Credit unions and other bill pay providers may be facing new competition from Apple Pay, which has begun allowing some users to pay monthly bills with its iPhone payment technology.
The move, announced back in January and rolling out this month, lets Xfinity customers pay their bills online with Apple Pay. Xfinity provides TV, high-speed internet, phone and home security services and is owned by Comcast, which is a publicly traded media company that owns Comcast Cable and NBCUniversal.
"Services are becoming a larger part of our business and we expect the revenues to be the size of a Fortune 100 company this year," Apple CEO Tim Cook said during the company's quarterly earnings call in January. "Our Services offerings are now driving over 150 million paid customer subscriptions. This includes our own Services and third-party content that we offer on our stores. We feel great about this momentum and our goal is to double the size of our Services business in the next four years."
The move could represent a broader competitive threat to traditional bill pay providers, according to Tim Keith, chief strategy officer at Infusion Marketing Group, a data-analysis firm specializing in credit union products and marketing. Bill pay is already flat-lining, he noted.
"In the last 18 to 24 months, the bill pay numbers, which had for four or five years or more before that, tracked directly with online banking growth. So if online banking got 10% in a year, bill pay's up 10%. It's a lower number, but it's still up by the same ratio. That all of a sudden stopped and started flat-lining. And bill pay — the percentage of members using bill pay is basically the same as it was two or three years ago."
Marcell King, who is chief services officer at digital payments company Payveris, said Apple's move is both bad and good news for credit unions.
"This is bad news because, as Apple expands these kinds of direct-biller relationships, credit unions face becoming less relevant — perhaps even being driven out of bill pay completely — as members are enticed to pay their bills at third-party sites that generate no credit union benefit," he said.
"The good news is, credit unions don't have to roll over and play dead in response to this competitive threat," he added. Credit unions should work to offer bill pay services that provide outstanding user experiences, he added.
"I think credit unions really have to put pressure on their core providers to give them access to better technology, to a better user experience and more timely ability to make these payments happen, or they're gonna continue to see erosion," Keith noted. "And part of the problem, as a former banker having been responsible for this type of profitability stuff, bill pay is an expense, it's a cost center for credit unions. And since most of these Apple Pay services and these payee-related services are free, you're never gonna be able to charge for it."
Transaction volume on Apple Pay grew more than 500% year over year, and about two million small businesses now accept invoice payments with Apple Pay through several billing partners, according to the company's January 31, 2017, earnings call.
On April 5 of this year, Western Union announced that its mobile app customers can now pay with Apple Pay for money transfers originating in the United States and going to more than 200 countries and territories around the world, including domestic bill payments.
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