Metavante Finds Adoption Rates Climbing for Expedited Bill Pay

Nearly two years after introducing a same-day bill-payment service, Metavante Corp. reported on Tuesday its client financial institutions are seeing a 10% adoption rate among active online bill payers on average after 19 months of offering the product. The average rate after nine months is approximately 5%, the Milwaukee-based banking processor said. Same-day, or so-called expedited, payments have proven to be lucrative enough that banks not offering it “are leaving money on the table,” Chris Burfield, product line manager for e-payment solutions at Metavante, told an audience at TransPay, an electronic-payments conference in San Diego sponsored by the Bank Administration Institute. A client financial institution, State Bank & Trust in Fargo, North Dakota, reported it has achieved a 9% adoption rate among its 2,500 active bill-pay customers in the 17 months since introducing the service in October 2007. Metavante's service, which it rolled out in May 2007, allows financial institutions to offer two ways for customers to opt for expedited payment. By far the most popular method is electronic posting, which lets billers credit payments the same day. This method accounts for 90% of expedited-payment traffic, Burfield said. The balance of activity is payment by checks sent via overnight courier, he said. The latter method is necessary in cases where Metavante lacks direct links to billers' accounting systems. Banks have recently identified same-day payments as a potential source of revenue, since they have largely been unable to sustain consumer fees for regular online bill-pay services. So-called convenience fees for expedited payments totaled $1.3 billion industrywide in 2007, according to Javelin Strategy & Research, a Pleasanton, Calif.-based firm. “We want to be sure financial institutions can share in the revenue,” Burfield said. Reporting data Metavante has gleaned across it portfolio of clients, Burfield said adoption rates vary widely depending on pricing. Banks pricing electronic same-day payments “aggressively,” which he defined as under $3.50 per transaction, are achieving a 10% adoption rate after nine months. Those pricing “moderately” are seeing a 6% rate over the same time span. And for those charging a premium price the rate drops to about 3%. Burfield advised his audience to charge between $4 and $5 for electronic payments. That range, he said, “will maximize profit and revenue to the institution.” State Bank & Trust charges $3.95 for electronic payments and $14.95 for overnight checks, said Erik Holmberg, electronic delivery manager at the bank. Burfield said insufficient data were available to compute adoption rates for varying levels of pricing for the overnight option. Metavante also found that incremental revenue wasn't the only advantage of expedited payments. It turns out that those who use the service become more frequent users of regular bill pay, he said. “This surprised us quite a bit,” he noted. Among all users of expedited payments across Metavante's client portfolio, some 31% became more frequent bill-pay users, while usage among 62% remained flat. Overall, the average number of regular online bill payments for expedited bill-pay users was 9.5 per month 90 days after starting to use expedited payments, up from 8 before they used the service. The processor also found heavier bill-pay users are more likely to use same-day payment. The adoption rate among customers who made 16 or more bill-payment transactions a month was 10%, compared to just over 2% for those who made less than four a month. Still, while expedited service if priced right can be lucrative, Burfield cautioned that banks shouldn't look for it to recoup all or most of their costs of providing online bill pay. “It will offset about 10% of the cost of offering bill pay by the institution,” he noted.