Last year, the $78 billion bank began the process of replacing its Internet banking and bill payment platform with a system based on Financial Fusion. As part of that effort, the bank decided to offer P2P capability. "We've been taking the next step up toward offering our customers more service and capabilities," said Rahul Bawa, vice president of electronic commerce at Cincinnati-based Fifth Third. "We decided that the fastest way to offering a true P2P solution for our customers was to partner with a payment processor."
After evaluating several vendors, the bank decided to augment its existing bill payment service with payment processing capabilities from Atlanta-based CheckFree, which was selected for its breadth of coverage and high service levels.
"Checkfree has about 80,000 merchants that they're already paying," Bawa said. "For guaranteeing the highest percentage of electronic payments for our customers, Checkfree offered the best opportunity." In addition, the company had a track record of transactions completed without errors well above 99 percent.
Previously, bill payment processing and fulfillment had all been performed in-house. Using Checkfree for payment processing is not only more cost effective, but also offers a greater reach of companies and individuals that can be paid electronically.
At the same time, the bank wanted to retain its established commercial relationships. Depending on the business relationship with the entity being paid, the payment is processed either by CheckFree or the bank. For example, if the payee is an electric utility with a commercial banking relationship with Fifth Third, payments will continue to be processed in-house. For the majority of payees, however, payments will be processed by CheckFree. A field in the payee record indicates whether the payment will go through the bank or Checkfree.
Each night, the bank sends CheckFree a file of payments due. Checkfree fulfills the payments either electronically or (for payees unequipped to receive electronic payments) by cutting paper checks. It then sends a file containing payments status back to Fifth Third, which updates its Internet banking site in real time.
By January, 40 percent of customers had access to the CheckFree system. The bank has already enjoyed a large spike in bill payment adoption. "Our initial projections when we first planned the project was on the order of 15 to 20 percent," said Bawa. "Based on a month of full utilization in some of our markets, we're seeing 25 to 30 percent adoption."
Fifth Third had been offering bill payment to its customers since 1998. On its previous system, however, customers were charged 30 cents per transaction. With the CheckFree system, bill payment is free. In addition to improving adoption rates, the bank expects to increase the number of bills customers pay online (the industry average is 8 to 11 bills per month). "We weren't there previously," Bawa said. "We're trying to get to that number."
While P2P isn't cheap, Bawa views it as a necessary cost of doing business. "We have a fairly good relationship with Checkfree, so that helps us manage our costs. It's one of the things we want to offer our customers, because we feel it will give us competitive advantage over other banks."
Online bill payment has proven to be an effective customer retention strategy. "Once you go set up five or ten of your bill payments online, you will tend to remain a customer of that bank," said Bawa.
At least as long as it functions without a hitch. "That's why we've spent a lot of time and effort ensuring reliability, up-time, and quality," said Bawa. "Well over 99 percent is paid correctly the first time, without any issues."
