What's New Around The Curve? Why Bill Pay Is Booming, And What's Next
When Matt Lawlor looks at the credit union marketplace, he sees a series of adoption curves.
The curve rising most sharply right now is online bill pay, even if credit unions don't yet recognize it, said Lawlor, chairman and CEO of Online Resources (ORCC).
"Bill pay has been lagging, but we are on the cusp of seeing it explode," said Lawlor during an interview with The Credit Union Journal during the recent Bank Administration Institute Retail Delivery Conference. "We are going to see bill pay growing at 50% to 100% per year. Many credit unions remain enthused, and well they should."
When Lawlor plots out the adoption curve for bill pay, it strongly resembles that of other technologies that have preceded it, such as ATMs, which at one point were widely thought to appeal to no more than 33% of consumers.
Lawlor said that credit unions have always understood the value of account presentation or aggregation, a category in which credit unions quickly surpassed banks. But credit unions were leapfrogged by banks when it came to online bill pay, which is offered free by many in the market. "Credit unions are now coming back with a vengeance in bill pay," observed Lawlor, adding that his company's experience has been that credit unions that were least interested in bill pay are now most interested.
The reason, he said, is recognition that bill pay is one of the true differentiators when it comes to establishing the credit union as the primary financial institution.
"We've always known that bill pay removes some costs (for the member)," said Lawlor. "But it's not a cost argument. Everyone wants it for retention. It's sticky."
Lawlor pointed to research that shows the average member has 2.3 accounts at the credit union; but the typical online household has 3.5 accounts with the institution. "People who pay their bills with you tend to use your financial institution," he said. "After one year you see a 40% increase in balances; after three years it's 100%."
Not too coincidentally, Online Resources has marketing resources available to help get members online, and Lawlor said that among its clients credit unions have been most active in leveraging that support.
"To make the (online) channel successful the trick is how many of your members can you get to use your bill pay," suggested Lawlor. "We're right at a transition point. Two to three years ago clients were asking how to convert the online channel from being a cost center. One to two years ago clients were asking, 'How do I make money or be successful in the online channel.' Now they're getting it."
Getting it best have been banks, said Lawlor, who noted the banks have been doing a better job in cross-selling in the online channel.
That cross-selling is integrated into that transition point, according to Lawlor, who believes the market is now at the front-end of a new adoption curve.
"Once you've got them into bill pay, what's next?" asked Lawlor. Online Resources' answer is a product it calls "Money HQ," which, as the company describes it, "transforms your online banking and bill payment site into your consumers' primary finance center. It gives them the ability to view all their online foreign accounts and bills at your online banking center regardless of their origin. Consumers can even act on this information, transferring funds between accounts, executing payments, and setting alerts based on account balances and due dates."
"Credit unions now understand the value of relationships," said Lawlor. "It's not just about competition. They now can see the increase in balances, and that is the key to being the primary financial institution. With Money HQ we've said to clients 'you ought to charge for this,' especially if you're giving away bill pay. And most of our clients are charging for it."
Lawlor said that to date 9% of consumers who are bill pay users have bought Money HQ. In the case of Pinnacle FCU in Edison, N.J., which participated in the pilot, it is charging $4.95 per month for Money HQ.
Credit union members are at the threshold of expecting to see real-time updates on their finances, according to Lawlor, who noted that remittances in urban areas are now 80% electronic. "We're headed to real-time money transfers," he said.
Underestimating An Old Standby
In the meantime, Lawlor said many credit unions are underestimating the power of one product that is well along on the adoption curve: the credit card. "The credit card is very important," he stressed. "A lot of clients do not appreciate the power of the credit card. Thirty-five to 40% of cross sales is due to the credit card."
But whether it's credit cards or a new product such as Money HQ, Lawlor said every credit union must plan for rapid product lifespans.
"The lifecycles are going to accelerate, and with better marketing you can compress the lifecycle," he suggested. "Once something commoditizes and you have to give it away, you have to come back with something else."