Consumer Expectations, Open APIs and the Evolution of Bill Pay

By Rahm McDaniel  

The evolution of financial services over the last decade has been dictated by fintech companies with a tight focus on experience. The resulting landscape of thousands of easy-to-use options for payments, savings and planning has fundamentally changed how account holders view the relationships they have with their financial institutions.   

But most community financial institutions still struggle with the tension between user expectations and the experiences their current technology delivers. It’s particularly palpable in the bill pay arena now that merchant billers have taken the majority of payment volume by offering card payment options to consumers.  

The bill pay solutions that have been around for the past 20 years are fundamentally transactional in nature. They perform the two basic functions of payee aggregation and bill payment, but without real-time payment processing, data, due dates and balance information, user experience falls short even when the payment is flawlessly delivered.  

It raises the question: Will traditional bill pay meet the same fate that awaits others that adapt too slowly? Or will it evolve to meet the expectations of the market? 

Currently, traditional bill pay platforms—and the accompanying three- to seven-day delays to process and post ACH payments—are at odds with modern users’ expectations of instant gratification. That the transaction happens eventually is mostly moot; account holders want a faster—and better—experience. The customer has moved from a transactional to an experiential paradigm. Bill pay, by and large, has not.  

Yes, bill pay has a reputation for being a sticky service—but a sticky customer is not necessarily a happy one. A better bill pay experience would increase adoption and retention for all the right reasons and improve the economics of the relationship for the bank.  

To reshape their bill pay experiences, community banks are beginning to emulate fintech companies and employ open application programming interfaces, or APIs, to build new services rather than rely exclusively on legacy products. In the briefest terms, these are sets of requirements that govern how applications connect with and interact with other applications.  

The right combination of API services can provide a means to produce low-cost and easy-to-implement applications or banking products that can either stand alone or plug into an existing banking/bill pay platform. But first, banks and their technology providers must rethink how bill pay works for their account holders—and how it should 

It sounds simple enough. Consumers should be able to pay bills using their preferred methods. But with traditional bill pay, they can’t. Existing solutions rely almost exclusively on checks and ACH payments, while consumer preference has shifted toward greater use of debit and credit cards—for a lot of good reasons, including real-time payments and the ability to earn points on rewards cards.  

Current bill pay solutions provide neither of these benefits, nor do they offer notifications about bill due dates—and they rarely give any insight into how the account holder spends money. On top of these shortcomings, bill pay interfaces tend to be clunky and just aren’t designed with usability in mind. They’re designed around a transaction, not an experience.

But open banking APIs represent a new opportunity for customer engagement and loyalty while turning bill pay from a cost center into a potential source of revenue. Merchant biller aggregation APIs let FIs develop quickly on top of their existing platforms without costly and time-consuming efforts by core or platform providers. A bank could, for example, easily deploy an application that allows account holders to use payment cards within a new, more modern and usable bill pay environment. This would give consumers access to their preferred means of payment—while also giving the FI access to interchange revenue from the use of payment cards. 

As elsewhere, banks have a choice. They can keep their current solutions, which do have transactional value. Or, they can develop a bill pay strategy that takes advantage of open APIs to give account holders the flexibility to choose card-based, real-time payment options that fulfill the transactional as well as the experiential.  

Either way, bill pay will change and evolve to keep up with what the market wants. The questions are just how much will it change, and will it change fast enough? 

RAHM MCDANIEL is vice president of strategic solutions at Q2 Holdings, which ABA endorses for its digital banking platform. Lean more at 


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