Bill payment app makers need to consider budgeting stress on families
While community banks and credit unions can’t solve every relationship problem, digital transformation should provide tools and services that can both satisfy the customer and, secondarily, prevent financial stress on families.
One of the most common sources of tension among couples is the one that lies between the "saver" and the "spender" in the relationship. These are actually complementary behaviors that can positively affect the other, but can be toxic when couples don’t communicate or coordinate effectively to manage their income and financial obligations.
Let’s take a common scenario: When a husband, for instance, uses the bill pay system to make a car payment or pay a credit card bill, the system will send the payment via ACH or paper check. He may not know or understand that payments sent on the due date or just before can take up to a week to post, leading to a payment that is slightly behind.
So a few days later when he receives an automated payment “reminder” call, he’s frustrated with the bank and his partner is frustrated with the failure to pay on time, resulting in an argument about personal responsibility that leaves tension long after the argument is over.
Many financial institutions, however, have their own problems to resolve first. Their marriages to legacy banking technology often mean they can’t deliver what customers experience everywhere else in e-commerce: payment options, recommendations, real-time data and same-day processing. This can give customers the impression that the institution simply doesn’t know or care to provide something better. Meanwhile, the growth of fintech has only made it worse. My relationship with the bank may have been OK for the last decade, but that new savings app on my phone seems to care a lot more about my needs.
Today, only 27% of bills are paid using solutions offered through a bank. Customers pay almost all of the rest directly through their billers’ websites, using credit cards and occasionally linking checking accounts to a variety of decentralized, individual merchants with no common thread to connect them.
It’s a hassle for customers, but they do it because they want immediate credit for making the payment and they want to use a card if they can. This is increasingly true among younger segments, and it’s a double-edged sword: Bill pay is a cost center, but it’s very sticky and a hugely important convenience feature that keeps customers loyal to you and your financial institution.
New bill pay solutions aren’t the end-all answer that could put marriage counselors out of a job. Spenders will still spend, savers will still save, and some problems will still exist. But a better approach to bill payments would help solve problems for both the customers and the financial institution by doing the following things:
First, bill pay would continue to do what it does today: provide a centralized platform for couples to pay their bills in one place. That’s table stakes.
Second, the system would provide real-time information on due dates and balances due, and offer end users the option of using the debit card attached to their primary checking account or a credit card for the billers that can accept it. That way, they could get the payment to post immediately.
Third, better bill pay would allow customers to automate payments and view their projected spend, using their cards, so that they could avoid the risk of forgetting to make their payments—and the wrath from their partners that may ensue—while also managing cash flow responsibly.
The financial institution will probably never get the credit for saving marriages, but that shouldn’t be its goal anyway. It has improved its customers’ lives, having consolidated numerous monthly tasks into just a few steps and created a new benchmark for customer experience that account holders can appreciate even if they don’t voice it. What the bank does get is the benefit of positioning its own cards as a payment option, turning a cost center into an interchange revenue source that can not only offset the cost of providing bill pay, but the cost of servicing a retail relationship.
In this competitive landscape, financial institutions aren’t going to magically acquire more account holders or deliver the returns they want by doing what they’ve always done. They have to earn it. They have to invest in creating new experiences that solve real problems and pay for themselves.