Fiserv Takes on the E-Billing Market – How Can We Get Them to Turn Off Paper?
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Fiserv Takes on the E-Billing Market:
How Can We Get Them to Turn Off Paper?
Jon Black looked up from the market research reports on his desk and turned to the window, watching the Chattahoochee River flow by his Atlanta office. It was March 2014, and Black, the senior VP of marketing and product for Fiserv, had just received some interesting market research results. For the past two years, Black had been working on ideas for helping Fiserv’s e-billing partners increase e-billing adoption among its consumers. It was Black’s job to advise and consult with organizations of all kinds (e.g., retailers, credit card firms, utility companies, etc.) regarding e-billing adoption.
Fiserv had already achieved leadership in electronic bill payment by researching and understanding not only billers and financial intermediaries but also end users who paid their bills. Electronic bill payment was now gaining wider acceptance, with nearly 75 percent of online households using it as their primary mode of paying bills. But with less than 20 percent of online households regularly using e-billing technology (instead of paper statements) to view their bills, Black was mulling over the opportunities and challenges he faced at the other end of the adoption curve.
To enhance his understanding of e-billing adoption, Black had begun a partnership with Amy Pote, a senior customer service manager at Quintanta Energy Company (QEC). Their aim was to test some email marketing messages and to determine which messages might be most effective for encouraging adoption. Black had about a week to analyze the results before he met with Amy to decide what might be best for QEC.
As he considered his options, Black recognized how crucial the e-billing business would likely be for Fiserv. Fiserv’s technology already assisted consumers with their “outgoing” interactions—that is, helping them direct money to companies using electronic bill payment. E-billing focused instead on consumers’ “incoming” interactions—helping them receive bills online instead of receiving paper statements. If Fiserv played a role in the entire “round trip” of outgoing bills and incoming payments, the company could further its premiere position in the value network of consumers, billers, and financial institutions. E-billing was also a potentially significant revenue stream for Fiserv. Of the 122 million households in the United States in March 2014, 92 million (75%) were considered “online” (connected to the Internet), and the average household received ten bills per month from each of ten different billers. Not to mention, online penetration was growing by approximately 3% per year, and turning off paper was indisputably better for the planet.
But if Fiserv and its partner companies could not encourage consumers to adopt e-billing, neither the company nor the planet would benefit. So Jon turned to focus on the market research results he had just received from Amy Pote at Quintanta.
Fiserv and Electronic Bill Payment
Fiserv (NASDAQ: FISV) was formed in July 1984 with the merger of Sunshine State Systems of Tampa and First Data Processing of Milwaukee, regional providers of financial services data processing for small banks and thrifts. Fiserv went public in 1986. By 2014 the Fortune 500 company, headquartered in Brookfield, Wisconsin, employed more than 20,000 people in 230 global locations. The company’s 2013 revenues were $4.8 billion, with net income of $648 million. Fiserv competed in several markets: it was the U.S. market leader in core processing services and the largest independent U.S. check processor. It became the leading U.S. Internet banking services provider and leader in bill payment and presentment services when it acquired CheckFree in December 2007.
In 2014 e-billing represented a relatively small revenue stream for Fiserv. A majority of the company’s e-commerce division revenues came instead from electronic bill payment. Electronic bill payment was conceived by a former decathlete named Pete Kight while he was managing health clubs in Texas in the late 1970s. At that time, convenient monthly payment methods were not available, so health club consumers were often pressed to pay for an entire year in advance—and each year after. This caused frustration for consumers as well as for the health club salespeople who had to perpetually convince them to renew their memberships.
Having successfully tested an automatic monthly payment arrangement between his health club and a local bank, Kight returned to his hometown of Columbus, Ohio, to launch a company called CheckFree. The company, which he initially ran from his grandmother’s basement, provided electronic payment services not just to health clubs but also to any biller and its payee. He was convinced that over time electronic bill payment was more efficient and would win out over paper-based processes. Kight’s first customer was a friend who owned an apartment complex. The friend agreed to let Kight use the building’s computer at night, and Kight agreed to sign up the friend’s tenants to pay their rent electronically.
Building on the technology and knowledge he developed to serve that first customer, Kight led CheckFree through the early days of the Internet and successfully competed against rivals such as IBM, Microsoft, First Data, and Citibank. As the company grew, Kight’s management team recognized that encouraging adoption and use of electronic bill payment required not only convincing billers and banks to take part but also successfully marketing the service to end users. (See Exhibit 1 for an illustration of Fiserv and its relationships with direct and indirect customers.) The team also realized that banks and billers had many more important priorities than developing effective strategies for marketing electronic payment services. To maintain leadership among larger rivals, therefore, Fiserv had to understand the marketplace better than anyone else and use that knowledge to help its partners encourage adoption and use of electronic bill payment.
The company committed itself to understanding consumer behavior in relation to electronic bill payment. Black and his colleagues spearheaded many of these activities, and worked with banks in a consultative manner to help them understand market segments, identify which consumers to target, and communicate with targeted consumers. Their efforts helped CheckFree and its partners shift from making key marketing decisions based on managers’ intuition or opinions to using a data-based understanding of consumer needs and preferences to drive action.
In August 2007 Fiserv entered into an agreement to acquire CheckFree in an all-cash transaction valued at approximately