Online Resources Study Shows Increased Appeal of Free Bill Payment

Key findings indicate that consumer response to free bill payment service offers has increased as online bill payment moves to the consumer mass market. The study is based on key lifecycle metrics regularly tracked by Online Resources across its 550 financial institution clients. The study included 113 clients who use simplified bill payment pricing, removing influences of those institutions that offer the service through hybrid or relationship pricing models. Last year, the rate of conversion to online bill payment for services that were offered free of charge was 31 percent and those offered for less than or equal to $5.00 per month was 28 percent, a difference of only three percentage points. This years study shows that the conversion rate for free services was 40 percent and for those offered for a fee was 28 percent, a difference of 12 percentage points. The study is outlined in Online Resources new white paper titled, Online Bill Payment Market Update: Fee or Free? The white paper also cites other recent industry studies that support that consumers who adopt bill payment services become as much as 40 percent more profitable to their financial institutions. Following are key findings from Online Resources study: -- Financial institutions that offer free bill payment have a 26 percent higher banking adoption rate than those that charge $5.00 or less per month and 40 percent higher than financial institutions that charge more than $5.00 per month. -- Conversion to bill payment of online bankers is 42 percent higher when online bill payment is offered free of charge versus when it is offered for a fee of $5.00 or less, and 105 percent higher versus when it is offered for a fee of more than $5.00. -- Bill payment adoption for financial institutions that offer the service free of charge is 80 percent higher than for financial institutions that charge $5.00 or less, and 190 percent higher than those that charge more than $5.00. The study further supports that while price incentives are increasingly effective in gaining consumer adoption of online bill payment, active use of customer relationship management (CRM) techniques can be effective for those financial institutions that continue to offer the service for a fee.