PURCHASE, N.Y.-Recurring payments and online bill payments can help a CU remain top of wallet with their cardholders and even prevent cardholder attrition.
MasterCard Advisors took that position during a recent webinar that emphasized the importance of taking extra steps to keep consumers using the FI's cards in an environment in which cardholders are consolidating their choices.
Michael Nashold, principal, explained that consumers have consolidated their use of credit cards as a result of the recession. "Before the economic downturn, the number of open lines and cards in the market were plentiful. But from 2008 through 2011 there was a 32% decrease in the total number of credit cards in force, from 647 million to 439 million. Clearly, consumers have consolidated into fewer payment mechanisms."
As compartmentalization of spend has increased, so too has the number of bills paid online, said Nashold. In 2012, 5.98 billion bills were paid online, and in 2013 that total is projected to reach 6.3 billion, he said. "A key to remaining top of wallet is to make sure your cardholders use their cards not only for everyday payments, like a cup of coffee, but for household bills," said Nashold. "It creates a stickiness."
A recent MasterCard Advisors study shows a strong correlation between consumers who use online bill payment (where each transaction is independently initiated by a cardholder-and recurring payments-where a merchant is set up to be paid on an ongoing basis) and the use and average spend on a credit card. But it's important to market online bill payments and recurring payments early in the cardholder's lifecycle.
Other Findings From Study
The study shows that active online bill payers spend an average of $475 per month on their cards compared to those who do not use online or recurring bill pay ($215). Consumers active in just recurring payments have an $864 average monthly card spend. If active in both recurring bill pay and online bill pay, monthly spend jumps to $1,629.
"On average, cardholders with recurring payments spend 60% more than active accounts without a recurring payment," said Nashold. "This differential increases as the number of recurring payments increases."
Nashold said MasterCard Advisors data shows, too, that cardholders using recurring payments are less likely to stop using their cards. "Recurring payments gives you a double-whammy, cardholders not only spend more, they stay with you."
Lagging Activity
Data shows that total card spend inactivity lags, by three to five months, behind cardholders becoming recurring payment inactive. "Cardholders' recurring payment behavior can be transient, so it is important for the financial institution to provide their cardholder base with ongoing education about the service to keep them active with recurring payments," said Nashold.
Households with higher incomes and education, too, are more likely to pay bills electronically, said Nashold, as well as younger generations.
When marketing to cardholders, Nashold emphasized that messaging must be segmented and coordinated across all delivery channels.
