Yodlee and Western Union have partnered to create a new bill-pay product that banks can offer to clients — a fee-based, same-day, online product to compete with biller-direct Web sites; these sites have long been favored by customers for their time-posting advantage.
The alliance is counting on the idea that customers will be willing to pay for a last-minute payment through their bank, instead of a biller site (usually for little or no cost) because of the convenience of gaining a single view of all their bills. (Although the banks will, of course, set the exact fees that they charge their customers themselves.)
What Yodlee brings to the partnership is deep experience as a vendor of aggregated, "screen-scraped" biller views, and a desire to offer speedier payments.
What Western Union brings is more than 4,000 direct online connections to auto lenders, card issuers, mortgage companies, utilities and other billers that individuals may need to pay urgently. This is Western Union's first foray into online banking.
With Western Union's tentacles tied directly into the AR/AP systems of biller clients, banks can offer real-time, last-minute bill pays, a vast improvement over standard remittance procedures (including paper check issuance) that delay payment postings by three-to-five days.
"Because these are all premium, fee-based payments, the game really is scale and the game really is variety and availability of billers," according to Joseph Polverari, senior vice president of strategy and development for Yodlee. According to Yodlee, three banks are piloting the new PayItAll service.
Other vendors offer same-day bill pay through bank sites, such as CheckFree Corp., Metavante and Online Resources.
However, according to Aite Group senior analyst Gwenn Bezard, the linking of Western Union's biller arrangements with Yodlee's 9,000 bank/brokerage client gives Yodlee's BillPay PayItAll service a decided edge over competitors.
"The key difference is the number of billers Yodlee can connect to in order to expedite the bill pay," Bezard says. "Western Union is the leader in that respect; they have more billers and more volumes than anyone else. Banks using the service should be able to serve the expedited bill pay needs of more customers than with rival solutions."
In 2006, according to Aite, Western Union had 45.9 percent of the expedited bill-pay market share for Web and call-center volume, ahead of Fiserv's BillMatrix (25.3 percent), which will be merged into CheckFree's bill-pay operations upon completion of those firms' planned merger.
In addition, the agreement with Western Union gives Yodlee the large-scale credibility it needs to improve the slow adoption of its bill-pay product, according to Bezard.
Banks have said, "CheckFree is not broken, … Why would I change it?"
For Western Union, the deal's attraction is keeping up with an evolving bill-pay market that is favoring the consolidator model.
Western Union marketing director David Shapiro says the company noticed that an increasing number of customers of its biller-direct clients were making payments strictly for last-minute payments. "What we saw is that there was a growing acceptance among consumers to do this [while] banking online."
And those include customers willing to pay a little for the assurance of avoiding a lot: the substantial late fee with a mortgage provider or card company.
A study in 2006 by Javelin Strategy & Research and Crone Consulting indicated an increasing number of online bill payers (16 percent) are using expedited pay options at least once a month.
The report also found more online bill payers were syncing payments to payroll schedules, indicating an acclimation to just-in-time methods.
Forrester Research has found that 33 percent of bill-pay users preferred biller sites because of that option.
(c) 2007
