Bill Pay Keeps Your Credit Union Top of Wallet

Bill Pay Keeps Your Credit Union Top of Wallet and Top of Mind with Millennial Members

Fun Fact: I didn’t know what bill pay was until I started working in the credit union industry.

As a millennial, I hail from the Venmo generation. Almost every transaction we make is with a credit card for the rewards or through digital channels for ease of use. We prefer to pay our bills directly on our credit card’s website or – if we’re really feeling flush with cash – we set up auto-pay!

Get this: according to PEW Research, millennials make up the largest generation currently employed in today’s labor force. What does this mean for you and your credit union?

First, it means you need to figure out how to compete with the merchant apps and big banks by determining which bill pay model works best for your credit union and your members. Then, you must effectively market your solution so you’re reaching your target demographic, which definitely includes millennials.

Bill pay is the prime opportunity to keep your credit union top of wallet with your members. If a member has bill pay set up, there’s a pretty good chance you’re their primary financial institution.

In the industry, we used to only see two settlement models. However, the ever-changing payments landscape has given rise to a third model.

Good Funds

This model guarantees the member has the funds necessary to make the payment before you, the credit union, pay the merchant on behalf of the member.


  • The credit union doesn’t have to deal with fees or the headache of making a payment on behalf of the member without the funds already existing.
  • The credit union can notify a member if their bill wasn’t paid due to insufficient funds. The member then can then empty out their Venmo account (or set up their Zelle – looking at you, Gen Z) into their bank account and resubmit the payment before it’s due to cover that payment.
  • The member also doesn’t incur a penalty for not being able to make that payment the first time if they are able to find the funds before the payment is


  • The payment is pulled out of the member’s account the day the payment is initiated, not the day it’s due. So, if your member has a cable bill due on the 31st, and they’re expecting to have those funds in their account until that day, they may find a lower bank balance than what they were expecting to see earlier in the month.


This model means you’re taking a risk on members by trusting they have the funds in their accounts to pay the bills they set up.


  • The money isn’t pulled out of the member’s account until the actual payment is due. The member’s money is in the account just as they expect it to be, so they’re not calling the credit union and asking where their own money is on the 5th of the month.
  • Something else to consider as a pro for the credit union (but not so much the member) is the potential for fee income.
  • Additionally, risk-based models can process a ton of transactions very quickly since they’re using the ACH rails to move money. This model is scalable and good for credit unions who see a lot of transactions being completed through bill pay.
  • Finally, the data here lies with the bill pay company making it easier to decouple or convert between bill pay providers and cuts down on data redundancy.


  • If the member doesn’t have adequate funds to make the payment, the credit union doesn’t have time to go back to the member and get access to additional funds to complete the request. This means a late fee for the member, and we all know members don’t like fees! Avoiding them is one of the reasons they joined a credit union in the first place.

Third Model

This model of bill payment came about recently thanks to some new players in the market. With this model, a bill pay provider establishes a holding account at your credit union with a connection to the core. At the end of each day, or through a real-time payments API, the bill pay provider submits a file for all the payments scheduled the following day. The settlement account acts as a middle man for payments being made to a merchant while also handling reversals and returns.


  • The bill pay provider guarantees the funds are there in the settlement account, so the member isn’t incurring non-sufficient funds (NSF) fees or other overdraft charges.
  • This method also piggy backs off the pros for the risk-based model above without the risk of not having adequate funds in the account.


  • Here’s on that only pertains to the credit union, but the credit union isn’t getting the revenue from those additional fees. Good thing it’s all about the member, right?

I know that all the individual elements of the payments landscape are confusing on their own. It gets even crazier when we start talking APIs, real-time and any other buzz word you can find on your vendor presentation bingo card. My goal is to make things easy for you to understand so you can make the best possible decision for your credit union, and more importantly, your members.

I’ll leave you with these final thoughts:

  • Use the data you have in front of you right now.
  • Encourage your members to use bill pay.
  • Use a holistic loyalty program (not just a rewards program) that encourages your members to try all the products and services you offer.
  • Employ member journey mapping to determine what a member sees, does, and how he/she could be doing it more effectively and efficiently.
  • Push your new members to sign up for online/mobile banking when they join the credit union.
  • And most importantly, track if your members use your card on Amazon, Netflix and Uber. If they do not, you can bet the big banks and their mobile apps are earning your interchange income.

For more information about bill pay, reach out to Strategic Business Analyst Lizzy Shebanek today!

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