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Bank-hosted consumer bill payment has been fading in popularity for years, but recent trends are giving Mastercard hope of reversing that trend.
Several new partners recently joined Mastercard Bill Pay Exchange, a hub Mastercard is developing with banks, billers and fintechs to streamline $4 trillion processed annually in consumer bill payments.
One new participant is Kubra, a Tempe, Ariz.-based biller platform that reaches 40% of U.S. households and some of the largest utility, insurance and government entities.
FIS and Wescom Credit Union have also signed on with Bill Pay Exchange, joining
Mastercard designed its hub for banks to offer consumers a mobile-first approach to real-time bill payments, aiming to reverse the growing trend of consumers using smartphones to pay bills directly at billers' websites.
Banks face a tough challenge in getting consumers to return to banks for turnkey bill payments. Only about 25% of all U.S. consumers’ digital bill payments are paid through banks' billing portals, down from about 50% more than a decade ago.
“Many banks originally charged fees for consumer bill payment, but when many began offering it for free, bill payment became a cost center without a lot of innovation,” said Sarah Grotta, director of debit and alternative products advisory at Mercator Advisory Group.
Billers meanwhile developed more ways to get paid directly by consumers via ACH, cards and Apple Pay, with reminders and instant confirmations of bill payment, Grotta said.
The result is a sprawling consumer bill-payment landscape with many parties working on digital solutions, reaping fractional fees that come primarily from billers.
But bill payment has a close connection to consumers' core banking habits, and as consumers face growing complexity in managing routine bills and rising subscription payments through digital channels, streamlining is becoming a priority.
“In surveys consumers say they want to see all their bills at once and know what their account balance is, and banks are still in the best position to do that,” Grotta said.
Bill Pay Exchange uses two levels of technology to directly connect financial institutions and billers, said Manal Toukan, senior vice president of product management for North America at Mastercard.
Mastercard's 30-year-old Remote Payment and Presentment Service connects to most U.S. financial institutions and over 150,000 billers, with real-time payments technology provided through VocaLink, which Mastercard purchased in 2016.
“We’ve signed several new commercial agreements that will enable billers to further reach their customers at thousands of banks with real-time messaging and streamlined reconciliation, and consumers will be able to view, manage and pay their bills without having to set up accounts with multiple billers or remember multiple passwords or due dates,” Toukan said.
The combination of streamlined, real-time bill payment capabilities plus the broad shift to digital payments caused by the pandemic may be a tailwind for Bill Pay Exchange’s growth, Toukan suggested.
For billers, Mastercard’s hub offers an opportunity to streamline payments arriving from dozens of different paper and electronic channels.
“Billers are eager to go paperless, because the cost of mailing and managing paper bills, and reconciling errors, can be substantial,” Toukan said.
After running
“Each customer is at a different stage of implementation, with some already complete and some just getting up and running,” Toukan said.
