America Online and Citigroup Inc. have announced a new multi-year alliance that will enable AOL’s 23 million subscribers to pay their bills online.
The Dulles, Virginia-based AOL will make Citigroup’s payment services available through all of its channels, including AOL.com, CompuServe, Digital City, Netscape Netcenter and AOLTV. Users will be able to take advantage of the new service starting this fall. The non-exclusive deal enables users to transfer money from person to person and to transfer money between accounts, facilitating virtual cash transactions over the AOL brands.
As part of the agreement, Citigroup will promote AOL on various Web sites. Likewise, Citigroup will be prominently promoted in the personal finance areas of AOL brands. Additionally, Citigroup will offer lines of credit created especially for the Internet and other new media, offering rewards such as cash back and airline mileage.
Citigroup will function as a clearinghouse for a number of interactive consumer transactions on AOL, including online purchases from e-tailers and auction sites, as well as sending money to individuals.
To accomplish the Net transactions via AOL, Citigroup plans to develop a new line of online payment options. Plans call for users to be able to access a variety of products from Citibank, Travelers Insurance and Salomon Smith Barney. These include banking, brokerage, investment and mortgage products, as well as credit cards, home equity loans, students loans and all types of consumer insurance.
“Financial services are becoming more and more critical to the online consumer, and AOL is an ideal partner to reach these consumers,” said Sanford I. Weill, Chairman and Chief Executive Officer of Citigroup. In a statement from AOL, Chief Operating Officer Bob Pittman said, “The explosive growth of online financial services is illustrative of two converging trends — the mass market coming online and its growing need for individual financial guidance and solutions.”
Because of AOL’s large subscriber base, the new service will inevitably pose stiff competition for the two biggest names in the bill pay industry, CheckFree and TransPoint. CheckFree is in the process of acquiring Transpoint, in a deal that should be completed before the end of the year. The Norcross, Georgia-based company offers a variety of online payment transactions from credit card balance transfer processing to facilitation of consumer payments at a biller’s Web site.
Industry analysts have indicated that consumers would like to be able to pay all their bills at one Web site, creating a fierce race among industry heavyweights AOL, Yahoo! and Quicken.com to become the primary bill-paying site. The new alliance between AOL and Citigroup may catapult AOL into that position.
Online bill paying has steadily caught on with the public, according to Stamford, Connecticut-based GartnerGroup. Gartner research director Avivah Litan reports that two and a half million households regularly paid bills online last year, and four million are expected to do so this year.
According to Gartner, consumers are still not entirely comfortable with the process. In a recent survey, 37 percent of respondents said they disliked losing control and not knowing exactly when a bill would be paid, while 14 percent cited trouble coordinating deposits with payments. Another 11 percent worried that bills would not be paid on time.