How One CU Slashed Cost To Offer E-Bill Payment
RALEIGH, N.C.-Most credit unions pay through the nose to offer electronic bill pay to members-often from $4 to $6 per member per month. State Employees' CU (SECU) here pays $2 per member per month, according to Rick Rhoads, SVP, e-services at the CU.
Most credit unions also outsource bill pay and therefore have little control over the member experience, which can include problems with payments, the payment method, security or the system interface. SECU, on the other hand, has complete control, and as a result, "an extremely low number of member complaints," said Rhoads.
The minimal costs and maximum control for SECU bill pay are hard-won: the $21-billion CU runs all components of bill pay in-house, Rhoads said.
"The primary advantage is that we can handle all member issues," he explained. "We track the types of complaints we receive and then respond by internally enhancing the system or modifying our process. If there's a system problem, we know firsthand and respond immediately. Since we own the system, we control the process, and there is no finger pointing."
SECU keeps bill pay costs down by automatically routing payments through the cheapest payment method for a particular merchant, whether it be direct ACH, through the MasterCard Remote Payment and Presentment Service (RPPS) or by paper check, said Rhoads.
SECU pays about 30 cents per bill paid by paper check, he said. Electronic methods are much cheaper. ACH items cost less than a penny, and RPPS payments are about five cents.
Only larger merchants have agreed to accept ACH payments from the CU, which left SECU paying more than 60% of its bills by expensive paper check, Rhoads said. Postage alone cost the CU $50,000 per month. Two years ago, however, SECU connected to RPPS, boosting its ability to pay bills electronically. Now, about 67% of SECU bill payments are processed electronically, he said.
"RPPS does a good job at attracting more merchants," and SECU continues to work with merchants to accept direct ACH, said Rhoads.
Electronic payments post more quickly than paper checks, thus giving members more control over payment timing, Rhoads added.
Rhoads said it feels good that the bill payment system is secured by SECU instead of a third-party. "Extensive security processes, such as monitoring and managing, are fully under our control, and the entire system is encapsulated in our multi-layer defense systems."
Asked if in-house bill pay is only for the "big players," Rhoads said that "SECU may be big in the credit union space, but we are small in the financial institution space. There are up-front costs to run bill pay in-house, and these need to be weighed against the strategic objectives of the organization." SECU's programmers are responsible for a variety of systems, not just bill pay, "which spreads their costs heavily," Rhoads continued. In fact, many in-house bill pay costs are "sunk" within the costs of running the CU, he said. "If a credit union already has a lot of in-house systems, then costs like data duplication to two sites, redundancy at each site and check printing, folding and sealing equipment are less of an issue."
Then there's the substantial effort to set up direct ACH relationships with merchants. CUs also need to be able to originate ACH transactions, which SECU does in-house.