This week, Bottomline Technologies, Fifth Third Bancorp, and Payment Processing Inc. were all buying.
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When we first ran this table in 1997 there was a bit more hope that fees for premium services might take hold online. At that time, there were still banks charging $10/mo or more for a package of generic online services. Even though we’ve seen most fees fall by the wayside (except $3-$6/mo for pay-anyone bill pay), we still think there is an opportunity for value-added providers to levy fees for premium services along the lines of American Express and Federal Express. Following is our updated list of potential fee-based services and what you might charge for each.
Source: Online Banking Report, 8/01
*The fees in the Low column are more appropriate for average consumer users; the fees in the High column are more appropriate for micro and small businesses.
Countrywide
Countrywide’s Web-based preauthorized debit
sign-up form eliminates the “send a voided check” making the process more
spontaneous.
Countrywide (Pasadena, CA; $171 billion in mortgages serviced), the second largest home lender in the country, is beefing up its payment services, both for its own mortgages and anyone else. Its Web-based form for mortgage holders to sign up for preauthorized debit is well-done www1.countrywide.com/customers/homepay/homepay.html (see screenshot above) but its new pay-anyone bill payment service is ill-conceived.
Strike one, the bill payment program is not Web based. It requires users to order and install Checkfree software. Strike two, Countrywide is charging $9.95/mo, a price point that went out the window two years ago. Strike three, it’s not yet integrated with HomePay, the preauthorized debit payment service.
Presumably, the company is working with Checkfree to port this program to
the Web, but they should have waited until that work was done. Yet the
program is significant as it shows how a non-bank can use online services to
gain entry into new markets.
Contacts: Cameroun King heads the interactive unit; Tom Boone is Dir.
Loan Admin., (818) 304-8400.
If you read the trade press, you might think there is only one way to offer online bill payment services; sign a long-term deal with Checkfree and hope for the best. Not so. There are dozens of ways to use the Web and e-mail to ease the bill payment chore for consumers and businesses.
The next time you brainstorm new services and product enhancements, try thinking of yourself not as provider of checking accounts, but rather delivering payment simplification or payment assurance services. For a moment forget the regulatory constraints and operational realities you face and think like an Internet start-up. What could you do, on- or off-line to ease the hassles of paying the bills each month?
Consumer Bill Payment Needs
As you prioritize payment services to offer over the Internet, don’t lose sight of the fact that it will take time before users take to electronic bill presentment. At IQPC’s Internet Billing conference on Nov. 19, Intuit talked about converting 40% of bills to electronic versions by the year 2007. Intuit’s short-term forecast (per Eric Dunn, Intuit CTO) is just 1 million Internet bill presentment users within the next three to four years.
But financial institutions can use the Web and e-mail to serve even those users who prefer to write paper checks for most billing obligations. For example, send e-mail confirmations to users when large checks clear (those were probably bill payments); or provide links on your Web to customer service support areas at major billers in your market. See pages 7-12 for more ideas.
Segmenting the Opportunities in Interactive PaymentsFor banks there are two distinct targets in this nascent market: billers and bill payers. Each has distinct, perhaps competing needs. Billers want to maintain or enhance relationships with their consumers using the bill as a draw into their Web sites. Consumers simply want to get the bills paid with the least amount of work and maximum amount of control. It may be difficult for financial institutions to play both sides of this debate.
Business customers may be your best prospects for online services. But they may be the most difficult to please. And you’ll have to compete with everyone from American Express to the Money Store for their loyalty.
Most banks have invested the bulk of their Web site budgets on the consumer side…and it shows. We have searched high and low and have found a surprising lack of creativity in the banking sites geared towards small businesses. Many banks would be better off removing the boilerplate brochures and simply listing the names, phone numbers, e-mail addresses, and specialties of their commercial loan officers. At least a small business prospect would feel they gained something from their visit.
In an effort to provide inspiration for your business banking efforts, we have outlined potential online strategies and tactics to help you:
Even though 60% or more of small businesses have a modem, that doesn’t mean the Internet has become the most convenient way to send and retrieve information for everyone. For many, the by-now ubiquitous fax machine is still the tool of choice for fast “online” communications.
As you build out your online content, consider putting all the Web-based information on a fax-on-demand server for easy retrieval by the Web-challenged. The additional cost to port your forms and documents to a fax edition is minimal compared to the incremental business potential of the business market.
Along the same lines, many business executives are daily e-mail users, but only casual Web users. Consider “e-mail versions” of appropriate documents. For example, a small business owner interested in your loans could send an e-mail to loans@yourbank.com and automatically receive loan information and an applications via e-mail.
Finally, don’t neglect e-mail/Web/fax hybrids for the mobile professional
who may not always have a fax machine, printer, or Web browser nearby when
needing information. For example, a traveling executive accessing your Web
site from his/her hotel room might want to print a report by sending it to
the hotel’s fax machine. Or a business owner using the company’s
e-mail system might want to send you a message requesting a faxed loan
application. The cost of putting these communication technologies in place
could be returned in just one or two incremental business loans.
Commercial Lending Services
Make sure the lending portion of your Web is done right before moving on to other content areas. This is where you’ll make the money to fund the rest of it.
Payment Services (consumer-to-business)
After lending services, the next most likely reason a potential business client will seek you out on the Web is for payment acceptance services (e.g. Visa/MasterCard) for goods and services sold on and off-line. Again, make it easy to find this part of your Web site. Even if you don’t offer merchant services, refer users to reputable firms that do.
Payment Services (business-to-business)
While payment acceptance is a vital area for retailers, the automation of accounts payable (e.g. bill payment) is something that could benefit each and every one of the 22 million businesses in the United States.
Internal Payment Services (to employees)
The last area of payment services, business-to-employee, has received little attention from the bill payment players such as Checkfree, MSFDC, and American Express. Though medium and large business payroll needs are well met by ADP and others, we believe payroll services for very small businesses and expense account services for all size businesses (cash advance/reimbursement funds transfer and tracking) could be a profitable value-added service especially when integrated with a revolving business credit card product.
E-Commerce Services
Even though they may be money-losers today, providing a broad range of E-commerce (EC) services could be the best way to show potential business clients that you intend to support whatever new payment mechanisms lay ahead in the next century. There is so much fear, uncertainty and doubt (FUD) in the EC arena that anyone who can provide real-world advice and assistance could quickly gain market share among the growing number of businesses wanting to use the Net for financial transactions.
Virtual Shipping Center
This has nothing to do with banking, but it’s a way to add value to your Web site with little investment. Become the one-stop-shop for package shipping/ tracking information in your market. You could very well gain bookmark status on the browsers of potential clients big and small.
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Virtual Research Services
According to FIND/SVP, the number one use of the Internet, used by 81% of small businesses, is online research (see table on next page). But with the glut of information available on the Web, even power users can become overwhelmed. Help your clients help themselves by creating a Virtual Research Center with links to the major search engines (see chart below) with brief explanations and examples of how to use.
Be sure to “localize” your Research Center by including directories developed by companies in your area. (You may want to subcontract the entire area out to one of these companies.) Also tell users how to use the national search engines to find local information, e.g. when searching for local computer rental stores type “computer rental” (in quotes) and “yourtown.”
Virtual Professional Services Center
Who would be better than the local business banker to sponsor a directory of professional service firms? You could opt to include everyone in town, just your customers, or some other criteria. Just make sure you clearly disclose it up front.
Subject Area (with name, bio/credentials, address, phone, fax, e-mail, & Web links)
Virtual Customer Network
Along the same lines as the Professional Services Network, provide an area where clients can place links to their businesses as Franklin Bank has done below.
The Franklin Customer Network at www.franklinbank.com/network .
Franklin Bank (Southfield, MI; $486 million) developed the Franklin Customer Network listing e-mail addresses and Web sites of its customers. There were 29 entries (Sep. 17), about half listing just an e-mail address, the other half with just a Web address (no e-mail). The bank should expand the listing to allow a phone number, fax number, and both an e-mail and Web address.
Contact: Rebecca Christian is SVP Communications and Marketing, 810.358.4710.
Virtual Business Concierge
The Virtual Concierge extends the Professional Services Center (left) concept to include personnel, facilities and entertainment resources. If you have positioned your financial institution as a service leader that goes the extra mile for your clients, here are some services you could offer in cyberspace to reinforce that positioning. 8
Subject Area (with name, bio/credentials, address, phone, fax, e-mail, & Web links)
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