how do banks profit from paying customers bills on line?

Answer 1

There saving on paper i guess, it all adds up!..

Answer 2

There is a considerable cost in keeping the network, computers, support staff, fraud, people who default on their payments, etc. The credit/debit card system needs *someone* to pay for it. If banks didn't charge merchants a fee for processing credit card transactions, then the cost has to be borne by someone else, ie the customer. This happens in some gas stations and some mom-and-pop shops which give "cash price" and "credit card price" - maybe 4-5 cents higher. Keep in mind not all consumers have a balance and pay interest - if you have some cards and pay in full, you, the consumer even get a kick-back of 1 or 2%. Being a bank isn't a sure-fire way to making money. Just look the state that all the major financial institutions are in - worse than any other sector. I'm not in the finance industry nor do I condone what the jokers there have done - giving Merrill Lynch executives $4 billion in bonuses as the company went insolvent. They also have successfully got the government trained in handing out hundreds of billions of dollars every couple of months with no questions asked. However, as far as credit cards are concerned, I believe the consumer is as guilty as the issuer. There are too many people who buy things they can't afford just because they have a credit card. If more people used them responsibly, there would incur little or no fees, convenience of not carrying cash around, and even small rewards.

Answer 3

Banks Offer Sweeteners To Paying Bills Online

it turns out that banks are finally realizing that there are benefits to having their customers use online bill payment. When banks first started offering the feature a few years back, they looked on it as a profit center and tried to charge for it. What they discovered is that people weren't willing to pay - and instead, started doing direct bill pay online with the various companies that billed them. Now, years later, the banks are finally realizing there is more to business than squeezing an extra dime out of every transaction. They've noticed that banks that offer free online bill pay (and who also encourage customers to use the service) create a ton of other benefits. They're much more loyal. Once they've set up their online bill payment system, they don't want to have to go through the process again. They keep more money in their accounts to cover the bills. They also use less time of bank employees. So, the banks are making a late-to-the-game effort to drop fees and convince customers to move to their own online bill pay offerings. Yet another example of how companies can benefit in other ways by offering something for free - and can actually do more harm to their business when they try to charge for something when people know there are better alternatives.

Answer 4

1. Current market scenario: Having customer pay bills online is currently a loss leader in terms making profits directly from the service provided.

2. Float: Most banks make money on "spread"...between time you set up the payment online and the time it is actually cashed by the recipient of the payment. The bank takes the money out on the day you set up the payment and it takes anywhere from 2 to 7 days for the actual payment to be taken out by the recipient. Therefore, there is a 2 to 7 days float period that the banks can do short term lending on after aggregating all their outbound payments based on the cash flow projections. Float management is a big revenue and pure profit generator.

3. NSF Fees: Non-sufficient funds fees. Scheduling online payments is a convenience factor and with recurring payments, there are chances that the account may run out of funds. With 75% of Americans living paycheck to paycheck, the chances of NSF happening are significant. For many Banks, NSF fees are a true profit generator.

4. Overdraft Fees: Everytime, you get into the NSF zone, for those that have the luxury of having a credit card or savings account, everytime, funds get automatically transferred but for a fee...once again pure profit.

Answer 5

The profit is mostly in the service it provide to the customer. It cuts down on the time the customer put in the transactions. No need for stamps, no need to go to and from the mailbox, it cuts down on the movement of paper(checks,etc) and provide for the customer to handle a needed time consuming task with minimum effort with precision accuracy.
Not only that but on line banking allow you to see at the push of a button all your transactions, view your checks , see what and how you have distributed your money and make modifications to your accounts in the privacy of your home.

Answer 6

Its not about direct profit, wrather a service that is going to get you to put your money in their bank instead of the bank across the street that doesn't have the same service(not that most banks don't offer this).

Answer 7

Banks profit because they do not have to pay personnel for check handling and wire transfer of funds to another bank.

Answer 8

Processing of checks is reduced when a computer transaction of bill paying is made....

Just like companies (energy, phone, water, cell, etc...) send those memos asking you to sign up for online billing....they save 39 cents in mailing....if 100,000 people do it....they save $390 in postage....each month....it's penny pinching in the corporate sense...

Okay, let's say Sprint has a million customers paying online globally....at the US rate of 39 cents....that is $3900 per month they save in postage.

Let's only hope they pass the cash on to their employees.....

Answer 9

It saves the bank money, rather than making them a profit. Although I guess they do profit in the long run!

Answer 10

Banks really profit by those 2 dollar charges every time you use an unfriendly ATM.

Boy I hope the guy who thought that up gets a rash somewhere he can't itch in public....

Answer 11

Some banks charge for that service and the free ones use that to get you to switch.