Hearst's Manilla Shows Ways to Make Money from Online Bill Pay

Demonstrating a way to make money on a service many banks view as a cost, Hearst Corp. launched the beta version of its bill presentment and payment site Manilla.com Monday.

The service, which is free to consumers, aggregates bills, reward programs and subscriptions, and sends reminders when bills are due each month. Another way that Hearst — best known as the publisher of Redbook, Good Housekeeping and Marie Claire, among other titles — plans to generate revenue through Manilla is by zapping a reminder to users when their magazine subscriptions are due to lapse. Hearst said it may do additional things like cross-sell other magazines and offer special discounts for early renewals.

Manilla does not charge consumers a fee for these reminders, and it would also pitch non-Hearst publications.

Citigroup Inc. is one of the first billers to work with Manilla. It has agreed to pay Hearst a portion of the money it saves when credit cardholders switch off paper bills to view them online instead. In return Manilla allows the card issuer to place advertisements on its digital bills.

For billers, "we've created something that allows them to save money and keep engaged with their customers," said Jessica Insalaco, executive vice president and chief marketing officer for Manilla.com. (A Citi spokeswoman said the company would not discuss Manilla during its beta test. Comcast Corp., a cable company, has also signed on to work with Manilla.)

Currently, Manilla is offered by invitation and only presents bills, though it can take users directly to a biller's site and log them in so they can pay. Manilla will go live for all consumers by mid-year, Insalaco said, and on-site bill payments will eventually be added.

Though many consumers already pay their bills through online banking, Insalaco said that Manilla's strength is a cleaner, streamlined interface.

"Consumers … have over 20 accounts they have to manage every month, and they get 35 pieces of mail per week and umpteen e-mails," she said. This clutter "is a very common pain point, and we think Manilla solves a lot of these problems," she said.

For its part, Hearst is making a bid to leverage its assets as a media company, carefully looping in the 50 million women who consume the company's content each month and who are the chief target for the new product, the company said, while situating itself in the increasingly crowded document storage space, which is aimed at getting consumers to turn off paper.

Some industry observers said that even if Hearst can improve upon the bill pay experience, many in its target audience may not want to switch away from their banks' service.

Ron Shevlin, a senior analyst at Aite Group LLC, said many consumers would be deterred by the enrollment process. "Once you've set up all your billers, it is a pain to change," he said.

"Banks and billers have been trying to get consumers to pay bills online for years," Shevlin said. "While there has been a pretty good adoption rate, the rate of growth is slowing down." Slightly more than a third of online banking customers pay bills online.

Still, about 65% of the top 100 U.S. banks offer e-bills to their consumers, according to a 2010 online banking report from Aite. While one third of online bill payment consumers receive e-bills, about half of consumers who pay bills online were unaware that their financial services company offered electronic bill presentment, Aite research indicates.

Emmett Higdon, a senior analyst at Forrester Research Inc., said there are other firms that offer banks the chance to earn money through online banking and bill pay, which they may favor over Hearst's pitch of cutting costs associated with paper.

"Banks are going to be more interested in monetizing … [online banking] directly through programs like Cardlytics," a company that offers merchant-funded rewards and does not take consumers away from the bank's site, Higdon said.

Other analysts said Manilla's ability to potentially archive all consumer bills in one place would be extremely useful, especially since most banks don't provide an archiving service for outside billers. "The archiving piece is so important here," said Nicole Sturgill, a research director at TowerGroup in Needham, Mass. She said that most consumers are not likely to need to look at archived bills frequently, but when they do need to, it is generally for some critical need, such as at tax time or to check details related to a mortgage payment.

Andrew Frank, a research vice president for media at Gartner Inc., said the Manilla service is a clever way for Hearst to try to maintain control of subscriptions in an environment where providers of services through electronic devices are all taking their cut for subscriber content. He pointed to Apple Inc.'s announcement recently that it would take a percentage of revenue from subscribers renewing via the iPad.

"The magazine industry, and Hearst, has a strong interest in a platform to control the terms of the subscription process and the relationship with the consumer," Frank said.

Through Manilla, Insalaco said that Hearst will also leverage its ownership of CDS Global Inc. of Des Moines, a subscriptions marketing and reminder service that touches some 60% of all magazine subscriptions in the U.S.

One competitor in the document storage space said that Manilla could suffer from combining a subscriptions agenda with document storage.

"We are a pure-play, with no agenda that might conflict with television, cable companies or financial institutions," said Steve Shivers, chief executive for doxo inc., of Seattle. In contrast to Manilla, doxo enables bill storage by signing up both billers and consumers, Both agree to turn off paper, and in exchange for that, doxo gets a percentage of the paper savings on each transaction. Manilla uses account aggregation to acquire customer bills, and then notifies consumers their paper bills will be shut off after 30 days, though consumers can still turn paper back on.

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