In my last blog, I discussed how banks and credit unions are losing bill pay customers and members to online billers resulting in lower engagement, higher attrition and shallow relationships. In this blog, I will discuss how banks and credit unions can tame the tide of defection and keep their customers and members on their digital banking applications for higher engagement.
Here’s what financial institutions can do to assist their customers and increase loyalty.
Help your customers manage their bills and payments
59% of the 15 billion bills reach American consumers via US post office as paper mail – that’s a lot of paper. Despite the best effort by the billers and financial institutions, only 26% are being delivered as eBills. The rest come in as emails or not delivered at all like a Home Owner’s Association dues. An average consumer has almost 20 bills in a household and that number is only going up in the new subscription economy. In fact, many people don’t even know how many subscriptions like Netflix, Spotify, Amazon Prime or iCloud they have.
This is a huge burden on most households. It’s easy to forget the bill due date when consumers are bombarded with priorities like their children’s homework, softball games and soccer practices. They use a host of tools like yellow notepads, spreadsheets, calendars and notes online to manage their bills. A stack of paper bills on the kitchen table acts as a reminder that consumers have to go through the pile and make sure bills are paid on time. Despite all the efforts, American households are paying $23 billion in late fees. Banks and Credit Unions can lessen this burden by offering a digital bill management tool that would help households manage all their bills on their banking application alleviating the pain and a big stress factor in their lives.
One of the common questions that comes up is why not put all or most of your bills on Auto Pay and forget about it. Most billers and financial institutions allow you do that. Consumer surveys from research firms have revealed that almost half of American households don’t like Auto Pay because they are afraid that they won’t have enough money in their bank account when the bill clears, resulting in an overdraft fee. Let’s keep in mind that an average American family of four has a household income of $56,000 per year. So, managing cash flow becomes very challenging, and paying bills when they are due is very important.
Provide your customers an end-to-end solution
There are four stages of the bill management process:
- Receive bills from various sources – paper mail, email, eBill etc.
- Manage and keep track of the bills for due dates
- Pay when the bill is due
- Monitor unusual charges, due dates, cash flow tracking etc.
Unfortunately, Financial Institutions help only with the third stage – payments. The other 3 stages of the Bill Management process are being completely ignored by the financial institutions and the consumers are left alone to deal with managing bills without the help they need from their financial institution. As a result, the customer engagement is limited only to the bill pay stage only when the payment is made through the digital banking application.
If banks and credit unions can offer a tool that helps their customers manage all four stages of the bill management cycle, customers would be highly engaged and perhaps prioritize your financial institution as their primary financial relationship. If all bills are available to your customers in one place – on your digital banking application securely and safely, where they can receive, pay and manage everything, there is no reason for your customers to switch to a competitor across the street that offers only the traditional bill pay.
Give them more payment options
Another big reason why consumers flock to biller site is that billers offer card payment options which are not available in the current bank bill pay flow. Consumers find this feature very attractive because they want to pay using cards to earn points and rewards. This could also reduce your bill pay cost if the payment is pushed directly to the biller site, so the biller is responsible for processing the credit card transaction. You gain by saving on the bill pay transaction cost. Of course, if the consumer uses the financial institution issued card, you can earn the interchange fee that would help offset some or all of your bill pay costs. In fact, you could restrict paying bills only through your Financial Institution credit card to maximize the value. This however, may have some adverse effects because consumer flexibility to use the card of their choice is reduced.
Turn Bill Pay on its head – make it work the way your customers work
As we discussed above, the current bill pay solutions address just the payment problem – that too just the bank account-based payments. eBills are just an afterthought – available only after you have manually entered all the Payee info such as address, account number, zip code etc. This obviously is not a good user experience. Why not download the eBill from the biller site in real time, get all the information from the eBill (it has everything that you need to pay the bill) and add the payee automagically! And make bill pay just ‘One Click Bill Pay’. Avoid the error prone process of entering payee data manually.
In other words, think bill presentment first and payment second. The Banking Industry is used to thinking of Bill Pay as the main feature and eBill as an afterthought. We need to reverse our thinking – because that is not how the consumers work. They get the bills first and then pay – that is more natural, and we should follow the same model in the digital world. It’s very hard to change the customer behavior. Let’s change our tools and technology to accommodate how our customers work and make the process simple and natural.
20% is not good enough
Many financial institutions are offering some kind of eBill capability. On an average, consumers get about 2 eBills per month – that’s about 10% of the household bills. Unfortunately, that’s not sufficient for most consumers to be interesting and it is unlikely that this would keep them loyal to your financial institution. If they find a better solution, they will easily jump ship. Finovera market research has shown that in order to make the bill pay application sticky, financial institutions need to make at least two-thirds of the household bills available as eBills on their bank site.
Now imagine a scenario, where your customer receives all or most of their bills every month on your bank site with full details as PDF statements – so they know who to pay, when to pay and how much to pay. The bank application will show if there is enough money in the checking account to cover all the bills. If everything looks good, then all the information required is pre-filled from the eBill and now the bill payment becomes a “One-click Bill Pay” – like Amazon.
Once the bill is paid, the statement automatically gets filed in a digital vault for record keeping. With all this data in hand, financial institutions can analyze consumer spending behaviors, make product recommendations and help their customers with financial well-being.
Of course, this requires a change in thinking but isn’t that a requirement for anything that’s worthwhile?