Yodlee Inc. is expected to introduce an upgraded version of its Yodlee BillPay service today that makes it possible for banks to run the service in-house.
The Redwood City, Calif., vendor said it is installing the BillPay PayItAll version, which can be run in-house or as a hosted version, at three of the nation's 20 largest banking companies. Related Links
Analysts said that the market for bill payments is in a state of turmoil, and that bankers may be willing to consider changing their payment technology providers.
"We are now directly competitive in the bill-pay space," Joseph Polverari, Yodlee's senior vice president of strategy and development, said in an interview last week. "We think there's some room in there for someone who's innovative, who's got expertise and a good solution, to come in and make a difference." (Mr. Polverari would not name the banks that have agreed to use the new version.)
Yodlee sees an opportunity for growth in the market, he said, since Fiserv Inc. of Brookfield, Wis., is acquiring CheckFree Corp., the leading provider of electronic bill payment and presentment services, and Bank of America Corp., CheckFree's largest customer, reportedly is considering taking at least some of its work back in-house.
"You've got some incumbents that were independent, and they are no longer independent," he said. "Do you want to buy that capability from a captive company that is on yesterday's technology?"
Outsourcing bill payment and presentment can cost a large banking company $100 million a year, he said, so an in-house alternative can be attractive as more consumers switch from checks to electronic payments. "If you're a bank, especially a large bank, you've got a mounting financial issue to deal with," he said.
"We know how to blow up the existing model in a way that is advantageous for the banks and consumers."
Mr. Polverari also revealed that Yodlee was an unsuccessful bidder for Princeton eCom Corp., the No. 3 provider of electronic billing and payment services. Online Resources Corp., of Chantilly, Va., acquired Princeton eCom in 2006.
Having lost the bidding for Princeton eCom, Yodlee built its own payments warehouse, he said, overhauling the one used in the the Yodlee BillPay system that the company inroduced last year.
"We built it in a way that is unlike any warehouse out there," with features, for example, that minimize payment errors by resolving at the user interface and the warehouse level, before payments get routed.
The warehouse can enable banks to route payments that generate the most profit or at the least cost, "giving the bank back visibility and control in the bill-pay process," he said.
Consumers can use the new service to make payments with credit or debit cards, as well as automated clearing house transactions.
In addition to offering reduced costs, Yodlee's new system offers banks the potential to generate interchange revenue, Mr. Polverari said; if consumers make payments with cards, the issuing banks will receive the fees.
Yodlee plans to announce a deal soon with a "service partner" to deliver immediate or same-day payments, for which banks can charge a convenience fee, he said.
Princeton eCom, Metavante Corp., and MasterCard Inc.'s Remote Payment and Presentment Service currently handle payment routing for Yodlee, but Mr. Polverari said its own network offers electronic remittance rates that are as good as those available from other providers.
In the past bankers have criticized Yodlee for its "screen scraping" technique that extracts data from the Internet's hypertext markup language, but the company now has direct connections with many large institutions, which generate half its data.
The rest comes from "HTML data gathering," which "rests on a consumer permission model," Mr. Polverari said.
The BillPay service also is linked to Yodlee's personal financial management application, which can allow customers to categorize payments and develop household budgets, he said. "You can buy a piece of it to enhance your existing solution, or you can buy all of it to replace your existing solution."
Catherine Graeber, a vice president and principal analyst at the technology research company Forrester Research Inc., said the market for bill payments may be ready for new alternatives.
"With all this upheaval of changing dance partners on electronic bill pay, I think they'll find people willing to listen to their story," she said.
Still, she expressed caution about Yodlee's prospects.
"Yodlee has announced other bill payment services before that haven't really taken off," Ms. Graeber said, and the complexity of converting customers to a new system can be daunting, with revised on-screen interfaces to learn and prearranged payments to be moved.
Yodlee needs a big customer that is willing to share a success story, Ms. Graeber said. "Until I see it live and somebody's talking about it, I take it all with a grain of salt."
