Free bill payment. It seems inevitable. With Bank of America and other U.S. mega-banks flogging free bill payment 24/7 , is it possible to still charge a fee and remain competitive?

We believe you can and should charge bill payment fees to at least a portion of your online banking base. But you need to expand the list of features and benefits for the fee-based option to distinguish it from free services offered by other banks.

Eventually, you will likely divide your online banking base into two or more segments. The FREE entry-level service receives the usual laundry list of online banking benefits. The premium level qualifies for an even longer list of benefits, most notably, pay-anyone bill payment. However, premium customers pay monthly fees ranging from $5 to $10 or annual fees in the $50 to $100 range

The key to making this work is to get away from calling the monthly charge a “bill payment fee.” That doesn’t stack up well with BofA and other major banks. Instead, position the premium service as something with MORE VALUE for online-savvy households. Make sure there are easily discernable differences between basic and premium, other than bill payment, for example more extensive archives or more security options. 

If you are going to give up $60/yr in fee income, make sure you let visitors know. HSBC has two banners on its Personal Internet Banking page.

If you do find it necessary to match the big banks with a free pay-anyone offering, we recommend the Wells Fargo approach. Dole out free bill payment judiciously, as an incentive to encourage customers to increase balances, adopt e-statements, or add an overdraft line of credit. 

-- Jim Bruene, Editor & Founder
jim@netbanker.com