Bill pay, a staple of many credit union online banking sites, will be declining and even obsolete within five years, according to Terence Roche of Cornerstone Advisors, the Arizona-based consultants to credit unions and community banks.
made that argument in a recent blog entry and subsequent interview with CU Times
"I don't mean to say bill pay will necessarily disappear in five years, only to point out how uncompetitive it is," he
case on three foundations: The cost of bill pay relative to other payment strategies, the smaller volumes represented by bill pay, and the growing number of less expensive and easy alternatives.
Bill pay costs credit unions five to 10 times more than other payment methods, according to Roche
, a cost which bill pay providers initially justified on the grounds of the service's recent entry into the market and the additional service bill payment providers offer.
pointed out that the circumstances-a lost check, the need for dispute resolution, etc.-that used to justify the extra expense have become quite rare.
What usually happens with payment systems is their costs drop as they become commodities over time, Roche
"That hasn't happened so far with bill pay and I am not sure I see it happening anytime soon," he
pointed out bill pay transaction volumes do not stand out, even against a slowly but steadily shrinking check writing world.
According to Roche
, consumers used bill pay 2.7 billion times in 2013, but that's compared to 18 billion checks written in the same year and 20 billion ACH transactions initiated.
The bottom line, Roche
maintained, is despite its ubiquity, bill pay still came in a distant also-ran behind the other payment methods in terms of volume.
Third, ease of use and popularity.
Middle age consumers that have the money now tend to favor bill pay they use at their institutions' online banking site.
But younger generations favor mobile payments or biller-initiated ACH transactions, debit or credit card payments.
"My point was a growing number of different payment methods are coming up, all of them less expensive than bill pay and many of them easier to use or more profitable to the consumer," Roche
An informal survey of this reporter's friends and neighbors bore Roche
One, Anna, a 30-something who declined to use her
last name, reported having written checks to pay bills until a couple of years ago when she
began using her
bank's bill pay service.
still does for some things.
But now she
also sometimes goes to the biller's website to initiate payment.
"They credit my payment immediately that way," she
said, "so if I need to, I can hold off on paying that bill until that day.