HSBC Bank USA said its decision to drop fees for online bill payment starting Sunday was prompted by Bank of America Corp. and other large banking companies that have said it led to better customer loyalty and profitability.
"We think in a short period of time we'll double our existing bill-pay customers," said John Camp, the senior vice president and manager of personal e-business, specifying six months. "I think where we go from there will be a function of the industry."
The Buffalo subsidiary of HSBC Holdings PLC of London has 500,000 Internet banking customers. It will not divulge how many use the bill payment feature, but Mr. Camp said 15% of those in its "targeted customer base" pay bills online.
Within the last two years Bank of America, Bank One Corp., Fifth Third Bancorp, and several other banks have removed such fees, and all have reported good results. They consistently say that online banking and bill-pay customers tend to stay with them longer, maintain higher balances, and conduct more transactions than other customers. HSBC Bank is no exception.
"Like any other bank, we have found that bill-pay customers are more profitable," Mr. Camp said in an interview Tuesday. "We've seen similar trends like those Bank of America released - once [customers] become online bill payers they become more valuable over time."
Bank of America said it picked up a lot of new bill-pay customers after it dropped the fee, and Mr. Camp said HSBC too sees the move helping customer acquisition. It apparently helped Cincinnati's Fifth Third, which eliminated a 30-cent per-transaction fee for its online bill payment service in November and said it has been adding customers at a rate of 6.9% a week this year.
Also like most other banks, HSBC has only been charging monthly bill-pay fees to customers with lower balances. It charges 53% of its customers $5.95 a month for online bill payment; the rest get it free.
Mr. Camp said any dollars lost to the fee elimination would be made up for by the profitability of additional customers. HSBC's online bill-pay customers are 38% more profitable than the average customer paying bills in traditional formats, he said.
Another goal is to encourage customer use of the Internet for routine transactions including bill payment and branch staff for more complicated services such as financial advice, Mr. Camp said. Customers who have been paying the e-billing fee will see the forthcoming change reflected in their October checking account statements, the company said.
HSBC introduced its Internet banking service in April, 2000, and Mr. Camp said bill pay has been a popular feature. "We believe that free bill pay offers HSBC a competitive advantage in attracting new customers to the bank as well as providing another value-added service to our existing customers," he said in a press release.
