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Enlarging the Picture


August 2014 – Vol: 37 No. 8
by Richard H. Gamble

As mobile image transmission picks up, adventurous CUs are moving beyond check deposit to bill payment and balance transfers.

Post-It note on top of phone reads: Pay bills with smartphone As mobile devices added more sophisticated cameras, progressive CUs introduced mobile remote check deposit. Mobile users loved it. Now the big question is: “What next?”

One obvious answer and the one embraced quickly by $560 million Credit Union of America in Wichita, Kan., was photo-mobile bill-pay, through which members could use the cameras on their phones to take pictures of bills for payment.

CU of America already had a successful online bill-pay product [iPay from Jack Henry, Monnett, Mo.] that was paying approximately 15,500 bills a month, reports CUES member Richard Logan, SVP/chief information officer. But members still received occasional paper bills from their doctors, dentists, plumbers, lawn service providers and auto mechanics. A significant number were paid by mailing or handing checks to the billers.

The potential numbers were less than for photo-mobile check deposit, through which members take and electronically submit a digital picture of their deposit documents.

Still, the numbers were real. So CU of America jumped. In September 2013 it rolled out its industry-leading mobile banking app, which included “SnapPay,” a photo-mobile bill-pay program, as well as “SnapCheck,” its photo-mobile remote deposit capture program.

For a mobile banking vendor, the CU uses Malauzai Software, Austin, Texas, because it offers a core mobile banking product that included photo-mobile check deposit—and it offered the then-novel photo-mobile bill-pay through a partnership with Allied Payment Network, Fort Wayne, Ind.

To use the bill-pay option, users activate an app, authenticate themselves, snap a photo of a bill and then send it to Allied, explains Allied’s president, Ralph Marcuccilli. “We confirm in real time that we have a good picture and then read the biller information off the image—the name, address and account number of who is to be paid.

“If some of this information is not on the document, we scan our records to see if we’ve made a previous payment to that biller,” he explains. “All of the bills we receive get paid, either electronically, or sometimes we mail a check. That happens 25 to 30 percent of the time” and costs its CU clients a flat 60 cents. Allied has about 10 CUs using its Picture Pay product.

Being quick had its rewards. Picture Pay was a real differentiator at that time,” Logan reports. “We thought we would get media recognition and we did.

“We’ve been interviewed. We’ve had calls about this. It has cemented our reputation as an innovator.”

Being quick also has its drawbacks. CU of America uses two vendors for bill-pay, one for photo and one for online.

“They are essentially the same product delivered through different channels,” Logan points out. “Now more online bill-pay vendors are adding the mobile channel. We expect to consolidate the two channels under iPay, which now can receive payees via Allied’s Picture Pay.

“Allied will still capture and process the bill image, then pass payment along to iPay for processing. We’re holding off our big marketing push until then.”

Fast Start

A similar story unfolded even earlier at $769 million 3Rivers Federal Credit Union, right down the street from Allied in Fort Wayne.

“We were the first U.S. credit union to offer mobile bill-pay using Picture Pay,” says CUES member Melissa Shaw, marketing communication manager. “We spent the first half of 2013 testing it and rolled it out in July. We had a strong mobile offering, but bill-pay was the missing piece. When the photo technology became available, we knew that was what we wanted. It had to be fast and easy to use, and it is.”

Normal processing is free to members but they can pay a fee to get expedited payment, she notes.

To move quickly, 3Rivers FCU also partnered with Allied, which was among the first vendors to offer photo-mobile bill-pay for financial institutions. The digital images of bills go straight to Allied, which does the back-end processing, explains Chad Gramling, 3Rivers FCU’s marketing insight manager. No new processing work is required of CU staff. Eventually a file comes in and posts automatically to 3Rivers FCU’s core system, he says.  

Jack Henry’s iPay was providing the CU’s online bill-pay when the CU added photo-based mobile bill-pay.” That has meant supporting two channels.

“In a perfect world, everything would be integrated,” observes Gramling.

The CU now has 12,000 active mobile banking users, of which about 1,000 use the photo offering. Volume has grown to three to five photo-based bill-pay transactions per member per month, according to CUES member Kevin Shull, chief information officer. “As more members have migrated to the mobile option for bill-pay, we’ve seen a definite reduction in general bill-pay costs,” he reports.

Members who have set up their billers online generally continue to pay them that way, but use mobile bill-pay for their new bills.

“We see a lot of medical and dental bills on the mobile channel,” Gramling reports. “However, some of our online bill-pay users have moved all their online bill payment bills to mobile in just a few minutes by taking pictures of the screens and submitting them just like they would a paper bill.”

Most first-time users don’t need coaching, Gramling reports. “It’s very user-friendly, and it feels familiar to people who use mobile check deposit. Our staff members were test users initially and can now provide advice in a branch or through the call center. There’s also a video on our Web site.”

Pluses and Minuses

Remote bill-pay through online and mobile channels may be one product flowing through two channels, but there are big differences at this point from the members’ perspective as well as the CU’s. To pay online, members have to go through a setup procedure and provide the required information about billers to allow for automatic payment. With mobile, they just log in, shoot a picture of a piece of paper, fill in the amount and hit “submit.” It’s the ultimate no-brainer.

But the CU or its vendor receives an image of a bill that often lacks key payee information, such as the destination account for the payment. Somebody other than the member has to collect the missing information, which costs something. Or, too frequently, a CU staff member has to cut a check drawn on the CU or its vendor and mail it to the biller—an even greater cost.

Mining bill-pay databases to match receiving accounts with biller names “sounds good, but it’s not happening yet,” Logan says. “We end up paying bills with paper checks through SnapPay (a PayPal partner, Hamilton, Ontario) that would be all-electronic through our online bill-pay program. That makes picture-pay more expensive than online-pay. We thought about charging a fee for picture-pay but ran into technology issues and chose not to charge for now, but that could change.”

So far, member use of the new offering hasn’t taken off fully. “It’s been OK but less than we wanted,” Logan reports. “Some members use it and some don’t.” The numbers show 30 active users out of 352 eligible users and about 63 photo-based bill-pays a month, he says. Some 33 billers have been tagged for repeat pays; the CU is authorized to pay those billers whenever a member submits a bill image.

Because photo-mobile bill-pay is so easy for members, it could be a real game-changer if it catches on, notes payments consultant Sabeh F. Samaha, president/CEO of Samaha & Associates, Chino Hills, Calif.

CUs prize member service, but they also prize member retention, and picture bill-pay is a lot less sticky than online bill-pay, he points out. “Once members entered all their biller information in an online bill-pay service, they are reluctant to change. If all they have to do is shoot and send, changing financial institutions will be no hassle. If it takes off, it will definitely open competition and remove the stickiness that exists today,” he says.

As the major bill-pay vendors add photo to their menus, they will use their large databases of biller information to find and supply the payee data required for electronic payments, particularly the receiving bank account number. The first wave of photo-based bill-pay transmissions could cause overhead and the number of check payments to spike, but then fall as data on these billers are acquired, Samaha explains.

For more thoughts on general drawbacks of bill-pay, read this article and “Is Bill Payment Dead and Gone in Five Years” from CUES Supplier member and strategic provider Cornerstone Advisors, Scottsdale, Ariz.

Even though uptake hasn’t been fast so far, photo-based bill-pay is a technology worth tracking—and maybe even piloting right now, Samaha advises.

“Start testing it with employees and friends of the CU. If a competitive shake-out is coming, you don’t want to get off to a slow start.”

Photo Balance Transfers

$2.6 billion Members First Federal Credit Union, Mechanicsburg, Pa., was an early adopter of mobile check deposit in July 2012. For its next step, it is passing up picture bill-pay for something that would have more impact on the bottom line: photo balance transfers on credit card accounts, which was expected to be introduced to members in July.

“We put a higher priority on mobile balance transfers because we need to grow loans,” explains Jay Parrish, EVP/chief information officer. “Credit card balances are definitely profitable. We know that photo bill-pay would be convenient for our members, and we’re looking at that now, but the bottom line came first.”

What Members First FCU wants members to do is take the monthly paper statement for a credit card issued by another financial institution, shoot a picture of it with their mobile device, and transmit it to the CU, along with authorization to transfer some or all of the balance to Members First FCU.

“We’ve been using a Visa quick application (an intuitive, traditional online loan application process that minimizes the information required, and therefore steps needed, to complete and submit an application), but this is much easier for the member. We see this as a great opportunity,” Parrish says. “Last month we had more than 300 online applications for loans through Visa, and half of them came through the mobile channel. We’re building an important revenue stream.”

For photo balance transfers, a member is prompted to take a picture of the credit card statement, just as he or she would be prompted to shoot a check for remote deposit, explains Scott Carter, chief marketing officer for San Diego-based Mitek, a big behind-the-scenes player in image-based services for financial institutions. Then “we get the current balance information from the issuer and present that back to the member, who can edit it, split the balance if they wish and submit it downstream to the CU. It doesn’t take many balance transfers to make the service profitable,” he observes.

“This helps us level the playing field with the giant issuers,” Parrish points out. “They have the scale, but we have the customer touch point when we’re dealing with one of our members. Now getting balances through photo-mobile is a real differentiator for us. Of course, it could become less so as others introduce it.”

Richard H. Gamble is a freelance writer based in Colorado.

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