Billpay: After 20 Years as a Loss Leader, Check/PageOnce Shows Path to Profitability

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In the United States, banks have squandered $10+ billion providing free billpay during the past 12 years. But that’s about to change, if the model from Palo Alto-based Check (formerly PageOnce) takes hold.

First, a history lesson for anyone born after 1980.

For the first few years of the online era (mid-1990s), “electronic bill payment” was offered by banks and credit unions with monthly fees of $5 or $6. That made it roughly breakeven, at least if you didn’t count the sometimes heavy burden on customer service to solve problems caused by the very analog back-end of the so-called “electronic” service.

But then in 2002, Bank of America ruined even that by offering free billpay and advertising it widely on television (note 1). It even released internal data purporting to prove that what the bank gave up in fee income was more than compensated by intangibles such as higher deposit totals and lower customer churn (note 2). I like to think that if Bank of America had read their OBR more closely, it would be booking an extra $300 million per year in fee income (note 3), but I digress.

Back to present day: American consumers have grown accustomed to free billpay, and I don’t think that will change. But that’s what makes Silicon Valley’s mobile-billpay upstart so intriguing.

Let me introduce you to Palo Alto-based Check (still better known as PageOnce) which originally launched as a personal scheduler (hence, the original name). It quickly morphed into the first native mobile PFM, landing on the scene in 2008, just a year after Mint launched.

But given the difficulty of monetizing budget-and-spending PFM, Check has tried several ways to earn revenue including offers, credit bureau monitoring, subscription billpay, and now transaction-fee-based billpay. Apparently, the last has the most promise, so the company rebranded as Check (with URL check.me), a big risk given the prominence of its PageOnce brand.

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How it works
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1. Choose biller from previous entries or add a new bill (see screenshot #1)

2. Enter account number with biller OR enter username and password and a check will download for you (screenshot #2)

3. Choose amount (screenshot #3)

4. Choose speed of payment (screen #4):
– Scheduled
– Send now: Standard
– Send now: Expedited

5. Choose payment type: Credit card, debit card or bank account (screen #5)
(Note: credit card option is not available for paying other credit cards, which is a Visa/MasterCard rule according to the company).

6. Confirm and pay (screenshot #6)

And now for the twist. Were you imagining this service displayed across your spacious desktop browser? No way. This is mobile-only and works like a charm, though the fees are a little confusing (see below).

The mobile interface is great, using state-of-the-art technology tricks to cut down on data entry:

  • Mobile camera used to import card details, powered by Card.io (see screenshot #8)
  • Account aggregation to gather billing info (note 4)
  • Comfortable mobile layout for selecting payment options

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Pricing
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Check has free billpay of course. Just enter your bank account details, schedule the payment at least a week in advance, and you are good to go. However, for those not quite as organized, or who don’t like revealing their checking account number, users can choose to pay a 4% fee (min. $4.99) to pay via credit/debit card within two to three days. Or for $6.99 (flat), the payment can be made the next day.  

Here’s the freemium pricing model:

   3-to-5 day ACH >> Free for any size payment (subject to account-specific maximums)
   2-3 day debit/credit card >> 4% service fee (minimum $4.99)
   Next-day debit/credit card >> $6.99 flat-rate service fee (note 5)

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Analysis 
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Check’s billpay system is designed for the mobile channel. For the most part, it works. Allowing users to easily choose payment source and delivery date (including next day) is critical to making billpay valuable. Banks would be wise to use a similar design (or license from Check), to increase fee revenues. I think it’s entirely possible that billpay becomes a stand-alone profit center under this model (note 6).

That said, with three or more payment sources combined with three payment speeds, scheduling new payments can get confusing, especially trying to determine tradeoffs between speed, source and price. When I originally set up the account, it seemed relatively straightforward. But when I went back the next month, it was hard to re-engage.

The company also needs to help users choose the payment method providing the best bank for the buck (optimizing price, speed and convenience). The company recently added a pop-up box (screenshot 7) that helps. And the applicable service fee is clearly shown at every step of the process, albeit in fairly small type (screenshot 6). I understand the company needs expedited and/or card-based payments to make a profit (similar to how PayPal defaults users to bank transfers instead of credit card payments). But users need to fully understand their options throughout the process (note 7).

Long-term, the Check service is more valuable if its users become accustomed to paying all their bills from the site, even if most are free bank transfers. That way Check becomes the go-to spot for billpay, and are more likely to be remembered when users need expedited payments or a credit card charge when funds are low.  

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Screenshots
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#1 (left) Bills due list
#2 (right) Add a biller form

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#3 (left) Choose amount
#4 (right) Choose payment speed

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#5 (left): Choose payment source/type
#6 (right) Confirm payment screen (with fee disclosed)

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#7 (left) Clicking on “?” on screen 6 launches a box with the fee schedule
#8 (right) Add credit and debit cards via scan

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Notes:
1. For more details of the history of billpay pricing, see our post from 2004 and OBR #109, Pricing Online Services (subscription, Aug 2004).   
2. I have read dozens of these case studies, and I still don’t believe that anyone has proven that billpay CAUSES those results. Everything I’ve ever seen proved CORRELATION. Yes, billpay customers are more profitable and more loyal. But they would have been anyway without without subsidizing them with a costly, trouble-prone service. I still maintain that lifetime statement archives would be a better retention device, and far less expensive than free billpay (see OBR 118, Lifetime Statement Archives (subscription, June 2005).   
3. Assume Bank of America would have 5 million active billpay customers paying $5 per month x 12 months = $300 mil 
4. Hopefully, it’s only a matter of time (and a licensing deal with Mitek), before Check imports the billing statement directly into its app.
5. Due to its various payment-provider contracts, Check’s expedited payment pricing doesn’t always seem logical. For example, the company charges a flat fee of $6.99 for next-day delivery of any size payment. But for 2- to 3-day service, the charge varies by payment size (4%) with a minimum of $4.99. So, for any payment above $175, it’s cheaper to send overnight than via the slower 2- to 3-day service. On a $500 payment, that’s a savings of $13 to send overnight. To pay my current statement balance, it cost $90 to send via 2- to 3-day service or $6.99 overnight, a whopping $83 savings. And Check does not mention this when you cue up a $2,000 payment.    
6. Besides fees based on transaction speed and payment source, we also believe there are significant potential revenues from credit lines used to cover payment-account shortfalls and the newest fee-income opportunity, expedited mobile check deposits (see IngoMoney, believed to be powering Regions Bank among others).
7. In the month I’ve spent testing the service, Check has made the service fee much more transparent, so I believe they are moving in the right direction. 

Fintech Four from Last Week

Since my previous Fintech Four (when Bitcoin was a lowly $200), it’s been an interesting few weeks. Here are the standouts last week:

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One: Coin is an overnight YouTube sensation
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image Who would have guessed a $50 payment gadget could be a viral hit? In the week since it was announced, the 105-second demo video (made Sandwich Video) has racked up more than 6 million views, 26,000 likes, and almost 9,000 comments. The company said it’s original $50,000 crowdfunding goal was hit in 47 minutes, they have not said how many have been sold since. According to a button on its site, the pre-order period will last 30 days.

Many of speculated about why this happened, but the most concise summary is on Quora written by Brian Roemmele. He lists five reasons:

1. The product solves a real problem, too many cards in the wallet

2. Coin implies there is a limited supply

3. It was selling at for a limited time at 50% off

4. It appealed to early adopters with a blend of “old” meets “new”

5. $5 referral credit (against the $50 cost) with a built-in sharing button at the end of the purchase process.

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Two: The latest fintech prize winners
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Fintech startups have been taking home awards at various fall tech events this fall. Here are six winners in from the past 10 days:

1.  imageFinovateAsia Best of Show winners from Singapore (post):

image2. Innotribe Disrupt winner at NextBank LatinAmerica (Bogota, Columbia)

  • Intoo, a 6-person Brazilian small business financing portal, won the Latin American round of the year-long Innotribe contest 

image3. Get In the Ring winner at this Dutch startup competition (Rotterdam)

  • EyeVerify (FinovateSpring 13) took home $11,000 in cash, plus a potential million euro investment, for its eyeprint authentication technology (post)

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Three: Finovera launches “PFM for your bills”
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Finovera (FinovateSpring 13), officially launched its billing/PFM portal and landed a favorable TechCrunch post. The service competes in the PFM space, but is more focused on the billing and payments side (along with Manilla and doxo). Unlike analyzing/charting spending, the process of organizing, paying, and archiving bills is a near-universal need. So, it’s an area that retail banks should pay close attention to (note 1). 

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Four: Virtual currencies gain more real-world backing
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U.S. regulators didn’t exactly endorse Bitcoin and other virtual currencies, but they didn’t condemn it either (Financial Times article). That was enough to send prices through the roof, touching $900 by some reports, a nice 50x gain since Jan 1. Most assets that appreciate so rapidly fall back to earth, but no one knows for sure if Bitcoin isn’t than 1-in-a-million item that defies common sense.

But this is not JUST a Bitcoin story, it’s about the “Internet of money.” And it could be the biggest financial innovation since the credit card. However, it’s still boggles my mind that regulators who are having a hard time letting normal people invest in privately held companies, are not clamping down on unregulated virtual currency trading. This story is far from finished. 
 

Table: USD value of a Bitcoin at Mt. Gox (last 6 months)

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Notes:
1. For a deeper dive, see our report on paperless billing and banking (Nov. 2010, subscription).
2. All Finovate alum videos are available free of charge at our Finovate.com website. 

First Financial, US Bank Launch First Photo Billpay Services

imageI started this post Monday, before I knew US Bank would be making headlines today as the first “major” bank with photo billpay. I got that news last night, when I updated my US Bank iPhone app (see inset).

But First Financial Bank (Abilene, TX; $3.7 billion deposits) actually imagebeat US Bank ($235 billion) to market by more than a month with its 22 Jan 2013 launch (press release; YouTube video). The bank said it had 12,000 bill uploads during the first 10-days of availability.

 US Bank mobile photo billpayBoth services use the Mitek engine to read the image and handle the OCR work. But First Financial also uses Allied Payment Network to process images that don’t get properly digitized on the first pass and Malauzai Software for app development. 

Like remote check deposit, the system will improve over time as it learns the nuances of the thousands of billing statements fed into the front end. But today, there is still work to be done on the minority of statements that don’t read correctly (see note 1).

First Financial features the new service front and center on its homepage (see first screenshot below) with a clever:

Tell your bills to say, “Cheese.”

US Bank has no mention of it on the front page (nor in site search), but if you navigate to its mobile banking page, you can’t miss it (third screenshot below).

image Bottom line: I’m not sure how many people will ultimately use photo billpay (though First Financial seems to be off to a good start). It’s an interim technology until we can convert the country to ebills.

But since that may be a decade from now, using your smartphone to snap-and-pay is the best answer for now. So, we are bestowing our first OBR Best of the Web of 2013 to First Financial  for raising the bar in remote delivery (notes 2, 3). And an honorable mention to US Bank for getting it out to a broader market.  

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First Financial features its new photo billpay on its homepage (6 Mar 2013)

First Financial Bank homepage featuring photo billpay powerd by Mitek


First Financial landing page (link)

First Financial Bank landing page for photo billpay

US Bank’s mobile page features photo billpay prominently (link)

US Bank mobile banking page featuring photo bill pay

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Notes:
1. Just today, the Chase ATM couldn’t read the amount on a computer-generated check we fed into its deposit slot. So we had to manually add.    
2. This Best of the Web goes to First Financial since it was first. Mitek already won when it introduced the technology in 2010 (see our Online Banking Report on Paperless Banking (subscription).
3. Since 1997, our Online Banking Report has periodically given OBR Best of the Web awards to companies that pioneer new online- or mobile-banking features. It is not an endorsement of the company or product, just recognition for what we believe is an important industry development. In total, 89 companies have won the award. This is the first for First Financial. Recent winners are profiled in the Netbanker archives.

Westpac Launches iPad Banking with Drag-and-Drop Transfers

image Touchscreen technology isn’t particularly game changing in banking. For the most part, users simply look at transactions, type a few numbers, and press a button or two. Touchscreen or mouse, it works pretty much the same. 

However, Australia’s Westpac Bank (creators of Cash Tank and Impulse Saver) has figured out a way to use the swipe motion to simplify the funds transfer process. In its new iPad app (launched today), each account is shown on the screen in a small summary box.

To initiate a funds transfer, users move the summary box for account A over the summary box for account B, then type in the amount (see first screenshot below). Similarly, to initiate a payment, users drag the summary box over to the “payments zone” on the right to begin a bill payment (second screenshot).

Bottom line: While pushing a box around on a screen may not be faster than using a mouse in desktop online banking, it’s an intuitive way to use an iPad app. Kudos to Westpac for incorporating it into their app.

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Westpac (AU) iPad funds transfer (10 July 2012)
Simply drag the “from” account box over “to” account to begin the funds transfer

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Westpac (AU) bill-payment process
Drag to “from” account over to the payment zone on the far right to begin a payment

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Doxo Provides the Missing Login at Small Billers

image I dropped by doxo’s Pioneer Square (Seattle) digs this morning to get an update on their latest news, payment capabilities added to its mobile app. That’s potentially game changing for smaller billers who still struggle with online payments, let alone the nuances of mobile delivery. We’ll get back to that later.

But what opened my eyes this morning was the website of one of doxo’s smaller clients, the Lake Stevens Sewer District, which serves 10,000 customers in a community a half-hour north of Seattle.

The utility, like 54% of the billers in doxo’s database, had no online account info available prior to adopting doxo Connnect. Now, customers visiting the utility’s homepage are directed to login in to doxo to view AND pay their bill online (via ACH), for free. Previously (note 1), customers could use an online form to pay via credit card. But this required filling out the form every month and paying an extra 3% to 7% convenience fee.

Not all customers are going to like the requirement of creating an account at a third party. But considering the alternatives, mailing a check or filling out a form and paying a $5 fee (note 2), it’s pretty compelling. And as more people get used to logging in at various sites with their Facebook or Twitter credentials, the doxo Connect option for bills makes perfect sense. You could even say it fits the bill (sorry).

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Lake Stevens Sewer District offers doxo Connect login on its homepage (link, 4 June 2012)

doxo payment at Lake Stevens Sewer District

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Notes:
1. The credit card option is still offered, see "Pay Here" link in the middle of the homepage (under the photo of the lake).
2. Of course, a number of the utility’s customers will continue to pay their bill via bank billpay systems, generally free of charge. But that’s not really a choice for customers visiting www.lkstevensewer.com looking to make a payment and/or review their account info. 
3. For more info, see our report on paperless billing and banking (Nov. 2010, subscription).

Citibank Helps Users Better Understand Prior Payment Activity When Paying Credit Card Bill Online

image As I was paying my Citibank business credit card bill last night, apparently one day late (oops again), I noticed three new data fields to the payment summary box (note 1):

  • Dollar amount of payments in process as of today from any channel(note 2)
  • Number of payments made online this statement period
  • Dollar amount of payments made online this statement period

Consumers often forget whether they’ve paid the bill or not, so it’s important to provide help so they needn’t click around the site, or worse, call customer service.

While I love the functionality, the bank could have been a bit clearer in language used. For example, I don’t think real people call their credit card payment a "payment request." While that term satisfies the legal folk, who I’m sure argued that it’s only a "request" until the money actually arrives, it’s not consumer-friendly language and the bank does not provide an explanation.

Lastly, there’s an unfortunate lag in the updating of the "payment in progress" field. Immediately after paying my $30.80 statement balance, it shows up in the "online payment requests" field, but not in the "payment in progress" (see first screenshot). A day later, everything was in sync (second screenshot).

Despite these drawbacks, it’s a good improvement in transparency, and every issuer should offer similar info.

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Citibank online credit card system (16 May 2012)
Note: This screenshot was taken after I’d paid the statement balance, so the "requests" fields shows 1 payment for $30.80. Unfortunately, "The Total Payments in Progress" did not reflect that yet, a confusing misalignment of posting times. 

Citibank online payment info box

Payment info box a day later (17 May 2012)
Note: Now the dollar amount in both fields match up.

Closeup of Citibank online credit card payment box

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Note:
1. To be honest, I’m not sure how long this data has been available. It’s possible the bank has been showing it for a long time and I just hadn’t noticed. Perhaps someone from Citi will comment and I’ll update the post.
2. The exact explanation of this field from the Citi help popup:

This is the total amount of payments that you have recently submitted that have not yet posted to your account. This amount includes payments made through: Online Bill Pay, AutoPay or Pay by Phone. Please Note: Any payment made on a weekend or holiday will be applied as of the day you make it. However, it will not be posted until the next business day. Any payment scheduled to be applied for a future date is not included.

Pageonce Removes Billpay Subscription Fee in Favor of Per-Transaction Pricing

imagePageonce, the largest PFM from a company not named Intuit, is abandoning its $4.95/mo subscription for mobile billpay and moving to a yet-to-be-determined transaction fee for each bill paid (note 1). The change was revealed at Monday’s Future of Money conference and I confirmed yesterday with COO Steve Schultz.

image The company has been testing various price strategies and found that per-transaction prices were more popular with customers. Its model predicts a five-fold increase in volume with the new fee structure, moving from $40 million annually to $200 million (note 2).

Schultz speculated that customers are used to paying this way for financial services. And it helps that an electronic billpay transaction displaces an out-of-pocket cost of $0.50 or so (stamp & paper check).

Pageonce is positioning itself as a mobile wallet, starting from a position of strength on the billpay side, rather than POS transactions. Schultz says eventually they’ll be at the point of sale and P2P as well. Because those three activities are all part of the “wallet experience.”

But the company is not abandoning its PFM roots. Mobile wallets also need tools to manage and track spending. Pageonce is chock full of those. 

The company’s business model going forward largely focuses on offers and lead-gen, similar to Mint. But it’s also not completely subscription-fee averse. Its mobile credit score/monitoring service, Credit Guard, is priced at a very competitive $6.99/mo.

My take: While I can’t point to specific tests of my own, most banks that have experimented with transaction fees have found them to be quite unpopular (of course, so are subscription fees). My advice <cue broken record>, for banks anyway, is to bundle several value-adds popular with the target segment and sell the package for a monthly subscription fee (or a discounted annual fee for your fans) (note 3).

How they do it:

  • Billpay processing is powered by TIO Networks (note 4).
  • Account aggregation was built in-house
  • Credit Guard is powered by IdentityIQ

Pageonce showcases its apps for every major mobile platform (link, 25 April 2011)

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Notes:
1. The company is testing fees from $0.25 to $1.00 per bill. I see no reason to undercut the price of postage, so I’d guess they end up closer to $1.
2. Assuming $1,000 in monthly billpay volume per active user, that implies the company currently has only 3,000 active billpay users.  
3. For more information on subscription pricing for financial institutions, see our Online Banking Report (May 2011).
4. See TIO Networks demo at FinovateSpring May 8/9.

Self-Serve: Chase Bank Allows Users to Create Their Own Billpay “Proof of Payment” Letters

image Last night, my son was having trouble convincing his college landlord that the Feb rent payment had been sent via online billpay. I was not happy, envisioning an extended conversation with bank customer service, something that is very, very low on my list of Monday night activities.

So I logged in to the Chase account to see if the check had cleared. At best, I expected to see that the payment had been sent via billpay, but no way to prove that the check had actually arrived. 

Bit I was pleasantly surprised. Not only could I see that the payment had cleared, the bank had posted an image of the check so I could see the landlord’s endorsement (see screenshot 1 and 2).

That was great on its own. But wait, there was more.

The bank offers a self-service “Note to Payee” function that automatically creates a letter to document payment details, including a copy of the check image (see screenshot 3). All you have to do is download the PDF and attach it to an email to the payee.

The only hitch in the system is finding these functions. They are located under the Payments & Transfers tab (see screenshot 1). That’s not bad, but it would be more intuitive to place a direct link from the the online statement (My Accounts) to the bill payment details. Also, the “Print to PDF” button is easily missed (screenshot 2).

Still, the entire process took less than two minutes. And I didn’t have to call customer service, a saving of 15 minutes of my time and $15-20 in customer service expense by the bank. 

The letter worked perfectly. Within an hour, the landlord had backed down, apologized for her error, and went back to her day job. This pretty much makes up for the unreadable bit of correspondence I got from the bank last week. 

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1. Chase bill payment activity screen (14 Feb 2012)

Chase bill payment activity area within online banking

2. Chase proof-of-payment screen
Note: Print to PDF option

Chase bill payment details page


3. Chase automatically generated “Note to Payee” letter in PDF format

Chase proof of payment letter
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Note: See our Online Banking Report for more info on bill payment, messaging, customer service and much more.

Pageonce Adds Billpay; Showcases Multiple Mobile Apps on Single Page

image Last week, we looked at how Square makes a single webpage look great across various mobile platforms. Today, we look at the exact opposite problem. How to showcase your various mobile apps on a single webpage. 

Pageonce does it as well as we’ve seen, using a single showcase panel that includes all five of its mobile app platforms across the top: iPhone, iPad, Android, BlackBerry and Windows. Users can scroll horizontally to see two sets of screenshots for each platform.

The company also includes version number, date of the last update, and app size in the lower right corner. And of course, there’s a link to download the appropriate marketplace to download the app. The Android page uses a QR code instead of a link.

In other news, Pageonce added bill payment to its iPhone and Android app today, moving ahead of Mint in the features arm race. The new Gold service, which we haven’t tested yet, is priced at $4.99/mo, good news for fee-starved online financial providers. Mint says it has bill payment coming too. It will be interesting to see if they put a fee on it.

Relevance for Netbankers: The addition of transactional services such as bill payment makes third-party PFMs, or virtual banks such as BankSimple, bigger threats to mainstream banks and credit unions. As uber-consultant Richard Crone always says, "He who enrolls, controls."

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Pageonce iPhone app

Pageonce iphone app showcased on its website

iPad

Pageonce on ipad

Android

Pageonce on Android

BlackBerry

Pageonce on BlackBerry

Windows

Pageonce on windows phone

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Note: We cover mobile banking and payments periodically in our Online Banking Report (subscription).

PG&E’s Convenient Mobile Bill Payment App

image Skimming my news feeds in the post-Finovate logjam, I flagged a news release about a new app that just landed in the Android Market (the iPhone version rolled out last December). The app allows Californians to easily pay their PG&E power bills from their mobile phone using a credit/debit card or checking/savings account. It’s powered by Tio Networks

And while you’d think that three years into mobile app era, there’d be hundreds, if not thousands of similar apps, a quick search of the Apple App Store came up empty (see note 1). 

The app is drop-dead simple to use, as it should be (see screenshots below). The amount owed (across multiple PG&E accounts if necessary) is shown. Then, users select payment method, "sign" the screen with their finger, and submit. An email confirms the transaction.

TIO levies a $1.45 transaction fee per payment (well disclosed, see second screenshot below), which is a buck more than a stamp, but it also gives customers the option of paying by card, something that can’t be done in the mail, online or in person. And payments received by 5pm are posted the same day, an important benefit for the large segment of the population that prefers to pay bills at the last minute.

Summary: Company specific same-day billpay apps are a great convenience for the majority of customers who pay their bill upon receipt (rather than relying on automated options). We expect to see many more like this. FIs and payment processors that serve billers would be wise to help them mobilize their payments.

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PG&E mobile billpay screenshots (iPhone version)

image  image  image

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Notes:
1. There are likely at least a few others that I didn’t find. The app search tools are not super sophisticated.
2. As of 7 July 2011, there are more than 425,000 available apps and more than 15 billion cumulative downloads.