There are plenty of articles on the internet about online bill pay. They introduce what bill pay is, how to use it, and its benefits. Their main argument is that it makes managing recurring payments easier.
But, there’s a way to make them easiest.
And it won’t cost your financial institution nearly as much.
The State of Recurring Payments
There’s a popular new term out there:
Basically, it refers to the growing practice of recurring billing for products and services instead of one-off purhcases. So, instead of selling a one-time product license for $200, a company might sell a subscription for $20 per month.
The benefits are obvious.
- Consumers don’t have to shell out big sums. Most people aren’t too thrilled about dropping a couple hundred dollars at a time. Smaller recurring payments are much easier on most peoples’ wallets.
- Companies make more money over time. Let’s say that $200 license would be good for three years. In that same three-year span, their $20 monthly subscription would bring in $720, almost 4x as much.
- Consumers can cancel whenever they want. If a product or service isn’t quite what you wanted, you can usually cancel at any time, and potential save lots of money if you decide early enough.
In many ways, it’s a win-win. However, there are major downsides to the subscription economy as well.
Most notably, it does cost consumers more money overall. And as more products move to subscription billing, managing those recurring payments is difficult — whether on a card or through online bill pay.
When Online Bill Pay Doesn’t Work Well
Online bill pay seems like it should be a great solution to managing all those charges, doesn’t it? It may help some, but in return, it creates even more issues.
Here are a few ways that online bill pay doesn’t quite live up to snuff.
- It’s a heavily manual process. If you want to set up online bill pay, you have to fill out payment information for each vendor. If you want to cancel bill pay, same deal.
- It requires money in the bank. 40% of Americans can’t afford a $400 emergency expense. Many others would love to get rewards on their credit cards. So, bill pay doesn’t offer the flexibility or the rewards of other payment methods.
- It’s not convenient. Sure, bill pay is more convenient that paying each bill with a check, but most of today’s subscription services don’t even accept bill pay, let alone paper checks. Plus, With each new or canceled subscription — and sometimes for each year — you must log into an online portal and set things up. That may have been more convenient in the past, but now? If it’s not an app that works automatically, it’s not convenient!
Bill pay is fading, and younger generations hardly know what bill pay even is. While that’s not a statistic you can write home about, it should tell you how much people actually enjoy using it.
But here’s the biggest issue of them all:
- It costs your credit union money. Lots of money. Or at the very least, you’re not making interchange revenue off those transactions.
A Better Way to Manage Recurring Payments
You need to give your account holders a way to manage recurring payments. Most people have between 10–15 recurring charges. That includes things like:
- Gym memberships
- Streaming video (Hulu, Netflix, Disney+)
- Amazon Prime
- Utility bills
- Subscription boxes
The list could go on for pages. Most people spend about $850 in recurring charges every month. That’s a lot of payments to manage.
That’s a lot of interchange revenue that institutions are leaving on the table. Plus, bill pay isn’t as convenient as an app that automatically detects recurring charges and offers a painless way to manage payments on it — even across multiple cards or payment methods.
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