AOL had dabbled in bill payment; several years ago, it offered a service in collaboration with Quicken.com that failed to generate user interest. The Yodlee service includes some important enhancements that are expected to boost participation rates not only for AOL but for online bill payment as a whole.
For one thing, AOL is offering access to a huge base of billers, some 2,500 in all, easily dwarfing the number offered through other online bill-payment consolidators, including Yahoo, says Gartner analyst Avivah Litan. Equally important, most of the billers accept same-day payment, allowing payers to avoid late charges.
Online bill payment has been dominated by two distinct models: biller direct and consolidator. The AOL service blends both; it provides consolidated bill histories for up to 12 months along with other features, such as alerting users when bill payments are due, while allowing users to link directly to their billers' Web sites to get more complete billing information such as credit-card balances and cell-phone minutes, etc. Bill-payment today takes place primarily at biller Web sites; 18 million Americans pay bills at biller Web sites, compared with 12.4 million who do so at bank Web sites, according to Gartner. All told, 35 million Americans are paying bills online, a figure projected to increase to 65 million by 2007.
Banks, which have tried without much success to launch their own bill-consolidation services, are eyeing the Yodlee software with interest, Litan says; many currently use bill-payment software from CheckFree Corp. The Yodlee aggregation model relies on a method called screen-scraping, in which Yodlee, with the customer's permission, uses his or her IDs and passwords to obtain account information from the biller's Web site. CheckFree connects directly to the biller's accounting system.
While the Yodlee method is less expensive, the CheckFree model is less risky from the bank's perspective. By placing the bank in the middle of the bill-payment process, the CheckFree system makes it easier to resolve customer-service issues, Litan says. "There's a clear audit trail," she adds, "so if something goes wrong and the customer calls, the bank will be able to trace it."