Building a Payment & Transaction Zone for Your Site (NetBanker)

The Payment & Transaction Zone houses the main transaction functions: pay-anyone bill pay, bill aggregation, interbank funds transfer, email payments, and so on. We think its time to consider dividing these capabilities into at least two distinct product bundles:

basic services for newcomers and those with relatively simple financial needs
premium services for power users and those with more complicated financial needs

While virtually all users would be expected to pay for the premium bundle, basic services could be provided without fees. Profits could be generated with fee-based upgrades linked to the free services.

Security Note: We recommend establishing an additional password that sits in front of any function that allows users to move money out of the bank.

Base-Level Features & Functions

1. Getting Started Area: You have gained nothing until you entice registered users to start using epayments. Like the one-page, color-coded instruction sheets that come with new computers and electronic gear, you need a well-thought-out process to draw users in and get them started. The area should include a guided quick demo, an interactive practice area, and encouragement for new users to send a payment to themselves to get things going. Don’t forget to reiterate performance and service guarantees.

2. Pay-Anyone Bill Pay: Offered by most financial institutions as part of their online banking program, the service allows payments to anyone to be initiated online.

3. Credit/Debit Card. Don’t overlook card products in your epayments design. Customers that don’t have them should be encouraged to apply, and those that do should be instructed on their use for epayments; as well as information regarding online security and privacy.

4. Transaction Confirmation Feedback Loop: To gauge customer satisfaction over time, create an email-based feedback loop for each transaction. Send an email confirming each transaction with an estimated posting date at the merchant. Ask customers to reply back to the email to rate their satisfaction with the processing of the transaction.

Consider posting cumulative responses to the survey in a public area so users can gauge how well individual merchants handle electronic bill payment. This will also help keep the pressure on merchants to improve their electronic payment processing.

The database of user feedback could also be aggregated (with no identification of individual users) and provided free of charge to your merchant clients.

5. Interbank Connectivity/Funds Transfer : Within a few years, interbank funds transfer capabilities will be an important and expected part of most online banking services. It’s already a bona fide hit on the focus group circuit and a clear benefit that will make users glad they signed up for online banking.

6. Transaction Clearing Confirmations: Users can set a minimum threshold and any check, debit/ATM, or credit card transaction above that amount generates an email to the user.

7. Integrated Email to Payment Recipients: All epayment functions should include integrated email so users can easily send optional messages to recipients of the funds. Transaction details would be prefilled on message forms. Users would simply add their comments and hit send. Messages would be archived for future reference.

8. Bill Pay Calculators/Budgeting Worksheets: Provide consumer and small business budgeting templates and financial calculators. Ford Motor Credit created a simple Budget Planner to help car buyers assess their financial situation www.fordcredit.com/planner

9. Bill “Overload” Protection Services: Provide overdraft protection targeted towards bill payment needs. Loan advances could be triggered via a link from the bill payment section of your Web site or via email requests.

10. Biller Customer Service Inquiry Form: Create a list of major billers with links to their customer service Web sites, and/or customer service email addresses. Build a fill-in-the-blanks form to help users better formulate their questions. Use cookies to prefill the forms with user information.

11. Links to Biller Order Entry: Along with links to customer service, include similar links to the biller’s online catalogue or order-entry sites. This could be made into a profit center by selling enhanced links to billers. Bank client companies could be provided with complimentary enhanced listings to deepen business relationships.

12. Paper Check Reordering: Paper checks aren’t going away for a long, long time. Make sure customers can easily find the form to reorder checks online.

13. Prepaid Card Products : You can offer a variety of prepaid card services, either as a free value-added service for premium customers (see below) or a fee-based option for all.

14. Payment Tracking Center: Millions of anxious overnight delivery users log in to FedEx, UPS and others every day. Epayment users should also be able to track their payments from the moment of initiation until they are accepted at the biller.

Premium-Level Features & Functions

1. Guaranteed Payments/Online Money Orders. From the bill payment interface, users could upgrade payments to “guaranteed,” essentially sending a money order to the recipient. The service would be integrated with email so messages could be sent to the recipient as soon as the transaction was authorized.

2. Expedited Payments: Similar to document delivery via FedEx, for a price, users would be able to expedite payments, cutting 2 to 4 days from the usual payment lead time. The service would require FedEx-like fees, but with $29 late fees becoming common for credit cards, even a $15 next-day-delivery fee would save cardholders a bundle, especially considering extra interest charges accrued on balances not paid on time.

3. Credit Card Statement Aggregation: This is any easy win-win for the bank/card issuer and its customers. For less than $10 per user per year to Yodlee, uMonitor, or other providers, let users aggregate their credit card billing statements on your Web site. An integrated balance transfer function would allow users to easily transfer balances from competing cards to your card or credit line.

4. Bill Aggregation: Similar to credit card aggregation above, but encompassing all types of billing statements from utilities, Internet service providers, and so on. Note: Number 3 and 4 could be offered as a single service.

5. Friends & Family Payments and Reloadable Debit Cards. Visa Buxx and other ATM-card-based transfer services aimed at groups of known individuals have a limited market, but users could be very loyal and profitable.

6. P2P Email Payments: While PayPal pretty much has the auction market cornered, there is still a need for email-based payments for the occasional exchange of funds between non-related bank customers.

7. Bill Concierge/Virtual Bookkeeper: This private-banking-like payment service with labor-intensive human help, could be made into an option over and above your normal premium-level payment services.

8. Financial Datebook: Essentially a day planner with an emphasis on bill payments and other financial activities. Can also be used for non-financial events such as birthdays, to-do lists, and so on.

9. Reminder Service: Integrated with the financial datebook above, or as a standalone function, the reminder service sends email reminders of important dates and times. The emphasis is on financial matters, especially bill-payment due dates, but the service could be used for personal and business appointments as well.

10. Planning, Budgeting, and Payment Averaging Services: This service could help users save time each month, provide excellent peace-of-mind benefits, and help cross-sell profitable bill-pay overdraft protection.

11. Smart/Automated Payment Services : The more services users become hooked on, the harder it will be for them to move bank accounts. Eventually, most routine payments will be automated, so anything you can do to begin that process today will help increase customer satisfaction and account retention.

12. Bill Pay Usage Incentives/Score Keeping: A few banks have tried one-time sweeps designed to encourage bill-payment usage. But we know of no one that has incorporated ongoing usage incentives into their bill payment program (email our editor, jim@netbanker.com, if you have info on any ongoing bill pay reward programs).

We think financial institutions should experiment with both approaches. Users need an initial incentive to learn a new way of performing an everyday task. But ongoing incentives could change sporadic bill pay users into heavy users, creating significant exit barriers for your online base.

The incentives don’t have to be large, they could even have zero cost. For example, provide a way for users to “keep score” by creating a bit of a game around the drudgery of bill payment. Some other ideas:

Frequent-flyer miles: Award one or two miles per $100 paid. A household paying $40,000/yr in bills would earn only 400-800 miles, which would cost the bank about $10 per year. You could award bonus miles for various actions like setting up a mortgage or referring a customer.
Bill pay “green stamps”: Establish a point system that allows users to collect points redeemable for bank services or discounts at area merchants.
Performance rewards: Track the number of paper checks written vs. electronic items and reward users with points for certain milestones. For example, award 500 frequent flyer miles whenever electronic items are more than 50% of the total.
“Free payment” sweeps: Pick one bill-pay transaction each month and pay it for the lucky customer. This is a proven credit card promotion with good marketing and PR results.
Recognition: Customers could be rated on the percentage of their monthly checks written online. The top scorers could be listed on your Web (using initials for privacy) with winners receiving a t-shirt. ð

Whether providing monetary incentives or not, you could provide continual feedback on electronic bill payment “performance.” Track adoption of electronic payments over time with comparisons against last month, last year, and so on. Provide comparisons against other users, with top performers posted on the Web (with names disguised). Performance measures could include: highest percentage of electronic items vs. total items; biggest increase compared to previous month, year, quarter, etc.

13. Scan & Pay: While this service sounds good “on paper” (pun intended), the market for early adopters – frequent traveler types who are willing to turn over their paper bills to a third party – is very small. We forecast just 1.5 million users by 2005 year-end. However, if you really want to satisfy this type of customer, you might want to consider it as a premium add-on option. Citibank, Chase (see screenshot below), and others already offer it so demand will likely grow, albeit slowly.

14. Multiple Source-of-Funds Options: Robust bill-pay programs should include a number of payment options. The traditional model of limiting bill payment to a single source of funds, typically a checking account, will soon become outmoded.

In addition to allowing users to pay from any account at your financial institution, consider allowing payment from competitive accounts. Why wouldn’t you want your customer depleting balances at another financial institution instead of yours?

You should also allow bill payments to be directly charged to your credit line or credit card account. To further increase loan outstandings, offer an instant bill-pay, line-increase program where users can easily apply for additional credit.

15. User Control Panels: Users should be able to log into an area that contains a “virtual dashboard” of dials and settings that can be adjusted to change bill payment and security preferences.