Many firms are thinking about offering bill payment services, but are concerned with the risks associated with offering this type of service. It’s important to have a well thought-out plan to avoid accidental bill payment.
Question 1: What are the benefits of providing this service?
There are many benefits to adding bill pay. First and foremost, your clients want the service. A competitor may be providing this service to your client with varying degrees of success — and offering bill payment as an integrated service within your wealth management or business management offerings provides multiple benefits to both you and your client.
According to AgilLink’s recent bill pay survey, firms that offered bill payment services reported three clear benefits to their operations:
- Additional stickiness in client relationships – 62%
- Ability to provide better insights and planning – 41%
- Additional revenue – 31%
Question 2: Which customers will receive the service, and how will I get paid?
One of the big concerns of firms considering bill pay services is that they will take on the work and not be paid properly for it. It’s important to determine early how bill pay services will fit into your customer segmentation strategy and to have an appropriate revenue model associated with the bill pay service offering.
Is bill pay something that you will offer to all your clients? Will you offer it as part of a matrix of services that a client opts into? Will it only be reserved for your largest clients? Thought should be given at the outset to how this service will fit into a client segmentation model, and in some cases, this may drive firms to create and define the model. Bill pay is a type of service that not all your clients may want, or that you may not want to offer to everyone. Client pricing goes hand in hand with segmentation, so it is important to get this work done up front.
Many firms are hesitant to appropriately charge for bill payment service, which is understandable. But it is something that clients value. And if a client values something, then they are willing to pay for it.
Trying to incorporate this into basis points on assets under management (AUM), can be a challenge. Some firms will do this as a strategy to prevent or reduce discounting. Asset management fees have come down over the past decade, and adding this service is a strategy that some firms use to keep fee revenue in place.
Another pricing strategy of many firms is to include the fee as part of a retainer. A client may select from a menu of services, and based on what services they select, a monthly or quarterly flat fee will be determined. Many firms will revisit the fee after the first six or twelve months to make sure the level of work and complexity is in line with the revenue generated.
Using a hybrid approach with a flat fee for only bill payment and AUM pricing for investment management is also another option. If clients have concerns about the cost, it’s important to clearly lay out what is involved and the infrastructure and talent that is needed to offer the service. If they want the cheapest bill payment provider, then they may not be a good fit for your firm.