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Bill Pay Automation: New Automated Solutions have Banks Learning from Retailers
Question: We recently became aware of bill pay kiosks at various retail locations in our market, in particular cell phone stores and convenience stores. We are curious about the business model for such an application, how successful these deployments have been, and if there is an opportunity for a small community bank to leverage this new technology.
Answer: There are two major business models for bill pay kiosks: direct bill pay and aggregate bill pay. Direct bill pay allows customers to pay their bills in person at their service provider's retail location. The cell phone operator you describe is a good example, in that they most likely accept only their bill and not those of their competitors or other types of billers. In addition to cell phone companies, cable operators, utilities, and other service industry retailers have deployed this solution. Their customers avoid long lines when paying their bill in-person. It also frees retail staff from a mundane task and allows them to deliver other value added services in the store--including selling more products and services.
The other model is aggregate bill payment. This is most likely the setup deployed in your local convenience store. With aggregate bill payment, customers can pay multiple bills at one location. This is similar to the bill payment services offered for decades by financial institutions and grocery stores, only the teller or customer service person is replaced with a billpay kiosk, and the consumer is generally willing to pay a fee for this service.
While convenience stores have been the early adopters, generally speaking they have underestimated the extent of the infrastructure, training, and support required to manage aggregate bill payment. This is an opportunity for community banks and credit unions that can leverage their existing branch infrastructure and staff in deploying a similar solution. Aggregate bill pay kiosks would streamline bill acceptance and payments for deposit holders. It would also let you attract unbanked consumers into the branch; not only would they pay a fee for the service, it would give you the opportunity to franchise these consumers into more traditional relationships.
The numbers support taking a close look at deploying this "aggregate" model in the branch. Unbanked customers present a huge opportunity for financial institutions; in a 2005 study, Price Waterhouse Coopers estimated that more than 40% of the US workforce lack bank accounts. Also, TowerGroup expects in-person automated bill payments to grow steadily through 2010. They estimate an increase of 94 million expedited walk-in/kiosk bill payments per year for the next 5 years.
Founded in 1986, Source Technologies provides integrated solutions for managing financial transactions and other secure business processes. Products include MICR printers and consumables, secure disbursement software, and the groundbreaking concourse self-service banking kiosks. As an added resource, Source Technologies is offering its FREE self-service whitepaper discussing aggregate bill payment solutions and how transactional kiosks are allowing banks to capture unbanked customers’ business. Source Technologies has created over $400 million in economic value for customers in the last ten years.
First published on BankersOnline.com 5/15/06
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