Jason O'Brien_resized
Jason O'Brien May 31, 2016

Improving bill pay for customer retention

Customers are becoming increasingly dissatisfied with the mobile bill pay experiences provided to them by banks. According to our discussions with financial institutions (FIs), only about 55% to 60% of customers are using their bank’s bill pay solutions. They are either switching to an outside app that is not affiliated with their bank or paying their bills directly through the biller site. The latter is true especially for customers who prefer to pay from a credit or debit card rather than through their checking accounts.

The surprising fact is that while many FI executives know this, they struggle to find solutions to increase the vanishing bill pay user base. Their typical response is to either offer better pricing terms or change the look, as opposed to functionality, of the online system. Still, these options do not address the root cause of abandonment.

Here are three suggestions for banks to reverse the current trends of bill pay utilization:

Consider bill pay as a revenue opportunity. Almost all FIs currently offer their bill pay solutions to their customers at no charge, even at a significant cost to the bank. The resulting mindset inhibits bankers from significantly investing in upgrades to the product. Why would you spend money on updating or improving your bill pay solution if you don’t see any return? Or, if it doesn’t result in any unique value proposition for customers?

To challenge the status quo on bill pay fees, banks need to separate the consumer’s willingness to pay for such services from their willingness to endure the purchase experience. Retailers have long recognized how influential the purchase experience is on a buy decision, with some retail analysts even suggesting that the purchasing experience outranks the product and price in terms of purchasing decision importance. So, before turning up their nose at revenue opportunities on a very valuable service, bankers need to first ascertain if there is a problem with their bill pay services, or if there is a problem in the consumer’s purchase experience. Address these items and a financial institution may be able to realize a sizable revenue opportunity with existing services.

 

Embrace the nature of distributed deposit accounts. The 55% to 60% of customers using their FI’s bill pay system most likely also have credit cards and accounts with separate institutions. This may explain part of the reason that the other 40% are opting out of bill pay – their bill-paying funds exist outside of the bank.

Banks do not have to limit their customers like this. They should recognize and cater to the fact that consumer accounts exist everywhere and provide customers with access to their funds, wherever those funds may reside, so that users can pay anyone from any account they might have. By embracing the nature of users having funds in multiple financial institutions, banks should deliver tools such as account aggregation to make information on those funds more accessible and more intuitive for customers to review when brought together in one place.

Appeal to customer needs beyond bill pay. If banks continue to think of finance and bill pay solutions as point-and-click “means to an end,” utilization will continue to erode. However, tactically assisting customers with one of the biggest contributors to their financial health, monthly payment obligations, drives engagement and promotes repeated and sustained utilization.

B
eyond simply helping with paying billers, financial institutions have a tremendous opportunity to inform their account holders how to stay in good financial health with regards to their bills. For instance, rather than simply listing a series of bills the account needs to pay, how about providing data analysis showing how each bill impacts the consumer’s financial condition? Get creative and find better ways to inform the consumer of the impact of their regular obligations as opposed to simply providing a list of due dates and payment amounts.

In order to drastically reverse the downward trend of institution-based bill pay utilization, banks need to understand why customers have refused to adopt bill pay and offer unique options tailored to them. By changing their mindset now, bankers can implement a bill pay solution that generates revenue, allows users to pay from any account with any institution and offers innovative features to spark user engagement.

Mr. O’Brien is senior vice president of payments in the Financial Institution group at San Antonio, Tex.-based SWBC, which provides insurance, mortgage, and investment services to financial institutions, businesses and individuals. He can be reached by email at jobrien@swbc.com or on Twitter at @nilsobrien.

 

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