PayMyBills

www.paymybills.com

PayMyBills had a busy quarter, hitting the 25,000-subscriber mark, in part due to its 2-years-free offer that expired in March:

Recent PayMyBills Milestones

As you can see from the chart below, many of the most interesting Internet banking products can easily be offered by non-banks. During the past five years in OBR, we’ve looked at all of them, but it was mostly theoretical. No matter how good they looked on paper, without being able to point to real-life examples, making a business case was difficult (see OBR 7/99 and 7/98).

All that is changing very fast. Fueled by an unprecedented pool of venture capital, innovative startups are swarming to the relatively untapped financial services and payments space. In second quarter, we witnessed the launch of three scan-and-pay bill management companies, CyberBills, PayMyBills.com and PayTrust. In third quarter, we saw the launch of three financial statement aggregators, VerticalOne, Yodlee, and PayTrust. And now in fourth quarter, we are watching at least one person-to-person payment company go live, PayPal.

Person-to-person (P2P) payments are not new. In fact, the paper payments business (personal checks, money orders, cashiers checks) continues to grow. According to The Green Sheet www.greensheet.com 68.8 billion paper checks will be processed in 1999 (U.S.), up 2.2% from 1998’s total of 67.4 billion; and an increase of 30% from 1989 (52.9 billion).

What is missing is a Web version of these products. The Web has spawned a whole new marketplace of sales between parties that have never met and never will. eBay has popularized the phenomena with its P2P auctions. In third quarter, eBay 36.2 million auctions, nearly four times the number in third quarter 1998 (9.2 million). In fact, eBay’s registered user base of 7.7 million is approximately equal to the entire online banking user base across all U.S. financial institutions.

Truly Virtual* Retail Banking Products

Source: Online Banking Report, 11/99

*companies don’t have to be a bank to offer these “banking” services

We’ve looked at hundreds of online banking demos, and PayMyBills.com has one of the best. They use red annotated text (lighter shade in the following screenshots) to highlight key parts of each screen. Copy is concise, well written, and focuses on the end user.

Screen 1: An important part of the demo, shows how bills are received within a familiar email client, and how the user simply clicks on the imbedded link to access the full billing statement online.

Screen 2: Shows an example of how your
scanned bill looks as you view it on the Web.

Screen 3: Outlines the bill payment user interface.

Screen 4: Shows bill reporting and download options.

Screen 5: Shows how to pay a bill that is not invoiced, such as the monthly rent.

PayMyBills.com

www.paymybills.com

Company: Pasadena, CA-based PayMyBills.com is another start-up from Bill Gross’s idealab! which has spawned 22 Internet companies including, CitySearch, eToys, and

Goto.com. In addition to venture capital, idealab! provides office space and the accompanying network infrastructure; consulting and services relating to development and technology; graphic design; business strategy; branding; corporate structure; marketing services; and competitive research. This is idealab’s second financial services company, the first is eWallet (aka Launching Pad).

Product: Scan-and-pay electronic bill payment with integrated pay-anyone capability. Also includes rules-based automatic payment, electronic archives, email notification, and $100,000 SafeWeb insurance.

User Benefits: Throughout its Web site, the company does a good job explaining how its service differs from current bill payment programs, which they call “online banking:”

Online banking basically offers you an electronic checkbook service. You don't have to sign checks, but you still have to manage the entire bill paying process yourself. PayMyBills.com provides a complete bill management service. PayMyBills.com can receive your bills, organize them online, and let you decide who, when, and how much to pay.

To boost credibility, users are automatically covered by SafeWeb Remote Banking Insurance from Travelers Property Casualty. The insurance provides coverage against unauthorized bill payments in the amount of $100,000 per incident with a zero deductible. CompuBank was the first to offer SafeWeb protection (OBR 10/98). Insurance coverage is provided free-of-charge.

The company is providing a usage incentive dubbed Pennies from Heaven. Each month several bills will be chosen at random and automatically paid using PayMyBills.com funds.

Marketing Plans: CEO John Tedesco briefed OBR on the company’s marketing strategy that is solely focused around total bill management. They intend to use online and offline media to build their brand. They also hope to make inroads with companies that want to offer its product as an employee benefit. Interestingly, the company is not currently soliciting banks as distribution partners, but will consider it if there is interest.

Price: All users pay a single rate, $9.95/mo for the first 15 bills each month, then $0.50 per payment thereafter. A 90-day money-back guarantee is provided. But, unlike its two competitors, there is no free trial period.

How it Works:

1. User completes online application.

2. User instructs billers to send bills in care of PayMyBills.com (PMB) in Pasadena, CA.

3. PMB contracts with Imaging Acceptance Corp to scan each bill and post it to a password-protected area in PDF format (user needs Adobe Acrobat to view bills).

4. User is notified of new bill by email.

5. User establishes payment rules (e.g., if less than $100, pay it) for automatic payment or authorizes each payment manually.

6. PMB deducts the payment from user’s account (multiple accounts can be used to fund payment) via ACH five days in advance of due date.

7. PMB sends payment to biller via paper check (or via electronic payment when available) using Chase Manhattan for payment processing.

8. User receives email confirmation.

Notes: PMB emails users if bills are not received as expected; transactions are downloadable into Quicken, Money, or spreadsheets.

Customer Service: The customer service center is located in its Pasadena headquarters and is available round the clock with live telephone support available from 9 a.m. to 9 p.m. The director has call center experience at another idealab! company, CitySearch.

Contact: Robert J. Nighan is Manager of Travelers Bond Financial Services. Bill Gross is idealab! CEO. At PayMyBills.com, co-founders Jeffrey Grass is VP Customer Contact, and John Tedesco is CEO, (626) 535-2848. Address: 130 West Union Street, Pasadena, CA 91103

As we said in our analysis of CyberBills (OBR 3/99), “we think (CyberBills) is on to something big, VERY BIG…you should take a close look at what (CyberBills) has to offer (as a service provider).” The same is true for PayMyBills.com, which may have an even better service, at least on paper. As you can see from the comparison chart about CyberBills and PayMyBills.com are virtually identical in most categories.

Although we have yet to test operational or customer service performance, PayMyBills.com looks to be the frontrunner of the threesome. We especially like the commonsense approach to explaining the new process and its benefits and the bill payment calculator (screenshot below).

“How the Service Works” is a masterpiece of copy writing, using just 62 words and a light touch.

The first bill payment savings calculators we’ve seen. While it doesn’t have the utility of a mortgage refi calculator, it makes sense to provide as many tools as possible. The form allows users to calculate the “true” cost of paying bills including the value of their time.

Note: The asterisk in the lower righthand corner of the above screenshot provides these three numbers from a 1998 Jupiter Communications study: consumers spend an average of two hours doing bills each month; the average cost of a paper check is $0.06; consumers annually incur an average of $42.00 in late fees. In press material, the company says that consumers spend an average of two to three hours; $46 on postage; and $144 on check-writing expenses to pay 12 recurring bills each month.

PayMyBills.com’s home page is tremendous, equaling the "NextCard standard” of just 25 words on the entire page.

The 17 words and three pictures across the top do a far better job explaining the electronic bill payment process than most 1,000-word bank brochures.

Finally, don’t you wish you had thought of this tag line?

live life! we’ll pay the bills.

They say business on the Internet moves fast. That hasn’t been the case in online banking until recently. In the span of just three months, we’ve gone from zero to three companies selling what we’ve dubbed scan-and-pay bill presentment. It’s an online marriage of pay-anyone electronic bill payment and a scanner; with everything posted to a Web site and tied together with email. A brilliant end-run around the behemoths promoting electronic bill presentment, which has been slow to come together given the massive size of the key participants, the large billers.

CyberBills was first to launch in March, earning an OBR Best of the Web designation (see OBR 3/99), PayTrust began a limited launch shortly thereafter, followed by a nationwide rollout in June. Then on July 19 PayMyBills.com debuted and also picked up an OBR Best of the Web designation.

Both CyberBills and PayMyBills come out of California; CyberBills from the Valley, PMB from LA. PayTrust is the East Coast wild card. All three companies are backed by venture funds.

The companies are trying to get a head start on bigger firms such as Checkfree, Microsoft, and Yahoo! to become the preferred place for consumers to receive and pay their bills. At first, they will be operational nightmares: changing addresses of client billing statements, scanning bills, emailing payment due notices, and mailing paper check payments. But as more and more bills are converted to electronic format, the economics will become far more favorable.

It’s too early to handicap these three companies. We like the user interfaces and branding of CyberBills and PayMyBill.com, but PayTrust can make up that ground relatively easily. The winner will be the one that can execute on the vision the best. And we think a crucial part will be distribution. These small, unknown companies need established partners to gain credibility and reach larger audiences. None can afford the massive investment in educational advertising it will take to attract a significant user base. After all, how many people are going to hand over their billing statements, account numbers, and personal data to an unknown company in California?

Look for one or more to lock in a portal deal by giving up a chunk of equity. At press time, CyberBills announced a distribution deal with Xoom.com, which has 9 million registered users.

All three will likely seek partnerships with financial institution partners. CyberBills has announced two such distributors, American California Bank (San Francisco; $58 million) www.acbank.com and Southwest Resource Credit Union (Baytown, TX) www.srcu.org The other two are interested in working with banks, but declined to disclose the results of discussions with potential partners. All have names that could work well in a co-branded offering, e.g., <www.yourbank.com/paymybills>.

Several types of companies are likely to be very interested in working with scan-and-pay providers:

• Credit card companies wanting to expand their services and move bill payments into the credit card receivables. (Note: The PayMyBills FAQ even addresses the question of, “Can I pay my bill by credit card,” saying, “not at this time,” making it sound like it may be in the offing.) NextCard would by a likely early entrant, especially given its existing relationship with PayMyBills.com fellow idealab! company eWallet.
• Web financial portals looking to offer a valuable service with little out-of-pocket cost; one that can be used by anyone without severing ties to existing bank or CU accounts.
• Small business portals looking to provide value-added services to their constituents. We think it’s an outstanding small business service and plan to use it internally (see OBR 9/98)

Scorecard: Scan-and-Pay First Impressions

Source: Online Banking Report subjective evaluation, 7/10/99

Price Comparison

Source: Online Banking Report, 7/99

¹CyberBills prices by number of active payees, not by number of payments; so the monthly cost could be substantially higher if the user doesn’t remove payees from active status. CyberBills also offers a $3.50/mo option for five payees and a $29.95/mo option with 25 payees and other premium services (see OBR 3/99 for details).

²Cyberbills free trial is limited to one payee only.

Banks, large and small, are in an excellent position to negotiate favorable licensing deals with scan- and-pay providers. An endorsement from a leading consumer bank could be a key ingredient in vaulting any one of the three into market leadership. Even smaller financial institutions, if they banded together, could strike a similar arrangement. (Note: As a subscriber service, we are volunteering to serve as a matchmaker in building a scan-and-pay buyer’s consortium. If you are interested, email your name, company, and phone number to scanandpay@netbanker.com . We will pass your name on to other interested financial institution parties, and send their names to you. Other than that, all replies will be kept strictly confidential. Financial institutions only, please.)

Since our March review (OBR 3/99), CyberBills has upgraded its look and feel and added an all-important product demo.

CyberBills launched a sister site, StatusFactory.com, offering the same services but with different positioning. Frankly, we don’t get it. To us, the CyberBills brand and Web site is far better.