The battle for online bill-pay customers is commonly framed as banks versus billers, and though billers took an early lead, most observers say the aggregation model of banks gives them the long-term edge.
However, a few nonbank aggregators such as America Online Inc. are stepping up their own initiatives, often with free services. Some are using incentives; next month a major credit card company is expected to come out with a bill-pay service offering the convenience of consolidation and the incentive of earning reward points.
Even without reward points, a third aggregator, LowerMy-Bills.com Inc., says it has had more success than it anticipated. It has signed up nearly 100,000 users since it began offering a free bill-pay feature last June - about 80,000 more than it thought it would have by now, said Matt Coffin, its founder and chief executive.
LowerMyBills.com collects information on household services such as long-distance packages, free credit cards, or home insurance to help its customers find the least expensive of these services.
Mr. Coffin said the bill-pay feature is intended to keep users coming back every month and perhaps sign up for additional services through LowerMyBills, which gets a fee from the providers for every customer account they sign.
"LowerMyBills, outside of the banks, really has the potential to be important to this market," Mr. Coffin said. His company, which is based in Santa Monica, Calif., uses bill-pay technology from Yodlee Inc. of Redwood City, Calif.
Hill Ferguson, Yodlee's general manager for electronic bill payment and presentment, said, "We continue to get strong interest" from nonbanks.
America Online also uses Yodlee's BillDirect application for its nearly year-old AOL Bill Pay. AOL does not charge people a separate fee for paying bills, though it does bill its customers for monthly access to the portal.
Marty Moe, AOL's vice president and general manager for personal finance, consumer education, and small business, said the Dulles, Va., company is "very seriously considering" offering AOL Bill Pay at no charge to non-AOL subscribers.
The service is linked to AOL's e-mail applications, so it can route color-coded messages about users' bills to their general-purpose mailbox. Criminals sending fake e-mail cannot reproduce the green mail icon that authenticates a message.
This service has proven popular as customers have become increasingly concerned about online fraud, Mr. Moe said. "We're finding that more and more, safety and security matters."
He would not say how many people are using AOL Bill Pay, but "we've had adoption rates that we're proud of." The company plans to release those figures next month.
Beth Robertson, a senior analyst at MasterCard International's TowerGroup Inc. research unit in Needham, Mass., estimated that AOL Bill Pay had 100,000 users by last June. "It's got to be higher than that now," she said.
Gwenn Bezard, a research director with Aite Group in Boston, noted that it costs less to offer Yodlee's product than software from CheckFree Corp. or the No. 2 vendor, Marshall & Ilsley's Metavante Corp., though BillDirect also has fewer features.
"Clearly, anyone today can provide bill-payment consolidation," Mr. Bezard said. "Because it's cheaper, it has allowed nonbanks like LowerMyBills and AOL to step in."
LowerMyBills.com's enrollment numbers, he said, are "pretty good" and indicate that nonbank aggregators could emerge as a threat to banks. Banks have reported solid demand and growth for their bill-pay services, but the actual number of users is far below the number of online banking subscribers, Mr. Bezard noted.
For example, only 40% of Bank of America Corp.'s online banking customers pay bills online, B of A said, versus the 35% reported by Wells Fargo & Co. and 18% by Wachovia Corp. Nationwide only 7% of checking customers pay bills online through their bank, Mr. Bezard said.
Mr. Coffin said some bank services are not giving customers what they want, creating an opening for nonbank aggregators. "There's still banks out there that are trying to charge for this service," he said.
And if the somewhat intangible incentives at LowerMyBills.com and AOL have brought in a healthy number of users, the chance of earning reward points by using a credit card site as a bill-pay aggregator should be even more attractive, according to Yodlee's Mr. Ferguson.
He said a major card issuer has been testing his company's software since November and is expected to unveil a bill-pay feature by the end of April. A second top-five issuer has also signed up with Yodlee, he said.
According to The Nilson Report, the five biggest card issuers are JPMorgan Chase & Co., Citigroup Inc., MBNA Corp., American Express Co., and Bank of America. Citi said it is not planning a card-based bill-pay service; none of the other companies responded to inquiries about their potential plans to offer bill-pay features.
Ms. Robertson said that with consolidated bill-pay sites becoming more common, banks should respond by promoting features nonbanks cannot match - the ability to see multiple account balances at once, for instance, or to pay different bills from different accounts. This is "a unique strength for banks," she said.
A handful of the earlier nonbank aggregators that charged a fee are still around but not really thriving, such as Yahoo Bill Pay, Ms. Robertson noted. "Some nonbanks offer this functionality almost as an aside, and few promote them and position them very strongly," she said. Despite the growth reported by sites such as LowerMyBills and AOL, banks' ties to their customers should give them an advantage, Ms. Robertson said.
"I don't think banks need to worry," she said. "I just think they need to be aware and they need to keep tabs on what their nonbank competitors are doing."
