Bill Pay Expectations Can Exceed Delivery, CU Finds

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Postage hikes are piquing interest in electronic bill payment (EBP), but members may find that the online service is much less than they bargained for, according to Jose Lara, vice president of Internet Services at Orange County Teachers FCU (OCTFCU).

"Members misunderstand Bill Pay," Lara explained. "Their expectations far exceed what an electronic bill payment provider can deliver. We end up managing expectations because we're not able to change the technology infrastructure."

EBP popularity with members once again seems imminent - indeed, American Banker's most recent poll conducted in conjunction with the Gallup Organization indicated that CU members are comfortable with bill payment. American Banker survey results showed that 24% of CU members use bill pay. And a Direct Marketing Association survey in June said that a full third of consumers would rather not use first-class mail to pay bills.

Down at the user level, however, not everyone is smiling. Industry analyst Gartner, Inc., Stamford-Conn., reported in May that EBP users who drop out do so mainly because they don't understand the service.

The $3.5-billion OCTFCU has allowed members to settle their bills with Internet clicks instead of postage stamps since 2000. After a member clicks "submit" on the CU's website, funds are immediately withdrawn. Members don't need to write checks or lick and post envelopes. And, after they spend the set-up time demanded by EBP, members may be more inclined to stick with their CU.

The catch-only about 60% of bill payees are equipped to receive electronic payments, Lara said. The service provider must pay the remaining 40% of payees by check, creating the same lag time as postage payments.

"Members expect that their bills are going to get paid electronically and immediately," said Lara. When they realize that many bills are still paid by check and not instantly, "they don't want us to take money out of their accounts until the bills are posted at the other end. But we need to take the money out of their account to pay the bill."

Unfortunately, OCTFCU has little control over the bill payment provider's payment processes. Lara called for a more member-friendly approach in which money would remain in members' accounts until payments are posted, and looked to the future when more payees are able to receive payments electronically-and therefore instantly.

The 260,000-member CU faces administrative challenges with EBP, as well. "There are just too many variables at stake. Once files leave our office, they're completely out of our control. Checks can get lost. We've had days where the bill payment provider told us it missed a whole day of payments and the bills are still sitting around its offices two weeks later. As a credit union, how do you recover from that?"

OCTFCU has a full-time support team of four people that resolves technical issues and handles payment disputes, in addition to a call center staff of more than one hundred. "Bill pay is an emotionally charged service and users aren't the segment of members you want to upset," said Lara. "We're very tentative about bill pay."

As a result, adoption rates at the CU are low. Though 23% of OCTFCU members are active online banking users, only 3% use EBP regularly, Lara reported.

For the moment, that's just the way the CU wants it. "We're perfectly content with bill pay growing slowly," he said. The credit union hasn't set any end user goals, either. "We don't want a huge adoption rate. We haven't promoted bill pay, because we want to make sure the system works well; otherwise it's a black eye for the CU."

The CU even charges members for the service-$4.95 per month. EBP actually costs the CU about $7 per member per month.

"We're at a loss charging $4.95," said Lara. "But the demand from members and the relationship it creates are enough of a justification. If we were to pull the plug, we would have a lot of members upset with us."

OCTFCU offers EBP through Open Financial Solutions (OFS), a consortium of U.S. credit unions working to aggregate volumes as they pursue new technology solutions. OFS has partnered with Corporate Network eCom, (CN eCom), a subsidiary of U.S. Central CU, to provide Princeton eCom's EBP platform to OCTFCU.

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