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Check's technology, with Intuit's marketing budget behind it, could shape consumers' expectations of bill pay through their financial institutions and inspire entrepreneurs to cook up similar software to disintermediate banks.
May 29 -
Taking their cues from popular consumer brands and digital upstarts, financial institutions are modernizing their websites, ATMs, and mobile apps in hopes of creating a better digital banking experience and, ultimately, attracting and retaining more customers.
March 7 -
The Minneapolis bank has found a novel way to persuade depositors to try online bill pay -- a service known to discourage customers from moving accounts but that banks nationwide are struggling to get more accountholders to use.
January 28
The data entry chore of paying bills electronically is becoming more of a snap on camera-equipped mobile devices.
A small but growing roster of banks including U.S. Bancorp and BBVA Compass are letting customers use the camera on their mobile devices to take pictures of bills to pay them.
With mobile expected to supplant online as the No. 1 method for paying bills within the next four years, somebanks are eager to find new ways to improve the mobile experience and keep customers from paying monthly or one-time bills through rival services. Tech heavyweights such as Google, Apple and PayPal, and upstarts firms like Check, are all potential threats to banks' historical dominance in payments and industry observers say that upgrading apps to better accommodate bill payments is crucial to attracting and retaining customers.
"Bill pay on mobile is really significant," says Matt Krogstad, vice president for mobile banking and payments at Bank of the West, the U.S. banking unit of France's BNP Paribas. "Leveraging the camera to make banking less like work is a huge opportunity."
Krogstad declined to give specifics on his bank's mobile aspirations, but industry watchers agree that quick-and-easy mobile banking features can make a difference when it comes to customer retention.
"If you give a customer an experience that is easier and delightful, they won't leave," says Mary Monahan, executive vice president and research director of mobile at Javelin Strategy & Research.
Enhanced mobile bill pay is especially important to millennials. According to a recent report from the business advisory firm AlixPartners, 28% of Americans between the ages of 26 and 34 would be likely to change banks to gain access to mobile photo bill pay.
Of course, there's no guarantee that enhancing the mobile experience will improve banks' bottom lines. Indeed, industry analysts note that the mobile push does nothing to address the fact that bill paying services are still a cost to banks, not a moneymaker.
Still, banks already offering photo bill pay view the feature as way to attract and retain customers. The hassle of re-entering batches of payee data is a big reason why customers are reluctant to switch banks. As banks let customers pay bills or enter data simply by snapping a photo, consumers might find changing banks to be less troublesome, observers say.
Niti Badarinath, the senior vice president and head of mobile banking and money movement at U.S. Bank, says he believes the early adopters have a competitive advantage because they can be fine-tuning their bill payment apps while late-to-the-game rivals are still building theirs.
"Using images to digitize data is a way to solve a pain point of entering information into smartphones," said Badarinath at the recent Digital Banking Summit. "We will take imaging further and further."
Still, some banks may be reluctant to invest in new mobile features because they question the benefits of offering bill pay. Yes, consumers are demanding it, but banks need to devote more time and energy into figuring out how to profit from it, some observers say.
"The larger story is bill pay is a flawed financial model," says Bob Roth, managing director at Cornerstone Advisors. "I think it has been for some time."
Bill pay is free for consumers but banks pay their vendors transaction fees on behalf of their customers. Those fees haven't decreased much over the years, even when transactions cost just pennies to process, according to Cornerstone, which reviews vendor contracts.
Sure, the price typically factors in added expenses like customer service, and banks are more than happy to eat those costs for customers who are profitable. Then, bill pay vendors position the capability as something that drives engagement, including but not limited to, cross-selling revenue-generating services like mortgages. Plus, the feature could now include peer-to-peer payments and expedited payments -- both of which banks could profit from directly.
Nonetheless, Cornerstone views the pricing model as ripe for change. "The issue is cost of delivery," says Terence Roche, partner at Cornerstone Advisors. "Bill pay pricing will have to compress."
If not, banks will need to find other ways to profit from offering digital bill pay.
Jim Bruene, founder and editor of The Finovate Group, says banks should look at Check's model.
The mobile-first service, which has been
Like Check, banks could offer better mobile experiences that give consumers payment options credit, debit and ACH and then charge them for making certain transactions.
"I've always been against it being free," says Bruene.
