If you’re anything like me, you pay the vast majority of your bills online. What’s not to love? It’s convenient, and it saves money on postage, check printing, etc.
Well, let me let you in on a little secret… Banks don’t offer these services out of the kindness of their hearts. Rather, they do it to lock down their customers. Don’t believe me? Then consider this…
According to a study commissioned by Fiserv, which develops online billpay systems, using the internet to pay bills, send electronic checks, etc. can reduce customer turnover by up to 95%. Why? Because it’s a hassle to re-create your system at another bank.
This shift to online banking has made it easier for banks to make customer-unfriendly decisions — like instituting fee increases — comfortable in the knowledge that people are largely unwilling to break their online banking ties.
According to Emmett Higdon, a consultant who managed Citibank’s online billpay system from 2004-2007, “For the consumer, it’s a double-edged sword.” Yes, it’s convenient, but industry insiders knew “that it would be a powerful retention tool. That’s why online bill paying went free in the first place. Inertia is powerful in the banking industry.”
In fact, online billpay usage has increased 38% over the past five years, and it’s expected to increase another 25% — to 55M households — by 2016. At the same time, a survey by Javelin Strategy and Research has revealed that few consumers are switching banks.
In other words, it’s working.
But guess what? It’s not actually that hard to change banks. Yes, it will take some time, but there’s relatively little effort involved. You will, of course, have to open a new account, and you’ll need to spend a few hours switching your direct deposits, ordering checks, and configuring your billpay/auto-debit options. But beyond that, it’s mostly a matter of waiting a month or two for things to settle out.
What about you? Do you use your bank’s online billpay services? If so, do you think this make you less likely to change banks? Or would you be willing to pick up and move the moment your bank steps on your toes?
As for me, I’d have to say that the convenience of our bank’s system does make it less likely that I’d switch, though it certainly wouldn’t stop me if our bank did something too egregious.
Of course, there’s nothing stopping the next bank from making customer-unfriendly moves once you get there. If we had convenient access to a good credit union, we’d probably go that route. But we don’t, so we just make the best of it.