The Case for Free Online Bill Payment

Statistics make it clear that the most effective way to boost member adoption of online bill payment is to offer the service for free. Panelists who participated in the Callahan & Associates Oct. 28 webinar titled "Improving Member Usage of Your Online Bill Payment Services" unanimously supported the idea of free online bill payment, pointing to the highly favorable demographics typically shared by online bill payment users. However, critics question the apparent implication that giving online bill payment to an unprofitable member will somehow make that member more profitable. This is not the proponents' contention at all.

To fully understand the argument in favor of free bill payment, it's important to differentiate between the bill payment enrollee and the long-time user. The purpose in offering free bill payment is to cast a wide net. And in casting that wide net, credit unions are likely to enroll their fair share of "freeloaders."

While this may happen at the outset, historical data points to the idea that over time, these "freeloaders" will stop using the service. Any free bill payment program must take this into consideration. For example, panelist Nathan Schmidt, who is the E-Services Branch Manager for Schools Financial CU, says that any member who doesn't use his credit union's bill payment system for 90 days is automatically dropped.

If the majority of "freeloaders" eventually drop from the system, what's left is a concentration of demographically very desirable members - members whose profitability more than covers the $3-$7 the credit union spends on their bill payment service. And because online bill payment does require some setup time by the member, the conventional wisdom says that members are more likely to stay with the institution where they use bill payment. This is especially important for credit unions, given that many members are likely to have accounts at retail banks, as well.

Certainly free online bill payment doesn't make sense for every credit union. It's important, though, for all credit unions to fully understand the benefits of free online bill payment before they reach any decisions.