Yodlee Pairs Up with Western Union in Expedited Bill-Pay Play

The already competitive world of electronic bill payments heated up this week with the announcement that wire-transfer leader The Western Union Co. and payment-technology provider Yodlee Inc. together will provide online bill-payment services, including expedited bill payments. Their pitch: direct access to more than 4,000 utilities, financial institutions, mortgage companies, insurers, and other billers that accept payments though Western Union, and potential fee income for financial institutions with a service most banks give away today. Dubbed YodleeBillPay PayItAll, the service includes same-day and next-day payment services. Yodlee's target clients are financial institutions, who can either license its software or use it on a hosted basis. “We've got the best front-end and middleware technology, we believe,” Joseph Polverari, senior vice president of strategy and development at Redwood City, Calif.-based Yodlee, tells Digital Transactions News. “And Western Union's got these 4,000-plus biller connections.” Although banks promote their Web sites as convenient, single places to pay multiple bills, Yodlee says they often fall short in meeting demand for same-day or even next-day posting because they can take several days to process a payment, with billers sometimes even being paid with a paper check draft. Three large financial institutions are using PayItAll now. Polverari is shooting for eight of the top 250 financial institutions as users by the end of 2008. Yodlee is providing the interface and back-end technology; Western Union is processing and settling the transactions. Payments may be funded with automated clearing house debits from the consumer's demand-deposit account, or by the consumer's credit or debit card. For Englewood, Colo.-based Western Union, the partnership should build new transaction volume beyond its big biller-direct business. The company generates most of its U.S. bill-pay business today through its 48,000 walk-in agent locations and through its Speedpay and other electronic services that include collections and mortgage payments. With Yodlee, it sees an opening into bank and credit-union Web sites, where bill payments are growing at double-digit rates even though most consumers still have never used them. “We're in a biller-direct model in the way we've built our business,” says Royal Cole, executive vice president of Western Union Payment Services. “We're branching out.” The Yodlee-Western Union partnership puts more heat on online bill-pay leaders such as CheckFree Corp., which is being acquired by Fiserv Corp., Metavante Corp., and Online Resources Corp. Yodlee, which has methodically rolled out specialty software for mobile payments and other services in recent years, has a stronger sales pitch for financial institutions by its linkage with the No. 1 wire-transfer player. “The deal with Western Union will considerably enhance Yodlee's competitive profile in online bill payment,” Gwenn Bézard, research director at Boston-based Aite Group LLC, said in a statement. “It now can claim to have the strongest offering in expedited bill pay.” Aite estimates that in expedited bill pay, Western Union was the market leader in 2006 with a 45.9% share through its various channels compared with Fiserv's BillMatrix at 25.3% and CheckFree's PhoneCharge at 5.6%. Banks have high hopes for expedited bill pay to restore some of the revenues they lost in recent years in competing for customers by making bill payments through their Web sites free. The theory is that consumers will pay some sort of fee for last-minute payments to avoid even higher late fees or having service shut off. With PayItAll, financial institutions will set consumer pricing. Yodlee and Western Union will split the wholesale revenues they get from clients; neither company would provide details. Banks may have a hard time putting the fee genie back in the bottle. According to Pleasanton, Calif.-based Javelin Strategy & Research, consumers paid an average fee of $5.64 for each expedited payment in 2006, down 15% from 2005. Even worse, the median fee was $0, meaning more than half of the users last year paid no fee.