For US online bill payment firms, cheques are a reality unlikely
to disappear soon. Payments aggregator Yodlee explained to
Charles Davis how they are tackling this problem
with PostcardCheck, a solution that slices cheque payment costs and
offers the lure of converting customers to electronic payments.
Striking squarely at a paper cheque stranglehold, US payments
aggregator Yodlee has launched a new product designed to increase
efficiency and lower the significant costs associated with paper
payments of online bills.
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Paper payments are by far the most costly component of any online
bill payment system, and they have bedeviled payments firms for
years. As the cost of electronic payments has been driven so low
that it essentially a commodity service, the 16 percent or so of
overall payments volume represented by paper cheques sent to
consumers has remained a real sticking point.
So Yodlee conceded that paper cheques will be around for the
foreseeable future and set out to do something to make them
“faster, cheaper and better,” Joe Polverari, senior vice-president
for strategy and development at Yodlee told EPI.
“If you look at the development of Yodlee Payments, you see two
lines of business, one directed at making the legacy payments, ACH
and cheques, easier, and the second electronic payments in the pure
sense,” Polverari said.
“We realised we can do these better faster and cheaper but we are
not getting rid of cheques, so we began looking at ways to work
within the mail channel in more cost-effective ways.”
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By GlobalDataImmediate cost reduction
Yodlee’s new solution, called PostcardCheck, helps financial
institutions immediately lower the cost of single cheque payments
by up to 30 percent, Polverari said, adding that the answer lay in
creating a new form of cheque that eliminates envelopes and can be
mailed at cheaper postcard rates.
PostcardChecks are folded in half, perforated and sealed
completely. Polverari said they meet the US Postal Service’s
requirements of a postcard, while ensuring data is packaged
securely for consumer privacy.
“Due to the innovative size of the Yodlee PostcardCheck, and the
fact that it does not require a separate envelope and can be mailed
at a postcard postal rate versus a standard bulk mail rate, it is
far less costly to mail than a traditional cheque and
environmentally friendly, requiring less paper output,” Polverari
added.
The savings are eye-catching: banks pay from the mid-40-cents to
75-80 cents an item for a traditional paper cheque delivery via the
postal service, versus less than 25 cents per item and even less
for PostCard rates.
“And you must note that banks are paying that much for what is
often slow delivery,” Polverari said. “So we said, ‘Let’s downsize
the payment format.’ It is a cheque, but the delivery vehicle is
simplified.
“It also has bar code tracking, with distributed printing and
mailing that qualifies for presort mail rates. On the consumer
side, all they see is fast payment, but on the bank side, you see
huge cost reduction.”
What Yodlee is changing is the postal instructions for cheques
going to a single address, which is the largest cost of most bill
payment systems. Those single-cheque payments will now be printed
as a Yodlee PostcardCheck instead of a traditional cheque and
mailed using less expensive rates and printing costs.
Yodlee is working with multiple, distributed printers to maximise
efficiency and minimize payment time, Polverari said, adding that
the system has already been purchased by one “very large” US
bank.
Online payments
Nearly two of every 10 payments originated online in the US are
still processed via paper cheque. Financial institutions offering
online bill payments to their consumers incur per item costs of a
single paper payment up to ten-times higher than comparable
electronic payments, Polverari said.
“In a tough economy, an instant 30 percent cost reduction is a
significant improvement that all institutions should investigate,”
he said. “Extensive testing of the new proprietary cheque format
indicates that these savings can be obtained without any increase
in the returns or rejections typically associated with paper
payments in general.”
Polverari said that Yodlee PostcardCheck is designed for rapid
deployment and is available for integration with any existing
online bill payment solution, or as an included feature of the
Yodlee BillPay suite of solutions: including Yodlee PayItAll (a
complete, pay-anyone solution); revenue-generating Yodlee DirectPay
(interchange generating card based payments); and Yodlee PayToday
(fee-based, guaranteed same day payments) online bill payment
solutions.
Better yet, Polverari said that Yodlee PostCardCheck features an
opt-in box with a self-addressed mailer so customers can easily
choose to begin electronic payments with the bank client, and
Yodlee will soon include a website address for even easier
migration to electronic payments.
“That way, the bank is reducing the cost of paper-based payments
and whittling down the number of paper-based customers,” he
said.
The development of PostCardCheck required Yodlee to combine a
variety of skill sets, Polverari said.
“We have people with a lot of direct mail experience, but they are
not the same people who do financial document printing, and so we
formed relationships with the experts and smashed those two
together, and the IT around that was no easy task,” he said.
The market is as ripe on the smaller bank end as it is for larger
banks, Polverari said, because the big banks eye it as an add-on to
their existing payments channel, and for the banks who are in a
closed-loop outsourcing arrangement, it makes sense to seek
lower-cost options for paper-based payments.
“This product will sell itself regardless of size or payments
volume, because the savings are automatic,” he said. “By using
PostcardCheck, the cost savings can be obtained without an increase
in returns or rejections typically associated with paper
payments.”
All that, and it is also a ‘green’ solution, or at least a paper
reduction.
“We are not getting rid of paper any time soon,” Polverari said,
“so we might as well make it cheaper and faster.”
It is all part of Yodlee’s strategy of winning customers one
feature at a time.
“We are quite content to win business one module at a time, and we
see this as a step along the way to getting clients into full
Yodlee Bill Pay,” he said.
