A Fast Start for Online Resources’ Expedited Bill-Pay Offering

Internet banking and bill-payment services provider Online Resources Corp. this week unveiled its expedited bill-pay service for financial institutions and walk-up providers to offer to consumers and small-business users, ratcheting up rivalries in the fast-growing realm of last-minute payments. While the expedited bill-pay market has some bigger competitors, including Fiserv Inc., MoneyGram International Inc., and The Western Union Co., Online Resources has an ace up its sleeve?the 1,400 banks and credit unions for which it already provides other bill-pay and online banking service, and its hundreds of connections to billers. In announcing its expedited offering this week, Online Resources said some 500 of its financial-institution clients already are offering it. Chantilly, Va.-based Online Resources began testing the service last year. In addition, some 3,000 walk-up bill-pay locations are using the new expedited service, according to Sheila Narayan, executive vice president and general manager of banking payments services at Online Resources. Although not disclosed until now, Online Resources' service actually went live in early April. “The early results are very good,” Narayan says, declining to give transaction figures. She does say that 1% of eligible payments at the financial institutions and walk-up providers are going the expedited route, a percentage Online Resources plans to grow. Bill-pay providers are clamoring to offer expedited payments to round out their current product offerings that offer later posting times and because of the profit opportunities. Financial institutions now offer most bill-pay services free through their online banking sites, but because an expedited payment guarantees same-day posting, consumers are more willing to pay banks or billers a fee in order to avoid higher late fees or service cut-offs. “It's a new source of revenue for them,” says Narayan. Credit card issuers often charge $39 for overdue payments. Card issuers are the top category of payees so far. “It definitely is resonating,” says Narayan. Online Resources has its own revenue arrangements with the financial institutions and walk-up provider that Narayan wouldn't disclose. Those entities in turn set their own pricing to customers. In a typical arrangement with a bank or credit union, Online Resources integrates its services into the financial institution's online-banking site. Expedited payments use Online Resources' proprietary gateway, which has 50 connections to ATM networks and core processors to provide real-time links to the payers' checking accounts. Online Resources had 9.34 million users of its payment services, including bill pay, as of March 31, up 49% from 6.27 million a year earlier, according to the company's first-quarter report. The number of payment users through financial institutions grew 14% to 3.73 million from 3.26 million in 2007's first quarter. The number of payment-services users from what Online Resources calls its eCommerce segment, which consists of direct billers, credit card issuers, processors, and some very large online billers, grew much faster?5.6 million users as of March 31, up 86% from 3 million a year earlier.