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VIENNA, Va. – When you’re a credit union with over two million members, eliminating a fee can have a major economic effect on the credit union while impacting the lives of a few million people in a small way. The $21 billion dollar, two-million member Navy FCU announced last week that it is dropping its $4.95 monthly bill pay charge and will offer it free to members. Free bill pay has sort of been an experiment in the financial services world that seems to be paying dividends, in usage at least. Bank of America, the first mega bank to move to free bill pay, saw a dramatic increase in usage after dropping its fee. Whether this results in more business for the bank is hard to gauge, however the line of thinking is that once you get a user to sign up for bill pay they stay put and they expand their relationship with the institution. That’s kind of what Navy FCU is thinking. “The greater number of payments an individual makes per month, industry statistics have shown that those members have a higher participation in the credit union,” said Deborah Guerin VP of Electronic Services for Navy FCU. Guerin said one of the primary reasons for doing this is the nature of its membership. “We want to be able to serve our members worldwide, at the same time recognize that this service is a sticky product,” she said. Currently Navy’s bill pay participation is pretty weak -only about 77,000 of its members use the service. That number might sound high for an average credit union, but considering Navy has more than one million online banking users, it’s a low number. It’s also had bill pay in place since 1999. So why has the world’s largest CU been so successful with online banking with over one million members, and not bill pay? Guerin said price obviously plays a role. Internet banking has always been free, and Navy’s bill pay service was as high as $6.95 at one point. But Guerin also noted that so far the credit union hasn’t given bill pay the marketing push it has online banking. That will change. The CU is planning to use a number of different marketing vehicles – including posters, statement inserts, and the newsletter – later this month to alert members of the price cut. Navy’s service isn’t going to be free for occasional bill pay users. Members have to pay at least three bills online a month in order to qualify for the free service. Those members who pay less than three bills online, will pay $4.95. The reason for the minimum of three payments again goes back to usage, with those members that pay more bills online likely having more relationships with the credit union. Navy is also eliminating a previous 15-bill cap on how many bills a member can pay a month. Deciding to eliminate a fee that 77,000 members are charged will obviously result in lost income for the credit union. Guerin did not want to discuss that element, but doing just the basic math of 77,000 users at $4.95 per month likely puts the lost income in the millions – a price Navy is willing to pay to better serve its worldwide membership and in the process hopefully deepen relationships with them, said Guerin. [email protected]

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