Paul, you have a great insight into the cross currents that CKFR is facing, and your estimates look good to me. Some observations I will add:
CKFR formerly provided billpay directly to consumers at $9.95 per month....now its all wholesale through the Financial Institutions at $4.00 to $5.95 per month for the basic billpay service. This is causing most of the decline in revenues per subscriber. The $4.00 is for early and big adopters like NationsBank and Wells Fargo. $5.95 is for the small fry Banks and Credit Unions that are just now signing on.
Here is what is interesting. Those fees of $4.00-5.95 per month are typically for only 10 payments. For the next block of 5, CKFR gets another $2.50 from the Financial Institution. And another $2.50 for the next block of 5 payments, etc. The average number of bills paid per subscriber per month used to be 8-9. Recent reports have it at 10-11. (It does take a new user a few months of getting used to the service before they reach these numbers. Therefore, CKFR's average user numbers are dragged down somewhat by the influx of new users.) E-bill will undoubtedly add to that monthly average, so lets just say it settles iin at 11-12 payments per month for a seasoned billpay customer. That equates to average monthly revenues per billpay customer to CKFR of ($4.00 - $5.95) + 2.50, or $6.50 - 8.45.
That feels a little better!
CKFR can get an additional $1.50-2.00 per subscriber per month for handling front line billpay support and technical/connectivity support if the Financial Institution chooses to outsource this part of the billpay package. This is mostly an option the smaller Financial Institutions are exercising, while they get their user base up and running. I suspect that most are planning to drop the front line support from CKFR later when their subscriber growth slows and they know better the extent of the labor pool and technical support knowledge required to take it in-house.
Another factor that will allow some increase in the average revenue per subscriber is the E-bill service. This will most likely be offered free to the subscribers by the Financial Institutions, as part of their Home Banking package. There will be no revenues to the Financial Institutions, and the revenues to CKFR will come from the billers, at around $.20 per bill.
As noted, the average seasoned billpay subscriber now pays 11 total payments per month. If 6 of these become E-bills, as that service becomes more widespread, you could wind up with monthly revenues to CKFR of 6 * $.20 = $1.20 from E-bill. Add the base charge for 11 payments as noted earlier at $6.50 - $8.45. If CKFR is doing the frontline support you can add $1.50 - $2.00 for that.
So we wind up with revenue estimates in the following range:
Billpay at 11-12 pays per subscriber, per month ...$ 6.50 - $8.45
E-bill at 6 bills........................................................$ 1.20 - $1.20
Front line support..................................................$ 0 - $2.00
Total monthly revenue potential............................$7.70 - $11.65
Note that the low end of the range will be most prevalent, because that's where the most subscribers will come from; the biggest banks at the lowest unit price. Still, there will be many smaller institutions offering the service that have to pay closer to the higher monthly estimated charge to CKFR.
So, the subscriber numbers will be rising rapidly, as consumer and Financial Institution acceptance and confidence rises. And there should be some increase in average revenue per subscriber as the number of payments rises and E-bill becomes more widespread.
A final cross-current to consider: Can another provider come in with an offer that undercuts the CKFR billpay price points? I mean, an offer of 15 payments at $6.00 per month would look awfully tempting if it came from a bona fide potential competitor like Travelers or MSFDC.
If I were MSFDC, I would offer an E-bill/E-pay only service at a really down and dirty price. By E-bill/E-pay only, I mean if the bill can't be paid electronically, then you can't pay it with us. And the price would be $3.95 per month or something like that.
That is the only thing I find a little worrisome in the CKFR picture....a cheapo knockoff service that undercuts the CKFR offering by handling only the electronic stuff, leaving the snail-mail, low-volume bill receivers for CKFR to wrestle with.
I am not necessarily predicting that will happen. I just like to have something to worry about. Keeps me on my toes. :-)
Contrary opinions are invited.
Brian |
