Issuers use incentives to push paperless billing

Banks pile on promotions, incentives, to get consumers to turn off paper billing

By Tamara E. Holmes

While more consumers are paying bills online, far fewer have given up on paper bills and statements, prompting credit card issuers and lenders to dangle incentives such as sweepstakes and extra features to get consumers to switch off the paper.

Approximately half of consumers use online bill payment services, but only about 15 percent have opted out of receiving paper bills and statements, says Josh Wendroff, director of marketing for 3I Infotech, which provides payment processing services.  As a result, companies must manage both paper and online billing for the same customers, plus spend money on postage.

To get customers to realize the value in going 100 percent electronic, most banks have used positive incentives, offering consumers a reward for turning off the paper. However, some companies have experimented with a negative incentive -- essentially, charging consumers to receive paper bills. Though negative incentives have not taken off in most industries, including financial services, they will likely become more widely used once the majority of consumers have opted out of paper billing, Wendroff says.

"There have been a few cases of companies that started charging for paper bills and basically had a customer revolt and ended up having to stop," says Wendroff. "But more companies have been looking at it because of the financial incentive to do so."

Since the recession, financial incentives have become more popular. For example, Discover is enrolling all customers who have opted for electronic billing statements into a sweepstakes through the end of the year in which one winner will receive $15,000 and three others will receive $5,000. Wells Fargo has done sweepstakes a couple of times a year, says Martha Smolen, senior vice president of online customer and sales management at Wells Fargo. The bank's most recent promotion, which ended Dec. 15, 2010, gave those who switched to electronic billing a chance to win $50,000. Other banks, including Citi and Chase, have also offered sweepstakes promotions.

Environmental appeal
Another way companies have made their case is through environmental appeals. For example, earlier this year, Wells Fargo announced that it would contribute $30,000 to the Arbor Day Foundation to help plant trees and honor its customers who had opted out of paper statements.

With identity theft a concern for many, card issuers are also touting the security benefits of online billing since there's no chance of paper statements being stolen from a customer's mailbox.

"Paperless statements allow cardmembers another level of protection, since they're sent electronically and are protected behind a secure log-in," says Mai Lee Ua, a spokeswoman for Discover. Financial services companies, such as Discover, are increasing their educational campaigns to let consumers know about security, as well as clear up other misconceptions. For example, many people are afraid that electronic statements can't be used for tax purposes, says Smolen.

"Different messages resonate with different people," says Smolen. "Some people are very motivated by the environmental message, some like the ability to win that cash, and if you've had fraud committed against you, a fraud message is very powerful."

A green future
While companies are rolling out the incentives today, there may not be as much of a need tomorrow. "What you really see is a split demographically," says Wendroff. While older Americans prefer to have that paper bill in hand, younger people are more comfortable doing everything online.

In fact, American Express has been satisfied with the pace at which customers have embraced online billing. "What we've found is that as card members continue to get more comfortable with our online experience and increasingly see the value in the additional benefits that online statements offer, they are making the switch to paperless billing. Therefore, we have not launched any promotions or incentives to promote paperless statements for the past few years," says Mona Hamouly, a spokeswoman for the company.

Companies are also nudging consumers toward e-billing by adjusting their online payment setup procedures so that paper statements are turned off automatically when consumers opt to pay online.

One of the reasons that companies have not done that in the past is because they have had different payment providers in charge of online billing and paper billing, Wendroff says. "It was difficult to coordinate who was receiving paper and who was receiving a statement online." Today, it's becoming more common for companies to use one payment provider for all billing services, Wendroff adds.

Technology is also prompting the shift. With mobile payment options, the pervasiveness of broadband and improved electronic security, paper statements are becoming less relevant.

Like record players, tape decks and VCRs, some experts think paper billing will one day go the way of the dinosaurs. "I think it's a socialization issue," says Wendroff.

See related: The problem with paperless credit card bills: forgetting to pay, 10 ways to go green with credit cards, 12 tips for automatic bill paying

Published: January 10, 2011

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