Journal Reader Question No. 1

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Those predictions a few years back that bill-pay would be "sticky" seem to be bearing out, as we are stymied in penetrating our membership further by reluctance to switch from current bill-pay relationships with other banks/credit unions. What applications are out there to address this?

Gary Daniel, Open Solutions Inc., Glastonbury, Conn.

The hesitation for members to move their bill payment relationship is due to the fact that the conversion from one bill payment vendor to another is currently performed manually. This is propagated by the fact that vendors do not provide a CSV export of payees or payments at the member interface; you also will not find an import of payees or payments. Until these functions are available directly to the member, they will probably stay with the current incumbent bill-pay provider.

However, a strong marketing program wrapped around explaining the value of bill pay and incenting members to switch to their bill-pay application is a model that does work. Billers who have marketed extensively direct to deepen relationships with members through incentive programs and heavy promotions have paid off.

But the problem here is establishing and maintaining IDs and passwords at multiple websites to view and pay all the bills. A credit union's marketing strategy should include a strategy of offering the right functionality, pricing, and incentive programs. From a functionality standpoint scheduling payments ahead of due dates, paying multiple bills, and tracking payments are essential for members. But just as important to get members to switch is communicating a member's perceived loss of float and lack of understanding about when money is actually deducted from their account.

From a pricing perspective, to get members to switch providers, fees for bill pay have to be completely waived to acquire and retain members. The adoption rates and numbers indicate that when a member enrolls in a bill pay service they become committed users. That does not mean they will not switch providers. Marketing the right message will help acquire new members while an automated conversion tool is created.

John Edwards, XP Systems, Corvallis, Ore.

Credit unions have access to excellent bill pay applications, which allow members to make bill payments to anyone named as a payee, not just utility companies, mortgage lenders, etc. And, having a core processing system with built-in contact management capabilities means credit unions can catch members at any interaction point with highly customized bill pay promotional messages; e.g., when they're opening a new account, logged in to Internet Banking, or simply calling with a question. Our customer credit unions have also been using the system's cross-sell and product design capabilities to "bundle" services at new member sign up time, such that bill pay is encouraged as one of several convenience services.

For members with other bill pay relationships, switching is often perceived as too complicated or inconvenient. One popular incentive is to entice members by offering the service for free. Another variation is to offer the service free as long as a minimum monthly transaction level is met, such as three bill payments per month. Obtaining additional incentives from the payees themselves, such as bonus points or other discounts, can help members make the leap.

Stephanie Shah, Harland Financial Solutions, Lake Mary, Fla.

Bill pay has come a long way since its initial introduction and scope of service. Today, members are able to do much more than simply pay bills and have the flexibility to pick and choose the services they desire, if they know about them.

Marketing new services that coincide with Bill Pay can provide the necessary incentives for members to switch or expand current relationships. Packaging services, such as money movement and account aggregation, are now available that enable financial institutions the ability to increase the value they provide to their members, attract online users, generate new revenue streams and reduce processing costs. Members can access a complete set of secure online payment options including single-session new account opening and funding, institution money transfers and "pay anyone" e-mail payments.

Account aggregation provides members a single virtual place to compile and view all of their financial information from the latest stock trade to the current balance in their vacation club account. And interfaces to services such as MoneyHQ, provides members a bill payment site that can be transformed into their primary finance center. It gives members the ability to view all their online foreign accounts and bills at the financial institution's online banking center regardless of their origin. Members can even act on this information, transferring funds between accounts, executing payments, and setting alerts based on account balances and due dates.

Marketing expanded services that provide members additional value can address a financial institution's need to increase their market share within their member base and even expand that membership further.

Todd P. Zerbe, COCC, Avon, Conn.

Vendors of bill-pay systems not only feel your pain, they share it! Without an easy way to switch current bill-pay relationships, these vendors will eventually find it difficult to increase market share. Unfortunately, switching bill-pay relationships will remain painful for credit unions for the foreseeable future. Bill-pay systems are proprietary, making it difficult to extract bill-pay data from the source system and convert it for use in the destination system. Complicating the task is the number of bill-pay vendors operating today. In addition to the better known entities, such as Checkfree, many banks and credit unions have developed their own systems.

Our clients have had more success through more aggressive marketing. One solution that some of our clients have followed is to provide the member with an incentive to switch their bill-pay service to the credit union. This can be done through the somewhat traditional "special introductory pricing" for the service. Alternatively, you could offer the member a bonus to make the switch. This bonus could be in the form of a cash reward or could be packaged into some form of attractive relationship pricing.

Also important is to learn who your members or prospective members are using for their bill-pay service. Understand how your competition's offering compares to your own. You may need to use different approaches based upon the particular competition you wish to target.

Since bill-pay is proving to be a "sticky" type of service, it is well worth your time to become creative in your approach to securing member relationships using bill-pay as a key component.

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