Yodlee Inc., which is known for the aggregation and online banking software it sells to large financial companies, has closed a round of financing to support its bill payment product.
The Redwood City, Calif., vendor has been pitching bill payment since 2003 — its first version went live with AOL LLC in March 2004 — but said a recent spike in demand has prompted it to seek $35 million of financing.
Bank of America Corp., a longtime customer of Yodlee's online personal financial management product, was one of the lead investors for the financing round.
The vendor also has struck two reselling deals to help it expand its online banking sales to small financial companies.
Anil Arora, Yodlee's chief executive, said the decision to seek outside financing was not a result of any issues with the company's main offering: an online banking system that features personal financial management tools.
"The core business, the PFM business we're doing, is profitable and growing like crazy, and we would not have had to raise money if we were just focused on our PFM business," Mr. Arora said in an interview.
"Bill pay, as you know, is a very intensive business to get right," he said. "There's a lot of operational infrastructure you need to build out."
To this end, Yodlee has more than doubled its head count in the past year, to more than 450 employees, and it is expanding its data centers to handle an anticipated rise in bill payment transactions.
Mr. Arora said his company needed the outside financing because it does not yet have the revenue to support these moves, though it already has enough contracts signed to justify the investment.
Yodlee bill payment product is "in deployment with multiple customers," he said, and two of the top 10 U.S. financial institutions (which he would not name) are using a component that lets banks accept bill payments made with credit cards.
He would not say whether Bank of America, a longtime customer of Fiserv Inc.'s CheckFree, is using any component of Yodlee's bill payment software.
A B of A spokeswoman said no executives were available Friday to discuss the Charlotte financial company's relationship with Yodlee.
Mr. Arora said his product can compete with those from established competitors like CheckFree and Metavante Technologies Inc. An October pact with Western Union Co. gave Yodlee the ability to deliver next-day payments, and the card component of the software lets people initiate bill payments on cards through their bank's Web site, using links the software creates with billers' Web sites.
Mr. Arora said Yodlee is the only bill payment provider that lets people make card payment through bank sites.
CheckFree said Friday it is developing a similar service, which it plans to make available in December.
Joseph Polverari, Yodlee's senior vice president of strategy and development, said it is also seeking to expand its online personal financial management business through reselling deals with technology companies that serve small financial companies.
Last month Yodlee announced such deals with S1 Corp.'s Postilion unit and Q2 Software Inc. (S1 is an investor in Yodlee.)
"Small banks can benefit from personal financial management just like big banks can," he said, though Yodlee's established sales practices, in which it customizes its products to meet each bank's needs, make it hard to reach that group directly.
"It's always been our intent to service customers and vendors … outside the top 50 institutions, but the way for us to do it is not in our direct model," Mr. Polverari said. "What we have not been able to do, frankly, because we were too busy working on the big banks, is get the product in a suitable format to take to those vendors and those smaller banks, even though we've had, for quite a long time now, quite a significant demand to get it down there."
Jennifer Roth, a senior analyst with the global payments practice at TowerGroup Inc., a Needham, Mass., independent research firm owned by MasterCard Inc., said Yodlee has challenges that may not be easy to solve with just a fresh infusion of cash.
"They have a PFM reputation. They don't have a bill payment reputation," she said. And since Yodlee's bill payment customers will not let the vendor use their names, "it's going to be really tough for them to really enter this market."
Even though B of A is a financial backer of Yodlee, "I don't see them moving off of CheckFree to move to Yodlee tomorrow," Ms. Roth said.
For now Yodlee's card-based system is unique enough to be a selling point, she said. "It will fulfill a need for the financial institutions."
However, rival providers are already developing such features, Ms. Roth said.
Yodlee's system is compelling today, but "is it going to be the best solution in the long run?" she asked. "I think that remains to be seen."
