Our Viewpoints

Our Viewpoint

New Payment Options Drive Revenue Opportunities Back to Financial Institutions

October 18, 2012

Since the earliest days of banking in the United States, financial institutions have safely, efficiently and conveniently handled the payment needs of their retail and business customers. The Internet, and more recently, the development and proliferation of smartphones has completely changed the payments landscape, introducing a plethora of non-financial institution players into the fray.

Some players simply want to participate in the flow of transactions between you and your customers. Others clearly want to take your customers from you – eliminating you completely from the payment chain.

Consumers and businesses do see value in the strength, reliability, security and safety that their local financial institution provides to them…despite what the popular press reports. Yet, their appetite for technology-based convenience and efficiency may cause them to forsake the faith they have in you if you can’t deliver what they are seeking.

This article focuses on two simple payment offerings you can launch today, with minimal effort, at a very low cost, that deliver the convenience and efficiency your customers want, without forcing them to go elsewhere to get it.

The Growing Adoption of Person-to-Person Payments (P2P)

In the past, if someone owed a friend or landlord money, that person wrote a check. In today’s increasingly paperless world, that’s just not good or fast enough. Enter P2P.

On the most basic level, P2P payments enable individuals to send or request money to and from other people and businesses, from their bank or credit union account, using only the recipient’s mobile phone number or e-mail address.

Here’s the scenario: I owe you money; I launch a mobile app or click on a tab on my financial institution’s Internet banking or website and initiate a transaction from my account to yours. I don’t need your account number or any of your private information, and you don’t need my account number or private information. You don’t have to have an account at my institution, and I don’t have to have an account at your institution. You receive a text or e-mail that contains a confirmation number that allows you to authenticate your identity and enter your financial institution’s routing number and the account number of the account you want the funds to go into. In as little as two days later, the cash is deposited into your account. No paper, no checks to endorse and deposit, no trip to the branch, no waiting in line at the drive-through or ATM.

Although P2P transactions aren’t new, the way and the frequency with which people use this service is fundamentally changing. With its origins in online purchasing, this payment option has now entered the mainstream as a convenient replacement for the paper check, available from the customer’s trusted financial institution. For example, more apartment dwellers are using P2P to pay their monthly rent on the due date. This strategy eliminates the landlord having to make multiple trips to the branch or wait several days for all of the rent checks to get delivered, and streamlines the ability of the tenants to pay their rent. College students sharing apartments are also using P2P to pay the individual portions of their living expenses. Coaches, “soccer moms” and association leaders are adopting P2P to collect funds for uniforms, field trips and dues.

Financial institutions can quickly capitalize on this growing trend by offering their own branded P2P product, without a significant upfront investment. D+H’s DPXPay™, for example, is delivered through software as a service (SaaS) model through our data center. Because of the SaaS model, everything is handled for your institution, including the processing of the ACH transfers. This model eliminates the need for your institution to invest in hardware or add personnel to bring the product to market.

Consumers can access your P2P service via downloadable app or mobile browser from their smartphones, from your public website, or from within your Internet banking system. Institutions can elect to charge fees per transaction, waive fees, or provide a certain number of transactions for free if the account holder meets specific balance or product bundling requirements.

Electronic Bill Presentment and Payment (EBPP) Cements Relationships with Small to Medium Business (SMB) Customers.

Small- and mid-sized business (SMB) owners are constantly looking for efficiencies, but, until recently, electronic billing and payment capabilities were simply out of their reach. Although large companies and utilities have made the investment to build custom EBPP capabilities, enabling their customers to view bills and make payments online, most SMBs were relegated to the more traditional, more expensive paper-based invoicing delivered through the slow by comparison U.S. Postal Service.

As a result, these small to medium businesses incurred postage, printing and lockbox expenses, while waiting weeks for the payments to trickle in. With EBPP offered by your institution, all of that is now changing.

Today, providers like D+H have created turnkey electronic bill presentment and payment solutions that financial institutions can offer to their small to medium business owners. These solutions enable any business that generates bills or invoices, from landscapers, pool cleaners, website designers and other SMBs, to give their monthly customers the option of electronically viewing and paying bills online, through ACH, credit or debit cards. The solution even has a voice enabled option for payments by customers who prefer a phone option.

Each billing cycle, your business customers (billers) have the ability to automatically load their bills into a fully hosted, secure online site. Their customers will receive notification that their bills are available for viewing by clicking on a link, or alternately, an electronic copy of the bill may be attached directly to each e-mail. Upon viewing the bill, the SMB’s customer may then choose to pay immediately or schedule payment for a future date.

Many SMBs are willing to reward their customers for receiving and paying their bills electronically, because, in the end, they reap significant operational efficiencies and financial benefits. SMBs save postage and printing costs, improve their accounts receivable position and also save bookkeeping effort. All of the payment postings get electronically created in a file that the business owner can import to his accounts receivable system – with no manual intervention or reconciliation required. This benefit, along with the inherent cost savings, is particularly attractive to busy business owners.

Responding to a Changing Market

These new products give financial institutions an opportunity to meet the emerging market needs of their customers, improve stickiness, increase revenue, and drive better efficiency. All of these programs give your institution the flexibility to charge fees for these services; or give consumers and business owners the option to skip or reduce the fees if they bundle other products and services. And, best of all, you are providing the service to your customers, rather than allowing non-financial institutions to take your customers’ payments business from you.


Scott Hansen
Senior Vice President, Marketing

Scott Hansen is the executive vice president responsible for marketing, product management, market development, product legal compliance, alliance management and strategic planning. Prior to his current role, Hansen served as executive vice president of the integrated solutions group, which included some of the company’s fastest growing businesses, including, branch automation, electronic banking, enterprise content management and financial intelligence.