growth
Founded in 1999 as a venture capital start-up company, US-based
Yodlee has gained an enviable reputation for developing wealth
management and banking solutions. It has now set itself ambitious
goals in the US payments processing market, Yodlee’s Peter
Hazelhurst disclosed to EPI. Charles Davis
reports.
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Yodlee has made a name for itself in the US as an innovative
company with a cutting-edge online banking account aggregation
service targeted at wealthy individuals. Now Yodlee wants to make a
much bigger splash in payments, and has more than doubled its work
force as it seeks to capitalise on a tumultuous US market.
Yodlee has introduced an upgraded version of its Yodlee BillPay
service that makes it possible for banks to run the service
in-house, and has built its inter-bank funds transfer solution,
Yodlee FundsTransfer, into a major force in the US electronic
payments business.
Peter Hazelhurst, senior vice-president of product development for
Yodlee, told EPI that the company senses an opportunity for
significant growth in the market in the wake of payment processor
Fiserv’s acquisition of CheckFree, the leading US provider of
electronic bill payment services.
“It’s only natural that once there is such consolidation in the
marketplace, financial institutions will look to restore a bit of
competitive balance by examining alternatives, and that is
certainly what we’ve seen thus far,” Hazelhurst said. “We’re
finding a great deal of receptivity, and we are moving quickly to
capture some of that market share.”
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Media speculation that Bank of America, CheckFree’s largest
customer, is considering taking at least some of its work back
in-house can only further embolden Yodlee, which has spent the past
year building a complete portfolio of funds transfer and bill
payment tools that leverage the company’s well-known aggregation
service.
“We believe we are the only game in town where you can move from
outsourced to enterprise with the same technology platform, and not
miss a beat,” said Hazelhurst.
He added that pre-launch sales have been doing “really well” and
Yodlee has doubled in size to 450 staff in the last nine
months.
Hazelhurst confirmed that Yodlee bid unsuccessfully for Princeton
eCom, the US’s third-largest provider of electronic billing and
payment services, which was acquired by payment processor Online
Resources in 2006. Once it became clear that Yodlee had lost the
bid for Princeton eCom, Hazelhurst said, Yodlee began building its
own payments operation, expanding the one used in the Yodlee
BillPay system introduced last year.
“We’ve always been known as innovators, but now we are focused on
becoming just as well known for execution,” he said. “We’ve built
the operation, end-to-end, from scratch, and now we’re ready to
compete on the processing and service end. We’re much more focused
on payments and transactional activity. We have a client that is
doing 300,000 account openings a month; that’s a whole new level of
execution for us.”
The results are already being felt. Yodlee is installing its
PayItAll bill-pay system at three of the US’s 20 largest banks.
PayItAll lets consumers make bill payments from any account at any
financial company, or with credit or debit cards.
Attractive solution
Outsourcing bill payment and presentment can cost a large banking
company $100 million a year, so an in-house alternative can be
attractive as more consumers switch from cheques to electronic
payments.
“The greater the migration to electronic payments, the bigger the
bill for the bank, and the more complex the operation becomes,”
Hazelhurst said. “If you’re a bank, especially a large bank, you’ve
got a price tag that goes up every quarter.”
Hazelhurst said Yodlee built its payments warehouse in a way unlike
any other on the market, with features that minimise payment errors
by resolving them at the user interface and warehouse level, before
payments get routed. The warehouse enables banks to route payments
that generate the most profit or at the least cost, giving banks
back visibility and control in the bill-pay process, he said.
Consumers can use the new service to make payments with credit or
debit cards, as well as automated clearing house
transactions.
In addition to offering reduced costs, Yodlee’s new system offers
banks the potential to generate interchange revenue: if consumers
pay by card, the issuing bank receives a fee. Yodlee also plans to
announce a deal soon with a service partner to deliver immediate or
same-day payments, for which banks can charge a convenience fee,
said Hazelhurst.
The BillPay service also is linked to Yodlee’s personal financial
management application, which can allow customers to categorise
payments and develop household budgets, he said. “Banks can buy a
piece of it to enhance their existing solution, or they can buy all
of it to replace their existing solution,” he explained.
Success with funds transfer
Yodlee has also announced Yodlee Funds-Transfer, launched nine
months ago, has already moved more than $1 billion and has
initiated over 500,000 transfers. The online, inter-bank funds
transfer application increases the speed and reduces the risk of
online money movement between any two financial accounts.
Yodlee FundsTransfer supports challenge deposits as well as a
unique instant account verification method, which Yodlee pioneered,
to authenticate users, offering more flexibility and immediacy for
consumers.
“Funds transfer has become a major business line for us, and we see
a lot of growth in the near future for it,” Hazelhurst said. “This
is a natural extension for any online banking and online account
opening service to provide a rich and valuable online experience
for consumers.”
Hazelhurst said that Yodlee will launch a new funds transfer
service, SmartSweep, in the next few months, which will allow
customers to pre-set funds transfers from one account to another
once balances hit customised minimums or maximums. For example, a
customer could instruct the SmartSweep system to automatically
transfer funds from a cheque account to an interest-bearing
account, or to move money from savings to cheque if the cheque
account balance falls below a pre-set minimum.
“You’ll see us gather a major piece of market share, and we have
some interesting strategic partnerships we’ll be bringing
in-house,” Hazelhurst said. “We intend to take a huge step
forward.”
