SACRAMENTO, Calif. – Conventional wisdom holds that billpay members are profitable members, and Schools Financial Credit Union now has more than three years of data to prove it. The $972-million CU rolled out its online bill payment service in September 1999 and has been keeping track ever since. It says members using online banking and billpay are now about 16% more profitable, primarily because they tend to have more accounts. “Correlation analysis clearly indicates that a Schools member using billpay maintains a greater number of accounts, 4.01 for those who are currently enrolled in our online services versus 2.47 for all our members,” says Nathan Schmidt, electronic services branch manager for the 112,000-member CU. “The more accounts a member has with the credit union, the more room for profit,” Schmidt says. The more accounts a member has, the more likely he or she is to stick with the CU, too, and in a price-sensitive market with lots of options, Schools has found that offering free billpay made enrollment numbers leap. Schools Financial made the service free (if the member also has direct deposit) after free billpay was introduced in its market by Bank of America. The result: billpay signups went from an average of 70 a month to an average of 157 new accounts per month. “At this point, making the billpay service free with direct deposit has been a successful decision. Securing a member with direct deposit is a key for a long-term relationship,” Schmidt says. “Pair that with an online bill payment account and you’ll have a lifetime relationship with the member.” He adds: “Online services are no longer `nice-to-haves.’ They’re `must-haves.’ If your financial institution does not offer the low-cost products and services your members want, your members will find those services elsewhere.” The vendor who provides billpay services to Schools agrees. “There is huge consumer demand for free bill payment, so in cases where credit unions wish to respond to this demand, we encourage them to look beyond the raw costs and instead focus on the ROI model for billpay,” says Tom Miles, CTO and president of e-services at PSCU Financial Services, which provides billpay services to 150 credit unions. “This model shows that online bill payers cost less to serve, have larger balances and more accounts than other members, have deeper relationships, and buy more products than other members,” Miles says. “In short, they are more profitable.” A lot has changed for vendor and credit union alike since Schools debuted its billpay service in 1999 and Florida-based PSCU Financial Services entered the fray in 2001. “One of the most beneficial changes in technology deals with integration and compatibility. For example, it is much easier now than it was in 1999 to seamlessly integrate bill payment applications across a range of platforms,” Miles says. The choices among vendors also has greatly increased, not only among core vendors but also industry players who offer unbundled bill payment services, including lower cost payment routing and settlement, Miles says. “In other words, depending on your tolerance for the cost of a turnkey bill payment processing system, you now have the opportunity to purchase discrete functional pieces of the bill payment puzzle and realize potentially significant savings,” the PSCU executive says. -

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