Promise of Bill Pay
New payments rails and technologies are enabling financial institutions, billers and FinTechs to deliver fundamentally new experiences in bill pay and personal financial management.
Bill pay has emerged as a key product to retain and engage customers in markets where loyalty is increasingly challenging. Recognition of this is driving increased competition to control the payment rails, value added services and user interfaces associated with bill pay. Four emerging trends are redefining the bill pay experience…and the players that control the underlying economics and relationships.
- Bill pay is at the heart of personal finance
Bill pay is a high frequency, recurring consumer behavior. It is also an opportunity to differentiate, since most providers’ experiences have not materially changed in decades. We don’t believe consumers are seeking a fundamentally new way to pay their bills – but they do want a trusted partner that can help them manage their upcoming expenses and protect their financial lives more holistically. A new value proposition for bill pay has to be centered around four key components:
- Value beats convenience – consumers want services that enable them to manage – not just pay – their bills
- More is better – the larger the number of biller end points in the directory (for presentment and reconciliation), the greater the appeal of a particular bill pay solution
- Choice is king – consumers want the ability to direct payment via their method of choice (incl. alternative financing) and get proof-of-payment in real-time
- Delight drives habit – clarity, comfort and convenience of paying bills will determine whether consumers consistent adopt and use a bill pay product
- The dominance of bank-centric bill pay has declined with the rise of biller direct
Consumers are increasingly placing their payment credentials on-file with billers. This is especially the case with high velocity recurring service providers like Verizon, Amazon and Netflix. This change in consumer behavior has led to a market shift:
- Banks can facilitate but not displace the relationship between next gen direct billers (e.g., Netflix) and their customers
- The growth of embedded credentials across new categories (e.g., marketplaces, on-demand services, etc.) has reinforced and created new needs across billers and consumers
- Legacy bill pay solutions in the market are unable to fully meet these needs – because of insufficient biller connectivity, limited user scale, unsustainable unit economics, or inadequate functionality
- Proliferation of credentials-on-file is creating increased customer friction
The rise of biller-direct bill pay has forced consumers to place their payment credentials across an increasingly disparate set of biller and merchant sites. This introduces the potential for significant friction – with the need for multiple passwords, a lack of data portability, and the absence of a single view across accounts.
- Opportunity exists to become the ‘hub’ for bill pay – centralizing and simplifying credential provisioning, management and servicing
- Other services – like tokenization and account updating – are critical to protecting and optimizing payment processes around billing
- Emerging infrastructure efforts will enable new experiences and drive competition
Card networks, large banks, and incumbent processors are trying to build and scale proprietary infrastructure solutions to billers, consumers and other FIs (often coupled with other products).
- The main profit pools for bill pay are centered on the rails (for payment) and the directory (for presentment) – owning the infrastructure means controlling these profit pools
- Newer competitors provide stand-alone solutions, focused on directly acquiring consumers through branded payment applications OR providing enhanced payment and biller connectivity to incumbent players
- New business models leverage alternative funding flows to route the transaction and capture better economics
What does this all mean for us?
We believe that the market is ripe for new solutions that enable banks to provide the best possible experience with the best possible economics, consumers to have maximum choice, and billers to receive funds fast and seamlessly. This guided our investment in BillGO: a modern platform that provides digital bill presentment and payment while leveraging different rails to create benefits for all ecosystem players.
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