Is E-Bill Payment Paying The Bill?

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ARCATA, Calif.-Northern Redwood FCU here doesn't offer electronic bill payment. EvergreenDIRECT CU in Olympia, Wash., does, but wonders if perhaps it shouldn't.

The two credit unions are among those challenging the notion that this expensive online service is worth the cost.

Electronic bill payment is often billed as a "sticky" service that will keep members coming back to the CU, yet bill pay has been gathering dust at more than a few credit union websites for the past 15 years. Bill pay adoption hovers at an average of about 15% of checking accounts at most financial institutions, according to various reports. It's rare to find a credit union with more than 15% of checking accounts using bill pay.

Bill pay may be free to members, but it's a pretty penny to provide. A few CUs pay as little as $2 per month per user in direct costs, but many are paying closer to $5 per user per month. In contrast, Internet banking commonly costs less than a dollar per user per month, or $2 per user at most.

"Bill pay would lose money for us indefinitely." said Greg Goodwyn, CEO at $18-million Northern Redwood. "Until the price drops, we are avoiding it. We've had fewer than 10 members ask for bill pay." More than 10% of the CU's 1,600 members actively uses Internet banking, Goodwyn said.

Ed Danz, CEO at $43-million EvergreenDIRECT CU in Olympia, Wash., thinks that if bill pay disappeared tomorrow, most members wouldn't notice. This despite the fact that an impressive 40% of the CU's checking accounts actively pays bills online since the CU launched the service 15 years ago.

"I really question whether bill pay is any more 'sticky' than just the checking account alone," Danz said. "I think people are using other methods to pay bills, like automatic payments and biller-direct, that are easier to set up than bill pay."

EvergreenDIRECT pays about $4,000 per month for bill pay-"that's pricey," said Danz. And employees have to spend time troubleshooting bill pay with members. "We have very needy members who can't do things for themselves."

Paying bills online may not be attractive to many older members, suggested Robert Reh, CIO at Nassau Financial FCU, Westbury, N.Y. The average age of the membership is 48 at the $325-million CU, a factor that may explain why only 7% of members are actively using bill pay, according to Reh. About 20% of the membership actively uses Internet banking.

"Age and profession may help decide on adoption of Internet banking," said Reh. With its new community charter, however, Nassau Financial "hopes to extend membership to more people whose profession includes the use of the Internet. We are trying to lower the average age of our members by using social media, email advertising and online account opening."

Bill pay adoption is "slow, but more members are calling and asking if we offer it," added Tootie Holmes, manager at $12-million IEC FCU in Springfield, Ill. "Some merchants in rural areas do not offer a web pay option, and our members feel more secure dealing with us."

IEC has offered bill pay for 15 years, and only 6% of draft accounts use it, said Holmes. Meanwhile, the CU began offering e-statements five months ago, and 7% of the entire membership is already using it.

The CU pays $5 monthly per bill pay user, she said. "We supplement the cost by offering debit cards that net us income from the interchange and overdraft fees." E-statements cost a total of $50 per month.

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