Billpay: After 20 Years as a Loss Leader, Check/PageOnce Shows Path to Profitability

By Jim Bruene on April 24, 2014 4:07 PM | Comments

image

In the United States, banks have squandered $10+ billion providing free billpay during the past 12 years. But that's about to change, if the model from Palo Alto-based Check (formerly PageOnce) takes hold.

First, a history lesson for anyone born after 1980....

For the first few years of the online era (mid-1990s), "electronic bill payment" was offered by banks and credit unions with monthly fees of $5 or $6. That made it roughly breakeven, at least if you didn't count the sometimes heavy burden on customer service to solve problems caused by the very analog back-end of the so-called "electronic" service.

But then in 2002, Bank of America ruined even that by offering free billpay and advertising it widely on television (note 1). It even released internal data purporting to prove that what the bank gave up in fee income was more than compensated by intangibles such as higher deposit totals and lower customer churn (note 2). I like to kid myself think that if Bank of America had read their OBR more closely, it would be booking an extra $300 million per year in fee income (note 3); but I digress....

Back to present day. American consumers have grown accustomed to free billpay and I don't think that will change. But that's what makes Silicon Valley's mobile-billpay upstart so intriguing.

Let me introduce you to Palo Alto-based Check (still better known as PageOnce) which originally launched as a personal scheduler (hence the original name). It quickly morphed into the first native mobile PFM, landing on the scene in 2008, just a year after Mint launched.

But given the difficulty of monetizing budget-and-spending PFM, Check has tried several ways to earn revenue including offers, credit bureau monitoring, subscription billpay, and now transaction-fee-based billpay. Apparently, the last has the most promise, so the company rebranded as Check (with URL check.me), a big risk given the prominence of its PageOnce brand.

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How it works
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1. Choose biller from previous entries or add a new bill (see screenshot #1)

2. Enter account number with biller OR enter username and password and Check will download for you (screenshot #2)

3. Choose amount (screenshot #3)

4. Choose speed of payment (screen #4):
- Scheduled
- Send now: Standard
- Send now: Expedited

5. Choose payment type: Credit card, debit card or bank account (screen #5)
(Note: credit card option not available for paying other credit cards, which is a Visa/MasterCard rule according to the company).

6. Confirm and pay (screenshot #6)

And now for the twist. Were you imagining this service displayed across your spacious desktop browser? No way. This is mobile-only and works like a charm, though the fees are a little confusing (see below).

The mobile interface is great, using state-of-the-art technology tricks to cut down on data entry:

  • Mobile camera used to import card details, powered by Card.io (see screenshot #8)
  • Account aggregation to gather billing info (note 4)
  • Comfortable mobile layout for selecting payment options

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Pricing
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Check has free billpay of course. Just enter your bank account details, schedule the payment at least a week in advance, and you are good to go. However, for those not quite as organized, or who don't like revealing their checking account number, users can choose to pay a 4% fee (min $4.99) to pay via credit/debit card within 2 to 3 days. Or for $6.99 (flat), the payment can be made the next day.  

Here's the freemium pricing model:

   3-to-5 day ACH >> Free for any size payment (subject to account-specific maximums)
   2-3 day debit/credit card >> 4% service fee (minimum $4.99)
   Next-day debit/credit card >> $6.99 flat-rate service fee (note 5)

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Analysis 
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Check's billpay system is designed for the mobile channel. For the most part, it works. Allowing users to easily choose payment source and delivery date (including next day) is critical to making billpay valuable. Banks would be wise to use a similar design (or license from Check), to increase fee revenues. I think it's entirely possible, billpay becomes a standalone profit center under this model (note 6).

That said, with three or more payment sources combined with three payment speeds, scheduling new payments can get confusing, especially trying to determine tradeoffs between speed, source and price. When I originally set up the account, it seemed relatively straightforward. But when I went back the next month, it was hard to re-engage.

The company also needs to help users choose the payment method providing the best bank for the buck (optimizing price, speed and convenience). The company recently added a pop-up box (screenshot 7), that helps. And the applicable service fee is clearly shown at every step of the process, albeit in fairly small type (screenshot 6). I understand the company needs expedited and/or card-based payments to make a profit (similar to how PayPal defaults users to bank transfers instead of credit card payments). But users need to fully understand their options throughout the process (note 7).

Long-term the Check service is more valuable if its users become accustomed to paying all their bills from the site, even if most are free bank transfers. That way Check becomes the go-to spot for billpay, and are more likely to be remembered when users need expedited payments or a credit card charge when funds are low.  

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Screenshots
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#1 (left) Bills due list
#2 (right) Add a biller form

image           image 

#3 (left) Choose amount
#4 (right) Choose payment speed

  image          image


#5 (left): Choose payment source/type
#6 (right) Confirm payment screen (with fee disclosed)

image          image

#7 (left) Clicking on "?" on screen 6 launches a box with the fee schedule
#8 (right) Add credit and debit cards via scan

 image          image

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Notes:
1. For more details of the history of billpay pricing, see our post from 2004 and OBR #109, Pricing Online Services (subscription, Aug 2004).   
2. I have read dozens of these case studies and I still don't believe that anyone has proven that billpay CAUSES those results. Everything I've ever seen proved CORRELATION. Yes, billpay customers are more profitable and more loyal. But they would have been anyway without without subsidizing them with a costly, trouble-prone service. I still maintain that lifetime statement archives would be a better retention device, and far less expensive than free billpay (see OBR 118, Lifetime Statement Archives (subscription, June 2005).   
3. Assume Bank of America would have 5 million active billpay customers paying $5 per month x 12 months = $300 mil 
4. Hopefully, it's only a matter of time (and a licensing deal with Mitek), before Check imports the billing statement directly into its app.
5. Due to its various payment provider contracts, Check's expedited payment pricing doesn't always seem logical. For example, the company charges a flat fee of $6.99 for next-day delivery of any size payment. But for 2-3 day service the charge varies by payment size (4%) with a minimum of $4.99. So, for any payment above $175, it's cheaper to send overnight than via the slower 2-3 day service. On a $500 payment, that's a savings of $13 to send overnight. To pay my current statement balance, it cost $90 to send via 2 to 3-day service or $6.99 overnight, a whopping $83 savings. And Check does not mention this when you cue up a $2,000 payment.    
6. Besides fees based on transaction speed and payment source, we also believe there are significant potential revenues from credit lines used to cover payment account shortfalls and the newest fee income opportunity, expedited mobile check deposits (see IngoMoney , believed to be powering Regions Bank among others).
7. In the month I've spent testing the service, Check has made the service fee much more transparent, so I believe they are moving in the right direction. 

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Last Chance for FinovateSpring 2014 Tickets!

By Eric Mattson on April 23, 2014 1:58 PM | Comments
FinovateSpringButtonLogo.jpg

FinovateSpring 2014 is almost here and we are very excited! With every passing hour, we are skyrocketing towards a new attendance record for the conference (and for any Finovate in our 20-show history)!

Based on current trends, we're projecting almost 1,400 innovators will be in the audience to watch the future of financial technology unfold. (A few tickets do remain so please register soon to lock in your seat before it is too late.)

While we are thrilled with the record-setting size of the audience, what is truly impressive is the quality of the attendees and the organizations that they represent. Here is just a small sample of the organizations that will be in attendance:

  • A.T. Kearney
  • Bank of Ireland
  • Bank of the West
  • BBVA Compass
  • BECU
  • Bessemer Venture Partners
  • BlackRock
  • BNP Paribas
  • Canaan Partners
  • Capital One
  • Celent
  • Celtic Bank
  • CenturyLink
  • CFPB
  • Charles Schwab
  • Chase Paymentech
  • CIBC
  • Citi Ventures
  • City National Bank
  • Consulate General of Canada
  • Coupons.com
  • Deluxe Corporation
  • Diebold
  • Digital Insight
  • Discover
  • E*TRADE Financial
  • Edward Jones
  • Equifax
  • EverBank
  • Experian
  • Fidelity
  • Fifth Third Bank
  • Filene Research Institute
  • First Data Ventures
  • First Republic Bank
  • FIS
  • Fiserv
  • Forbes
  • Foundation Capital
  • Frost Bank
  • FTV Capital
  • Gartner
  • General Atlantic
  • GoDaddy
  • Goldman Sachs
  • Google
  • Google Capital
  • H&R Block
  • IBM
  • Institutional Venture Partners
  • Intel Capital
  • Intellectual Ventures
  • Intuit
  • Itau Bank
  • Jack Henry & Assoc.
  • KPMG
  • Lazard
  • Lending Club
  • Life.SREDA Venture Capital
  • Lightspeed Venture Partners
  • MassMutual
  • MasterCard
  • Maybank
  • McKinsey & Co.
  • Menlo Ventures
  • Microsoft
  • Mizuho Bank
  • Mohr Davidow Ventures
  • Morningstar
  • Mountain America CU
  • Nasdaq OMX
  • NCR
  • NEA
  • New York Life
  • North Hill Ventures
  • Norwest Venture Partners
  • NTT Data
  • PayPal
  • PNC
  • Principal Financial
  • RBC
  • Ribbit Capital
  • RBS
  • RushCard
  • Sberbank
  • Scotiabank
  • Sequoia Capital
  • Silicon Valley Bank
  • Stanford University
  • Swedbank
  • TD Ameritrade
  • The Bancorp
  • The Vanguard Group
  • TowerGroup
  • Transamerica
  • TransUnion
  • TTV Capital
  • U.S. Bank
  • Union Bank
  • USAA
  • UW Credit Union
  • VentureBeat
  • Visa
  • Wells Fargo
  • Western Union
  • Yodlee

Please don't delay! Tickets are selling fast and space is limited so please be sure to register now to make sure you get a seat!

FinovateSpring 2014 is sponsored by: The Bancorp, Capital Source, Financial Technology Partners, Hudson Cook, KPMG, Life.SREDA, UK Trade & Investment, Visa, Xignite and Zions Direct.

FinovateSpring 2014 is partners with: Aite Group, ABA, Bank Innovators CouncilBankersHub, BayPay Forum, California Bankers Association, Fin-Tech.org, Government of Canada, Celent, Filene, Hotwire PR, Javelin Strategy, The Paypers, SME Finance ForumVisible Banking, & Western Independent Bankers.

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Categories:

Fintech Unicorns

By Jim Bruene on April 23, 2014 12:19 PM | Comments

Gilt statue of a unicorn on the Council House,...

Gilt statue of a unicorn on the Council House, Bristol (Photo credit: Wikipedia)

In January, we identified the billion-dollar fintech unicorns (post), but William Mougayar went deeper looking at the tech companies founded since 2000 valued at $250 or more. He compiled a list of 235 companies around the globe. Seventeen of those (7%) we consider fintech (15 if you don't count real estate specialists Zillow and Trulia). The list is not yet complete (more companies are being added by readers), but it's an interesting data point.

Highlights:

  • Square has been the alpha unicorn (oxymoron?) since it burst on the scene five years ago. But it looks like Lending Club is closing the gap, valued at, $3.8 billion, just (!) $1.2 billion less. However, the peer lender seems to be on the rise and headed to an IPO, while media reports indicate Square may be struggling a bit to maintain its valuation and has scuttled its own IPO plans for this year.  
  • This is the first time we've seen Paydiant mentioned in the billion-dollar club, but we are not surprised.
  • Of the still-private companies listed here, all but two are Finovate alums (note 1). 


Table: Fintech companies valued at $250 mil or more (founded 2000 or later)

Company Finovate Alum? Founded Valuation
Square No 2009 $5.0 bil
Lending Club Yes 2006 $3.8 bil
Zillow No 2005 $3.8 bil (public)
Xero Yes 2006 $3.5 bil (public)
Klarna Yes 2005 $2.5 bil
Wonga Yes 2007 $2.0 bil
Stripe No 2011 $1.8 bil
LifeLock No 2005 $1.5 bil (public)
Trulia No 2004 $1.2 bil (public)
Paydiant Yes 2010 $1.0 bil
Climate Corp No 2006 $930 mil (acquired)
Braintree (Paypal) Yes 2007 $800 mil (acquired)
BazaarVoice Yes 2005 $540 mil
Cardlytics Yes 2008 $500 mil
Payfone Yes 2008 $500 mil
Prosper Yes 2006 $500 mil
Vitrue No 2006 $300 mil (acquired)

Source: StartupManagement.org (link), 20 April 2014

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Note:
1. Come see the latest unicorn candidates at FinovateSpring next week (April 29/30) in Silicon Valley.

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Announcing the Full Presenting Lineup for FinovateSpring 2014!

By Eric Mattson on April 16, 2014 1:34 PM | Comments

FinovateSpring 2014 is less than two weeks away, and the excitement is building! More and more tickets are selling with every passing hour and on April 29 & 30, we're expecting to break Finovate's attendance record for the second year in a row with an audience of over 1,400 industry professionals and entrepreneurs.

You've probably already seen a few of the companies presenting at FinovateSpring this year, but a bunch of presenters just came out of stealth mode on Friday to complete the lineup. So, without further ado, here's the full lineup of 68 companies that will demo their latest fintech innovations in the heart of Silicon Valley in less than 14 days:

  • Artivest
  • Avoka
  • BodeTree
  • ChiaraMail
  • Coinbase
  • CREALOGIX
  • CUneXus
  • D3 Banking
  • Dealstruck
  • defi SOLUTIONS
  • Digital Insight
  • Digital Retail Apps
  • Encap Security
  • Endeavour
  • EyeVerify
  • FinBuddy
  • Fiserv
  • FlexScore
  • ID.me
  • Insuritas
  • IntelliResponse
  • Interactions
  • Jumio
  • Kofax
  • Kown
  • Kreditech
  • LendingRobot
  • LendingTree
  • LendUp
  • Loop
  • LOYAL3
  • Market Prophit
  • Motif Investing
  • MShift
  • Nearex
  • NICE Systems
  • OnBudget
  • Ondot Systems
  • Pellucid Analytics
  • Personal Capital
  • Pixeliris
  • Privatbank
  • Qapital
  • Quisk
  • Radius
  • RealtyMogul
  • Red Giant
  • Rippleshot
  • Roostify
  • SaveUp
  • SmartAsset
  • Spreedly
  • Stockpile
  • StrategyCorps
  • Sureify
  • Tactile Finance
  • TD Ameritrade & LikeFolio
  • TextPower
  • True Link
  • Venovate
  • Verde International
  • Visible Equity
  • Vorstack
  • WePay
  • Wipit
  • Yseop
  • ZenPayroll
  • Zumigo

Please don't delay! Tickets are selling fast and space is limited so please be sure to register now to make sure you get a seat!

FinovateSpring 2014 is sponsored by: The Bancorp, Capital Source, Financial Technology Partners, Hudson Cook, KPMG, Life.SREDA, UK Trade & Investment, Visa, Xignite and Zions Direct.

FinovateSpring 2014 is partners with: Aite Group, ABA, Bank Innovators CouncilBankersHub, BayPay Forum, California Bankers Association, Fin-Tech.org, Government of Canada, Celent, Filene, Hotwire PR, Javelin Strategy, The Paypers, SME Finance ForumVisible Banking, & Western Independent Bankers.

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Categories:

Mobile PFM: Tracking Automobile Trips

By Jim Bruene on April 14, 2014 6:44 PM | Comments

imageLast week, MileIQ cracked the top-50 in Apple's "Finance | Free" category. Think of it as Fitbit for cars, running in the background automatically logging all car trips (and killing battery life). 

At the end of each trip, users categorize the trip by swiping left for personal or right for business (see screenshots below). Users can also annotate transactions by "flipping" them over and typing basic details (see screenshot 2 below).

That's basically all there is to the mobile part. Users go to the companion desktop dashboard (screenshot #5) to further categorize trips, stitch the various segments into a single trip, delete items, add parking and toll fees, edit the tags, manually add a trip and create reports.

You can also create a quick email report at the push of button from within the app (screenshot #6).

It's free for 40 trips per month, but then costs $5.99/mo or $60 annually. It could make for a nice auto loan/lease premium item.

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Relevance for FIs
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This feature would be a nice fee-based value add for personal financial management (PFM) programs. But the more interesting aspect is the UI. Banks could provide a similar function for handling all transactions. Users swipe to the left to categorize a transaction as tax-deductible/business or right if not. Later, just the left-swiped transactions could be tagged with more specific categories (business travel, charitable contributions, etc).

This simple approach every so slightly "gamifies" mobile transaction processing, helping users save money and better manage their finances. 

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Screenshots
Mobile UI

#1 (left) Main page shows drive(s) to classify
#2 (right) Annotation available on the "back" of each drive card

 image        image


#3 (left) Congratulations for handling all transactions  
#4 (right) Pricing options

 image       image


#5 Desktop dashboard

image

#6 Quick email report, generated by button in mobile

image

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1. We've tackled PFM numerous times over the years in our Online Banking Report. Most recently here (subscription).

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