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In the US, most consumer banks offer online bill paying. It's convenient for me, but what's in it for the bank? Many vendors take payment electronically, but some require a paper check sent via the post office. The bank does not charge either the sender or the receiver for this service. On a small $20 bill, they must be paying a few percent in postage!

Is it cheaper than processing the personal check that I would otherwise write? I might believe that they offer this service to compete with other banks for my business, but they actively encourage me to use it too. So there must be something in it for the bank as well.

(This is thinking from the bank's perspective rather than mine, so apologies if it's off topic.)

Mike Kale
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Another reason for banks to push this is stickiness. Once you have all of your bills setup, its more trouble to change banks. This reduces the customer turnover rate, which lowers their costs.

bjschoenfeld
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KeithB
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Most transactions that the bank performs for you are electronic ACH transactions, so the costs to them are minimal in the long run. Most banks do it now to keep up with the competition. Almost every bank does it now, so they have to do it to attract new business and keep existing customers.

Also, the more you rely on the bank and use them to pay bills, the more they learn about you over time and can use that data in overall marketing plans. It's easier for them to record it into their system if it is all electronic to begin with.

Ninjabomb
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The paper check method also allows the bank to use your money while the check is in the mail.

My bank debits my account immediately, so while my $100 utility bill is traveling the U.S. Postal System for two days, they can make use of my $100 in whatever slush fund they like.

mskfisher
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One other aspect of this is that the bank will plan to eventually approach the merchant that they are sending paper checks to and say "why don't you sign up with us and give us your ACH info, and we won't send you checks?" And a lot of merchants will say "sure", because someone has to open those checks and take them down to the bank, and that isn't free. And that time while the money is in the mail, or sitting on someone's desk to be deposited, that is money that isn't working for you. So everyone wins.

Scott McIntyre
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It’s more convenient for both you and the bank; its much simpler to handle things electronically than it is to go through paperwork. Also, its eco-friendly and by saying that they care about the environment, banks earn brownie points with environmentally-conscious customers.

Carlita Menezes
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