Question

The Wall Street Journal reported that businesses are aggressively pushing consumers to pay bills electronically. Numerous banks dropped their monthly fees for online bill paying, and many merchants are offering incentives for customers to sign up for online bill payment.

Aside from the direct cost savings to businesses, such as lower postage and other administrative costs, what other reason might explain a business’s interest in online bill payment? Explain your answer.

Answer 1

Solution:

Online bill payment may help banks in many ways:

• This might reduce the time taken to process bill payment as online payment gets direct. This will in turn reduce the cost of banks and companies like electricity, gas etc.

• The bank can advertise free of cost. Also firms can pass on the low cost to consumers in the form of low price. • The cash flow would increase and so would the average collection period.

• There are less chances of defaulting as bouncing of cheques etc. are not possible when the payment is made online. The online mode is transparent, clear and convenient for both consumers and company