customers
Regular users of online electronic bill payment services are a
better proposition as customers for banks in key areas ranging from
profitability to loyalty. This conclusion was drawn from a study of
customer paying habits commissioned by US bank SunTrust Bank (STB)
in conjunction with electronic commerce services provider
CheckFree, and conducted by consultancy Aspen Analytics.
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The study, based on 13 months of data, found that STB customers who
received at least three electronic bills (e-bills) per month and
paid them (bill pay) at the STB website:
• were 86 percent more profitable than offline customers;
• had a 78 percent lower attrition rate on average;
• carried 121 percent higher deposit balances than the average STB
customer;
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By GlobalData• were twice as likely to have a mortgage and 60 percent more
likely to have a savings account with STB; and
• had 22 percent more products with the bank than those customers
who use online banking but are not using bill pay or e-bill.
Low attrition rates
Aspen stressed that the objective of the study was to explore the
dynamic of e-bill over and above that of online bill pay and that
it is thus important to distinguish between customers who receive
e-bills and pay them electronically and those who merely pay bills
electronically. Adoption of e-bill on average lowers customer
attrition by nearly 50 percent over and above that of using online
bill pay alone, said Aspen. Aspen also found that customers who are
high e-bill users (more than three per month) have an even lower
attrition rate.
To put this into perspective, Aspen pointed out that a high e-bill
customer is nearly six times less likely to attrite than an offline
customer and is 78 percent less likely to attrite than the average
STB customer. According to Aspen, the average annual household
attrition rate experienced by most major US financial services
providers is about 15 percent.
Also of note, Aspen found that customers who use STB’s internet
banking service for functions not necessarily related to e-bills
demonstrate an attrition rate that is over 35 percent less than
those who do not use STB’s online banking service.
To determine the impact of migrating banking customers from online
bill pay only to using e-bill, Aspen created a financial net
present value model that calculates the impact on five-year
profitability due to the lowered attrition rates and higher profits
for e-bill customers. The model demonstrated that over five years,
the e-bill customer is likely to be worth nearly 25 percent more
than the online bill pay customer, and nearly double that of the
average online customer.
According to CheckFree and STB, the study was the first of its kind
to isolate e-bills as a major factor in driving customer retention
and profitability based on a matched sample analysis. “This
landmark study shows that there is a strong link among online
banking, increased profitability and share of wallet, and there’s
an even stronger link among e-bills, customer loyalty,
profitability and usage of other banking products,” said STB’s
director of consumer deposits and access services, Tom
Bennett.
Support for earlier studies
CheckFree, which has supplied e-billing services to STB since 1995,
noted that the study builds on previous research findings that
customers who use online billing and payment services were more
profitable and loyal to their financial institutions. A study of
consumer bill payments conducted earlier this year for CheckFree by
research company Harris Interactive found that consumers using
e-bills reported significantly greater satisfaction with their
financial institutions and were more likely to recommend a bank’s
online offerings to friends and family. In addition, 58 percent
said they were less likely to switch financial institutions as a
result of using e-bills.
Aspen’s findings also underpin those of earlier studies. For
example, a study conducted by Bank of America in 2002 showed that
online bill pay customers were 31 percent more profitable after 31
months.
Another study published by management consulting company Boston
Consulting Group in 2004 revealed that online bill payment is a
significant driver of bank profitability and that households that
actively use online bill pay will, on average, double their profit
contribution to the bank within three years.
CheckFree is in the process of being acquired by financial services
technology and payments processor supplier Fiserv in a $4.4 billion
cash deal that is expected to close before the end of 2007. In its
2006 financial year, CheckFree processed 1.13 billion transactions
and distributed 184.6 million e-bills.
