SAN ANTONIO—Bill pay solutions, often considered a commodity by FIs, may just be the avenue through which fintechs steal a significant amount of business from banks and credit unions.
That is what SWBC is asserting, pointing out that emerging fintechs have set their sites on bill pay, because they see a vulnerability that most of the current solutions offered by financial institutions are not nearly as useful and user friendly as they need to be.
Jason O’Brien, senior vice president of payments at SWBC’s Financial Institution Group, is another who cautions credit unions about the threat from fintechs, adding that CUs likely don’t see bill pay as the way fintechs will steal away members.
Citing bill pay research SWBC has conducted—consumer focus groups and interviews with at least one dozen financial institutions—O’Brien said a problem exists with most FI solutions.
FI Solutions Lacking
O’Brien explained that consumers like many of the bill pay offerings from fintechs and are not very happy with many of the financial institution solutions, saying the latter often fail to address consumer needs and are inconvenient to use. FIs point out that a large percentage of their account holders are still not using their bill pay service.
“In talking with financial institutions we found that 35% to 45% of their account holders are not leveraging their bill pay solutions today,” said O’Brien. “So at any one financial institution there is sizable portion of their account holders who either rejected the bill pay offering or never got engaged. This is an opportunity for credit unions that is not being fully leveraged.”
What is truly concerning, said O’Brien, is the growing interest from fintechs—like Mint Bills—in this space and the amount of capital investors are pouring into those companies.
O’Brien pointed out that an Accenture report found that in 2013 $4 billion globally was invested in fintechs, a figure that tripled to $12 billion in 2014. Last year the total hit $24 billion and projections call for $46 billion in investments in fintechs by 2020.
SWBC’s assessment is that the scenario presents a big threat to CU business, especially as consumers become more accustomed to mobile bill pay interfaces.
Tangible And Tactical
Saying that bill pay is one of the most “tangible and tactical” ways individuals can pay their bills on time and maintain their financial health, O’Brien said SWBC’s research found two primary problems with financial institution bill pay solutions.
“First, the majority of financial institution solutions are not in alignment with how consumers maintain their finances today,” said O’Brien. “In reality, consumers hold funds in accounts that are all over the place. So not having a bill pay solution that is representative of all the funds they have in an inhibitor to paying bills on time.”
The other challenge FI solutions present is the user interface, O’Brien said.
Jason O'Brien
“With the vast majority of the FI offerings, consumers say the information appears very ‘financial,’” said O’Brien. “It is not presented in a way that is easily understandable and usable by someone whose day-to-day finances are stretched. Consumers said this was a big inhibitor to using a financial institution solution.”
Critical Service Component
O’Brien said that credit unions need to take steps to protect not only the 35% to 45% of the membership who are not using bill pay, but also those using their bill pay offering who might leave for a better solution.
“Credit unions need to realize that bill pay is a very critical component of their service, and recognize the threat from fintechs here,” O’Brien said.
O’Brien recommended that CUs make sure their bill pay solutions are “fluid and intuitive,” provide simple access to all necessary accounts, and do not present “barriers” at the enrollment step.
“We have seen many instances where the onboarding process for bill pay is not easy and simple, creates a barrier, and people walk away,” he said.