Customers would desert online banking if it weren't free
2011-03-02
Major financial institutions enacted a customer loyalty coup when they hit upon online banking. This free service allows consumers to check their accounts, complete transactions and pay bills online and free of charge, while helping FIs save money on the paper and printing used for traditional mailed statements.

In fact, this banking channel has proved so popular and cost-efficient among FIs that they began charging consumers for paper statements, hoping to bring as many customers online. However, as Congress and the federal government increasingly impose new regulations and prohibit certain revenue-generating actions, many wonder how long this service will remain free.

A recent study by Mintel Comperemedia surveyed banking customers on this very issue and found that while 79 percent of respondents visit their banks' online website on a daily or weekly basis, nearly 80 percent said they would stop using this service if it were not complimentary.

"Most consumers would be loathe to pay for an online bill pay service, simply because there are other services that are offered free of charge," said Susan Wolfe, vice president of financial services at Mintel Comperemedia. "So if banks start charging for online bill pay, they run the risk that customers will use another payment mechanism or go to one of the free third party services."

And even those consumers who would put up with a monthly fee have a relatively low tolerance. Only 7 percent of consumers would be willing to pay $5 per month, with 5 percent adding that they would pay $10 and a mere 2 percent agreeing to a charge of $25.

"The wide range of payment mechanisms means customers have choices," adds Wolfe. "Getting customers to sign up for online banking is the easy part - getting them to use the full online offering is much more challenging."

For example, despite its decreasing popularity for other types of payments and transactions, writing checks is still the most popular way for consumers to pay their bills, with 62 percent indicating they use the paper method. Online billing through a bank came in fourth as 40 percent of respondents said they had paid through this channel.

In a webcast last week, Wolfe suggested a new channel that may open up online bill paying to a greater number of banking customers: mobile. Apps and person-to-person payments are tools banks can offer that third party providers cannot. 

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