With its pending $750 million acquisition of The Western Union Co.’s bill-pay subsidiary Speedpay Inc., payment-software and processing provider ACI Worldwide Inc. will gain control of a profitable operation that made a name for itself in expedited payments.
“Speedpay invented the expedited-payments market,” says Richard K. Crone, chief executive of San Carlos, Calif.-based payments advisory and research firm Crone Consulting LLC.
Expedited bill payments allow consumers to make last-minute payments to utilities and other billers for a fee, thereby avoiding a higher late fee. Such payments started becoming popular about 15 years ago as consumers began wanting to use debit cards to make such payments, especially as due dates approached, but many billers still did not have merchant accounts. Even when they did, in some states regulators banned utilities from passing on payment card discount rates to consumers in the form of convenience fees.
Speedpay stepped into the void with its expedited-payment service. “Western Union’s Speedpay solved the problem for them,” says Crone.
Other bill-pay providers at the time began copying Speedpay, according to Crone. They included BillMatrix, now part of Fiserv Inc., Princeton eCom, Online Resources, and Western Union rival MoneyGram International. Online Resources bought out Princeton eCom before itself being acquired by ACI in 2013.
The closer the due date, the higher the fee, generating substantial revenues for the providers, according to Crone. At first, the payment providers largely kept expedited and related convenience fees to themselves, but over time billers demanded more of the revenue, he says.
Still, Speedpay has remained strongly profitable. The business generates $350 million in annualized revenue and $90 million in earnings before interest, taxes, depreciation, and amortization, according to Naples, Fla.-based ACI.
That revenue comes via only 270 billers. In contrast, ACI’s existing bill-pay business serves about 3,700 clients but likely generated less revenue last year than Speedpay. According to an ACI regulatory filing, bill payments produced $204.7 million in revenue in 2018’s first nine months, implying an annual run rate of about $273 million. ACI declined to discuss its bill-pay financials.
Current ACI bill-pay customers include health-insurance providers Anthem and Blue Cross Blue Shield, the Internal Revenue Service, and American University, the company said. Sanjay Gupta, executive vice president of ACI’s On-Demand Solutions unit, tells Digital Transactions News by email that leading biller categories for the combined ACI-Speedpay will include consumer finance, utilities, insurance, health care, higher education, and government.