet, even though the customer does not use a PIN as part of the transaction.
The typical BillPay Solutions user could include insurance companies, telecom providers, utilities, health-care companies, publications and financial services firms - any company that sends out regular bills and operates a Web site for customers to pay their bills, Mr. Mazarakis said.
Chase Merchant Services, of Melville, N.Y., is one of the market leaders for handling these payments; its market share among such billers is about 18%, Mr. Mazarakis said. But merchant processors tend to focus on processing rather than helping billers reduce the cost of these payments. The goal is to deliver "a more efficient way to array payment options," he said.
Chase Merchant Services said that one biller customer (which it would not name) received about half of its payments by check, and 35% in cash. ACH payments made up 10% and credit cards account for 5%; PIN-less debit volume was negligible.
Using BillPay Solutions, Chase Merchant Services developed a plan for this biller to trim check and cash payments to 35% and 25% respectively, while increasing ACH transactions to 15%, and moving 20% of payments to PIN-less debit. Credit card transaction volume was unchanged.
James Pittman, the senior director of treasury and remittance operations at BellSouth Corp., said at a conference last month that it costs the Atlanta utility around $2 when a customer pays a phone bill with a credit card, versus 50 to 60 cents for PIN debit and 10 to 15 cents for an ACH payment.
At Wednesday's presentation, a representative from the Star debit network (which is owned by First Data Corp.) said that fees for PIN-less debit are even lower than traditional PIN debit.
Dan Schatt, a senior analyst with the Boston market research firm Celent Communications LLC, said a growing number of billers are taking a closer look at their payments operations. "If the billers can find ways to cut down on paper and electronify their payments, they can significantly cut their costs and improve their bottom line," he said.
James Van Dyke, the founder and principal analyst of Javelin Strategy and Research in Pleasanton, Calif., said there are advantages other than cost savings from steering people to electronic payment systems.
Marketing is one example, he said. Offers in monthly statements are often ignored, whereas someone paying online could get a more tailored offer.
"The Web is more dynamic than a statement stuffer," he said.
