Credit unions today are faced with a number of obstacles in trying
to increase usage of their bill pay service. What was once considered
a promising source of fee income is rapidly becoming a standard
service that many consumers are expecting for free. Many large banks
have started offering the service for free, while the number of
vendors allowing customers to pay at their Website have increased
The main argument for eliminating bill pay service fees is that
bill pay users are a highly profitable customer segment, who have
significant loyalty to their primary financial institution. Some
banks have already signed on to this theory - witness the recent
fee elimination by Bank of America, and others. Credit unions who
are still charging monthly fees should re-evaluate their strategy,
and consider eliminating or at least lowering their fees. Wescom
Credit Union recently dropped their $4.95 fee after their analysis
revealed that their bill pay users had an average profitability
$400 higher than non-users.
A recent online Survey Consortium survey of bill pay users and non-users
provides further insight into this area. Of the 19 Survey Consortium
credit unions, the credit unions with free bill pay services had
penetration rates twice as high - averaging 18% - than the fee and
relationship based services, which averaged 9%. While these figures
are based on a small group, the numbers are in line with what the
experiences of other financial institutions, who have typically
doubled their enrollment.
Member comments obtained through the online survey show that cost
is a major barrier to signing up for credit union's bill pay service.
When members discuss aspects related to price, the issues they raise
Cost of service compared to stamps: The majority of online
members reported paying 8 or fewer bills per month. Members didn't
want to spend more than what they were currently paying for postage.
Clearly, they didn't see the convenience aspects as something to
pay more for.
''Currently I pay approx $7 per month for the USPS service.
You would need to find an incentive that would motivate me to rebuild
my account lists, assure me that the money would be removed on the
payment date not prior to it, and beat the monthly rate I currently
''If the service was reasonably priced, I would sign up. It
would be nice to have a central location to pay ALL the bills online.
$83 a year is too much. To make that rate feasible I would need
to mail 15 bills a month to begin considering it..''
In comparison to other financial institutions who offer it for
free: In part due to Bank of America's aggressive marketing,
these online members were well aware that some financial institutions
offer it for free.
''Make it free like Bank of America and other banks who offer
it as a courtesy to their customers!!!''
They can use other automatic payment options for free: On
average, members were using more than two methods to pay their bills
currently, including mail (76%), automatic account withdrawals (44%),
biller's website (34%) or automatic credit card payments (17%).
Additionally, some banks and credit unions offer incentives for
customers to use electronic methods of making loan payments.
''When I can pay my bill on my creditor's site, why do I
need this service? It's redundant for me.''
Some credit unions claim they don't want to subsidize the usage
of a special service targeted at a small member segment. Yet, aren't
these members already subsidizing other credit union members? It's
well documented that online members tend to have higher balances
and use more credit union services than other customer segments.
And members feel that they should be rewarded for this loyalty,
as shown by these comments.
''Why should I have to pay you to pay my bills? It should
be a free service provided in my membership with the credit union
- should be a benefit of the credit union.''
''I think this should be a free service; we have all of our
accounts with you.''
''Make it free or at least free for Partner accounts.''
Many credit unions have added free bill pay as a benefit under
their relationship pricing plan. The benefit of this strategy is
that loyal members feel they are getting an advantage, while the
least profitable segments are required to pay for it. At some credit
unions, the majority of the membership ends up getting the service
for free but it is marketed to them as a relationship benefit. Other
potential strategies include lowering the fees to make it more comparable
to postage costs, or charging by the bill instead of a flat monthly
Credit unions interested in increasing their bill pay usage should
carefully consider the benefits of eliminating or lowering their
fees. We'll be discussing more ideas related to increasing bill
pay penetration in the coming weeks.