Five Payment Fixes That Cut Servicing Costs and Turn Indirect Borrowers Into Members
A member finances a car
on a Saturday afternoon, drives off the lot and may not give your credit union
another thought—until it’s time to make the first payment.Every month after that,
they return. Not necessarily to a branch or even your website, but to a payment
screen. For an indirect borrower, that screen may be the only “branch” they
visit each month.
That creates an
opportunity credit unions sometimes overlook: the payment experience isn’t just
a transaction, it can be the beginning of a deeper relationship.
Too often, the first
meaningful interaction with an indirect borrower happens only after something
goes wrong: a payment fails, an ACH return occurs or the account becomes
delinquent. By then, the credit union is solving a problem instead of building
a relationship. For loan-only members, every payment is an opportunity to
create trust, deliver value and deepen the relationship. Yet most credit unions
still treat the payment experience like plumbing.
And plumbing is easy to
ignore when it works. It’s when something backs up that you realize just how
much it affects everything around it. The payment experience is no different. A
forgotten password, expired card or returned ACH may feel like a small inconvenience
to the member, but behind the scenes it can trigger a support call, payment
retry, collections touch or reconciliation exception. What begins as friction
for the member quickly becomes a cost for the credit union.
Recent research modeled the total cost
of accepting a typical loan payment and found that the transaction fee,
approximately $1.20, was the smallest component. Friction, member support and
back-office work added another $6.02, bringing the estimated total cost to
approximately $7.22 per payment.
The fee you negotiate with your processor represents
less than one-fifth of the true cost of accepting a loan payment. Scale the
remaining costs across your credit union’s auto loan portfolio, and the
financial impact of payment friction becomes impossible to ignore. At 500,000
payments per year, those often-overlooked expenses can approach $3 million, yet few credit unions are tracking
them or tying them back to the payment experience.
Now consider the opposite scenario: The payment is so easy
that the member completes it successfully on the first attempt, stays current
and requires no staff intervention. When designed well, the same screen that
just accepted the payment can introduce the member to autopay, a checking
account or their next loan.
One well-designed payment experience can deliver three
meaningful outcomes: more on-time payments, less money spent accepting those
payments and a clear path to the shared account, next loan and broader
relationship that come with becoming the member’s primary financial
institution.
That’s really what
payment experience management is about: looking beyond the transaction and
thinking about the entire payment journey. A payment isn’t just money moving
from point A to point B. It’s a moment with your member—an opportunity to make
paying easier, reduce the work happening behind the scenes and strengthen the
relationship along the way.
So, where do you start?
Here are five ways credit unions can turn the payment experience into something
that works better for the member and for the institution:
- Give members more ways to repay their loans
If your credit union defaults to ACH because, on
paper, it’s the cheapest way to process a payment at roughly 40 cents a transaction, it’s time to rethink
that math. If it fails, return fees, retries, member outreach and staff time
can push the cost of recovery above $20. One failed payment can erase the
processing savings from 50 successful ACH payments. And because ACH returns may
take days to surface, the member may think the payment is complete while the
credit union is already working to recover it.
More payment choices give members another way to pay
when ACH does not work for them. A digital wallet transaction may cost around $5.99, but wallets represent less than 1% of payments in a representative lending
payment mix. At that volume, they contribute about one cent to the $1.20
blended transaction fee. The higher fee on an individual wallet payment has a
much smaller effect on the overall cost of acceptance.
The better question for a credit union is: What does
it cost us to collect this payment successfully? The lowest-cost option is the
one that helps the member pay on time, on the first try, without a return or a
staff member having to step in.
- Get out of your members’ way
An indirect borrower may finance a car through your
credit union without ever visiting a branch. Then, every month, you ask them to
find a payment portal, remember a password they rarely use, look up an account
number and enter payment details again.
Even routine payment tasks can create unnecessary
friction. In a survey of loan payers, 42% named remembering logins, passwords and
account numbers as their biggest payment challenge; 32% were frustrated by repeatedly entering
card or bank details. Research puts the impact of delayed or incomplete
payments at approximately $1.31 per payment.
One simple fix is to give members a shorter path from
reminder to receipt. A text or email can include a personalized link that takes
them directly into a secure payment flow, with relevant loan details already
filled in. Nearly half of surveyed borrowers (47%) said a reminder when a bill is due would
make it easier to pay on time. The same direct path can be offered through a QR
code on a paper statement.
Members should not have to work so hard to give you a
payment. Less searching. Less typing. Fewer chances to give up before they
finish.
- Solve payment problems before they become calls
When members cannot find their balance, confirm a due
date or complete a loan payment, they pick up the phone. Those calls add up.
Assisted support averages about $2.70 per payment across the full portfolio.
Put the answers where members can find them. Show the
amount due, due date, payment status and payoff information without making them
call for help. Saving loan payment details to an Apple or Google wallet can
keep that information close at hand and, when connected to current account
data, update as new statements become available. In a consumer survey, 35% of respondents said being able to save
payment information to their wallet and pay by smartphone would make paying
loans easier.
The same principle applies when a loan payment fails
or a member needs another way to pay. Offer a clear path to retry, switch
payment methods or securely share a single-use payment link with someone
helping them make the payment.
Solve the routine problem before it becomes a call.
Members get an answer sooner, and employees have more time for conversations
that require high-touch support.