TIO Networks Corp. recently surpassed the $1 billion mark for total value of processed payments. TIO chief executive Hamed Shahbazi says the milestone reflects growing consumer interest in real-time bill payment.
“The reality is that there is a real need out there for fast posting transactions,” he said.
A number of factors are at play, but the downturn in the U.S. economy is the primary culprit. In fact, a number of states where TIO has a presence have shown that utility shutoffs are significantly higher this year than last year. Gas prices, the credit crisis and the housing meltdown have all had an effect. It’s also going to push people toward more expedited paying channels, because people are going to hold onto their money as long as they possibly can.
Since spring 2002, TIO has processed approximately 14.5 million transactions and has a presence in more than 3,600 retail locations, mainly in the United States. The company also owns the largest national network of cash accepting ATMs for bill payment and prepaid services. The company recently saw its 10,000th location activation, which more than tripled its billpay network. And it recently placed its 6,000th OEM Express location and launched its NEXXO Financial Money Transfer Program at more than 80 kiosks in four U.S. markets.
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That’s good news for deployers of billpay kiosks, which allow consumers to make real-time payments, said Francie Mendelsohn, president and founder of Summit Research Associates, an international consulting firm devoted to kiosks.
“For millions of people billpay is a great way to get those bills paid on time,” Mendelsohn said.
Everybody wins because of the potential additional revenue the retailer can generate from aggregated billpay, she said.
“With a lot of stores, once you’re in there and pay the bill, you often will purchase other items, so there’s incremental revenue that can be generated at that location,” Mendelsohn said. “There’s also revenue generated by the companies that put it in and it provides a true service for the customer — especially those nearly 40 million unbanked.”
The challenge, says Source Technologies’ vice president of strategic development, Bill Lynch, is to place billpay kiosks in markets where the demand for aggregated billpay is great.
“The challenge is to put the kiosk out there and get enough market demand, and get people to remember that they can go in to SuperAmerica to pay their bill,” Lynch said. “Then the challenge is convincing corporate, regional and store managers, and employees that there is a bill-payment device in the store, so if someone comes in to ask about bill payment, they will be pointed toward the machine.”
Even TIO is feeling a bit of the retail pinch.
While the company’s transactions climbed during the third quarter of 2008 — up 27 percent from last year — revenue and profit were down. Revenue fell three percent and profit fell nine percent. The weak U.S. dollar, whose value is down 14 percent from last year, is to blame, Shahbazi says. The company is working to cut expenses and deliver growth in locations and transactions.
“You’re going to see TIO continue to position itself as a high-value processor,” Shahbazi said. “You will also start to see TIO’s bill pay capabilities be leveraged for Web payments. We think that we can leverage those billing relationships way beyond self-service.”
Immediate benefits
For Source Technologies, a Charlotte, N.C.-based provider of integrated solutions for financial and informational transactions, aggregated, self-service billpay is big business.
Verizon, Alltel, Sprint, AT&T, Singular and T-Mobile all have self-service kiosks in the majority of their stores, and Lynch says the No. 1 reason people walk into a wireless store today is to pay a bill.
“What that kiosk has done for them is take a competitive administrative task off the staff of the office and push it onto a device,” Lynch said.
Lynch says self-service bill payment is most popular in the wireless industry, and in the wireless/cell-phone top-up business, where users walk up to a kiosk and pay for additional minutes. The service is getting great acceptance in Europe. In the United States, adoption has been relatively slow, but with economic changes influencing every aspect of consumer buying patterns, self-service billpay adoptions are expected to see an uptick.
“Where I see the potential in that marketplace is at the Wal-Marts of the world,” Lynch said. “You have enough foot traffic coming in to a store, and you could get to a level where you have enough demand for that product just by walk-in traffic.”
Getting all of the payment options on one platform is key, Shahbazi says. And as the economy continues to tighten, the types of transactions that consumers will perform at self-service devices is expected to grow.
“You’ve got different people that do bill pay and different people that do money transfers and different people that do wireless top-up,” he said. “One of the special things we’ve done is bring those functions together on one platform. That’s one of the things that has helped us be successful.”
Slow adoption rates
Despite the continued growth and success billpay companies enjoy, the adoption pace has slowed.
“What we’re faced with in the U.S. is business factors and cultural factors that are prohibiting areas, and until those get addressed and either the cost of the hardware or software gets down to a low enough level that you can live with smaller transactions or the volume of transactions increases to a level that it can sustain that equipment, you’re going to have a slow adoption rate,” Lynch said.
“Every marketplace can be explained in the context of an S curve and I think that what you’re seeing is that we’re getting to the steep part of the curve as it relates to kiosk billpay,” Shahbazi said. “I think there’s been a lot of time and effort put into kiosk billpay, but I think it’s really starting to emerge. I think that retailers want it. The only way to really break through this is to evolve the industry from a one-trick pony dispensing cash and getting paid in convenience fees and interchange to doing more — whether that be money transfer or billpay or wireless top-up or advertising. There’s no doubt that most of the real viable opportunities to break through and add new revenue streams have something to do with innovating and adding new functionality.”
