Let’s get hangups that consumers have with autopay enrollment out of the way:
- I have to give up control over my checking account
- It’s a pain to set up (routing number? account number?)
- I’m not always sure I’ll have enough money
- I want to control how much I pay on my bill each month
That’s quite a list of credit card autopay “head-ACHs”. Unsurprisingly, use of autopay to pay credit card bills is fairly low at 16%.
Yet what credit card company, or any lender really, wouldn’t want to increase autopay enrollment? It’s an effective payment aid that keeps customers current on their accounts. In this post, we examine how BackOnTrackTM can help increase autopay enrollment.
Population autopay enrollment
Several thousand delinquent collections customers completed BackOnTrack. None of these customers were enrolled in autopay when they completed BackOnTrack. This allows us to examine what factors relate to subsequent enrollment.
The overall autopay enrollment for this population was 1.5%. Not a huge number, certainly nowhere near the 16% average seen industry-wide. But recognize two dynamics in this case:
- These are collections customers, by definition people who have a harder time staying on top of their payments
- The credit card company did not have an active approach to getting customers to enroll in autopay
That second bullet is important. As you’ll see below, many customers are interested in autopay. Without a push to get these interested customers to enroll, that interest dissipates.
Nudging autopay enrollment
A key design principle of BackOnTrack is to prime the consumer to think of positive steps to reclaim their financial health. Think of priming as preparing someone to take an action.
We were able to track autopay enrollments by BackOnTrack completers in the months following their initial delinquency. This allows us to draw some conclusions about who enrolls, and what influences their decision.
In the graphic above, the nudge (“HOT TIP”) asks the consumer whether they are interesting in learning more about automatic payments. Keep in mind this question comes on the heels of different priming mechanisms. 45% of delinquent collections customers expressed interest in learning more about autopay. Considering the 16% enrollment rate for current credit card customers, priming generates a good rate of interest.
And the priming correlates with subsequent autopay enrollments. The table below shows enrollments based on the consumer’s interest in in autopay.
|Interested in autopay||Actual autopay enrollment|
The above results are consistent with a powerful behavioral principle, described by Ohio State researchers:
Sherman showed that asking people to predict their actions does more than just reveal a tendency toward favorable self-presentations; the probability of the predicted action is affected. Once subjects have made a prediction, their behavior is likely to confirm that prediction.
Expressing interest in autopay appears to lead to higher follow-through on enrollment.
Financial fragility correlates with autopay
In a previous post, we talked about the financial fragility question that every creditor should ask. In that post, you see an ordering of better sources to raise $2,000, and worse sources. The source for $2,000 is a very good indicator of the financial health of the borrower.
And that fragility shows some correlation with autopay enrollment. The table below shows the autopay rates, based on the source for $2,000.
|Current savings or retirement funds||2.0%|
|Family and friends||1.8%|
|Credit cards, home equity, loan||2.2%|
|Working longer hours||1.4%|
People with more reliable sources to raise $2,000 (savings, friend & family, debt) enrolled at higher rates for autopay. This intuitively makes sense, no?
Reason delinquent and autopay
For some reason, this is one of my favorite stats. In BackOnTrack, we ask the customer why they were late:
Here are the autopay enrollment rates for the different choices:
|Payment system too complicated||2.1%|
|I was too busy||2.0%|
|I was short on cash||1.4%|
Look at the two reasons with the highest enrollment. Both are intuitive for why autopay would be more popular.
- Payment system too complicated: If you consider it hard to make a payment, biting the bullet and signing up for autopay alleviates this issue.
- I was too busy: In a future blog post, we’ll examine payment reminder enrollment. But for now, know that autopay was even more popular than payment reminders for people with this reason late. A way to think about that: “I’m busy and will miss making my payment. You can send me a reminder, but I’ll probably ignore that too because I’m so busy. Autopay solves this problem.”
It’s the intuitive logic of the higher enrollment rates that I enjoy.
Tools to increase autopay enrollment
As we’ve seen, BackOnTrack alone is useful for increasing autopay enrollment. It works by combining priming and nudging. Consumers who then express interest in autopay are more likely to follow through on it.
But that 2.4% enrollment of those who are interested, though. That’s definitely an area where low-hanging fruit can be harvested.
Two strategies to increase autopay enrollment via BackOnTrack will help.
Make it easier for consumers to sign up: On that HOT TIP page, the process is updated to enable a deep link to the consumer’s account, to sign up for autopay. Seize the moment right at the point of being primed. Also, leverage prior ACH information provided to make payments. The customer need only confirm use of banking information already provided.
Market hard to more likely autopay enrollees: Some characteristics are indicative of greater likelihood to sign up for autopay. The financial institution can do outreach to these customers, using language consistent with their situation.
Signup to be notified when we’ve posted a new article to the Scorenomics Blog!