ANALYSIS: Corporate Case Study - CheckFree banks on driving thecategory to ease pressure

CheckFree is the clear leader in online bill paying, but is taking heat from clients and competitors alike. Julia Hood examines how the PR team plans to increase usage while overcoming misconceptions.

CheckFree is the clear leader in online bill paying, but is taking heat from clients and competitors alike. Julia Hood examines how the PR team plans to increase usage while overcoming misconceptions.

The health-club boom in the latter part of the 20th century is responsible for more than just the nation's penchant for washboard abs - it was actually the impetus for what is known as electronic bill presentment and payment (EBPP).

Pete Kight founded CheckFree out of his grandmother's basement in 1981.

An employee of Nautilus health club, Kight recognized that gym memberships would be less prone to cancellation if the fees were debited each month from the members' accounts, rather than exacted in a lump sum each year.

The model remains the industry standard today, and CheckFree was born.

Twenty-one years after its launch, the company now develops services that allow people to pay their bills online. Some 475 financial services sites use CheckFree's technology, including Bank of America, Charles Schwab, Merrill Lynch, and the US Postal Service. More than 250 companies use CheckFree to send bills online. Over 6 million consumers tapping into these sites are accessing CheckFree systems, and the company is far and away the industry leader. CheckFree's tagline touts the company as "the way money moves on the web."

But even as more and more people recognize EBPP as a growing trend, CheckFree, which is publicly traded on the Nasdaq, has to answer to its own shareholders when issues like fees and competition cause its stock price to drop. "CheckFree seems beset on all sides these days, with banks pressuring it to lower prices, competing vendors making a play for its business, and investors selling its stock in response to bearish analyst reports, reads a June 24 story in American Banker, prompted by a deal with Wells Fargo that caused its stock price to drop 18% in a week.

But David Fontaine, CheckFree's director of media relations, says the Wells Fargo deal benefits the company by extending its long-term relationship with the bank by offering electronic billing for the first time. Previously, Wells Fargo only used CheckFree's bill-payment feature.

Nevertheless, the PR team's enthusiasm for CheckFree's technology is palpable. The company's three-person PR team is headed by Judy DeRango Wicks, who joined three-and-a-half years ago after working for such PR firms as Ketchum and Crescent.

"It's one of those things like when you are in school and you study about consumer behavior change and theories about opinion change, but rarely get a chance to do it, Wicks says. "It's really terrific to bring the benefits to people, to give people two to four hours a month back to their lives."

Coveted bank customers

Users of electronic bill-paying services are among the most coveted of bank customers. "Typically, our online banking customers have about 35% higher deposits and balances with us versus the non-online banking customer, says Betty Riess, spokesperson for Bank of America, a CheckFree client.

"They also have an 80% lower attrition rate. It demonstrates that the online banking service is one in which those customers not only stay with the bank, but grow their relationship with it."

Keen to court these good consumers, Bank of America has started offering free online bill paying. Meanwhile, CheckFree, which is one step removed from the customer, has also been working to increase usage. Wicks explains that the company's PR strategy shifted when the early adopters to online payment were locked in, but there were still vast numbers of people who were not taking advantage of the service.

Early practitioners of electronic payment options often started by using Microsoft Money or Quicken software, which were supported by CheckFree technology. By the time the online revolution in bill paying occurred, these early users made the transition easily. "The early adopters were computer savvy enough to take home a software package, install it, key in data, and enjoy doing that, Wicks says. "We needed to change strategy to move into the mainstream. It's unhooking a behavior that people are comfortable with."

CheckFree noted that the time was ripe, with more and more people becoming comfortable with online transactions through companies like and other internet retailers. Together with Schwartz Communications, its PR agency of record, the company launched its "market acceleration program (MAP) to increase awareness and use of online bill-paying systems.

"We are pushing the category, Wicks says. "If you are a leader in a field, you can push the category itself. We've been pushing the fact that you can pay bills online in almost a generic fashion."

Personalizing the experience

The strategy was to target 23 key markets where CheckFree had relationships with banks and other organizations. Working in conjunction with their local clients' PR teams, as well as the company's other marketing functions, CheckFree focused on a multidimensional campaign that included targeting local media with real-life customer references.

"We provided reporters access to the analysts who could speak for the whole market so they could do great stories, with research to back it up, Wicks explains. Among the primary misconceptions about EBPP the team had to work to overcome was the feeling among potential users that they would not be in control of their finances.

"I think the company has been very strategic about recognizing that CheckFree has that marketing challenge of stimulating demand, says Carol McGarry, EVP at Schwartz. "By doing that, they are benefiting their own customers, the banks, and retainers who are using their software. Schwartz also helped the company reach out to lifestyle and personal-finance reporters.

Harris Interactive was hired by CheckFree to conduct a poll at the end of 2001 to determine the level of awareness of online bill paying. The company found that 99% of those responding were familiar with the concept, and 25% were actively paying bills online. Another 25% were considering it.

While the virtues of EBPP continue to be analyzed in the media, recent coverage of CheckFree itself has focused more on the company's financial health, and a recently announced relationship with Wells Fargo. Although the bank is using CheckFree for electronic bill payment, it is also using other vendors. American Banker speculates that CheckFree's market leadership could be threatened. The week the Wells Fargo deal was announced, the stock was down 18% for the week at $15.51, and as of press time the stock price was $14.83. Earlier this year, CheckFree laid off 450 people.

"There are two main issues confronting online bill payment, explains David Scharf, an analyst with JPM Securities. "The most obvious is consumer adoption, which has to do with not just the pace at which consumers are signing up, but also with the pace at which billers are investing in the IT resources to present bills online."

Scharf says the other big problem for CheckFree and its competitors is the pressure that financial institutions will bring to bear on vendors for these services. With financial institutions like Bank of America offering free bill-paying services, it stands to reason that someone will get squeezed.

But CheckFree's PR team remains focused on the goal of bringing consumers to the EBPP platform, believing that elevating the whole industry will make the company stronger. "We'd like to see adoption grow at a steady rate - we know that it's not an overnight process, Wicks says. "We think big, and go for it."


Vice president, media strategy: Judy DeRango Wicks

Director, media relations: David Fontaine

PR Agency: Schwartz Communications.

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