Where is the Innovation With Remote Banking and Bill Payment?

There was a time when the primary means of paying a bill was stuffing a check in an envelope and going to the mailbox. We allowed a number of days before the payment due date and immediately adjusted our check book to reflect the disbursement. Although this is still the practice for many, millions have opted out and changed their method of paying bills. The motivation to change behavior is attributed to convenience, saving time and reducing expense.

But remote banking and bill payment has made significant leaps over the years. I recall a time when customer service representatives handed out free floppy disks on the street corners of New York City to anyone who would accept them. Whether they had a computer or not, people grabbed these disks because they were free. Armed with a computer and a modem, people could now connect with their bank remotely to obtain information about their account balances and even pay bills. Of course, this would be considered the early days and only a few billers were enabled to receive electronic remittances, while the vast majority of payments were sent via check and list or separate checks representing a single payment.

I have been an eye-witness to the vast changes that took place in the electronic banking and bill payment space. The involvement of the Internet and higher modem speeds along with banks offering the service for free had a significant impact on adaption. Banks got involved and provided incentives to their customers to use the product.Comparing “free” with getting stamps and running to the post office is a no brainer. The volume spiked liked a hockey stick as banks found new ways to create stickiness and build customer retention. After all who really wants to change their bank and start setting up new home banking payees somewhere else?

The expansion of electronic delivery channels for the bank customer’s resulted in larger profits for the bank. Whether they outsourced to a vendor like most or ran the application in-house, they figured out the economics to make money. However, even with all this effort and technological improvements, there remains an opportunity for banks to better manage the customer experience and expectations.

There was a time that a customer that used a remote banking and bill payment product did not know if the payment was sent via paper or through an electronic channel such as the ACH. That is not the case today. The informed customer knows the delivery channel of their payment. However, despite this, banks send a significant amount of payments via individual checks. Imagine that, I am paying a bill through my computer or mobile device and the provider is sending out the payment via a check. How innovative is that?

In my last blog posting I mentioned the recent NACHA Bill Payment and Exception Item Research that indicated that bill payment exception items costs the industry upwards of $800 million dollars annually. Although there are opportunities to enhance the current process and provide innovation, who is taking the lead? The consumer suffers because, with exception items, the payment is still being sent as a check, without the remittance stub. This creates a manual process at the biller location in order to post the payment.

When banks work to improve the exception processing on their end, this could reduce their operating costs and perhaps free up funds to make additional enhancements to a system that has been absent of innovation. Furthermore, billers can challenge the industry to innovate as well, since their mutual customer is impacted. There are opportunities to innovate and the failure to make these improvements causes consumers to become more cynical, and they begin to wonder about the value they are getting.

We are stakeholders and have to continue to monitor the industry and applaud the organizations that continue to make a difference for the customer. We continue to hear fascinating news about MCX, Bitcoin, Alipay and the remote banking bill payment Industry exceptions items costs the industry upwards of $800 million dollars a year. It is time to innovate!

Wayne Brown, the managing partner of The Walker Group, has several decades of experience in financial services. Before starting The Walker Group, he held roles at product management roles at Citigroup, Deutsche Bank and Fidelity Information Services. As his role in leading The Walker Group, Wayne works with FinTech companies to expand both their product and client reach through his extensive network of senior financial executives. He can be contacted at wbrown@walkergroupnyc.com