Financial Systems -- WWW.Bills.Com -- Bill-Paying On The Web Is Already Here.Next Up/ The Ability To View And Pay Bills From Multiple Merchants.
INFORMATION WEEK:
There's a new source for bottom-line cost savings and
top-line revenue for banks and merchants alike: online
billing.
Though online billing is only beginning to be noticed by
IS executives, its potential is generating a great deal of
interest among telcos, retailers, banks, even midsize
construction companies. All are developing technology
and business plans to enhance relationships with
customers by transforming static paper bills into
dynamic opportunities for cross-selling and targeted
marketing. "I'm extremely excited about online billing,"
says Frank Delfer, consumer CIO of AT&T. "We believe
it's going to grow, and we're passionate about
supporting it."
Like a U-shaped magnet, electronic billing has two
prongs: bill payment and bill presentment. They're
separate but integral parts. But so far, only one part-bill
paying-is exerting much pull on customers. In fact, the
ability to pay bills on the Web is already
well-established. But the presentment of detailed billing
information in a standard format is only beginning to
become a force in Internet commerce.
Many consumers pay some bills at various Web sites or
dial directly into their bank's computers. But that
process still usually involves ripping open a paper
envelope to confirm the amount of the bill and the
particular goods and services being charged. Certainly,
customers of companies such as American Express can
pay and view detailed bills on the Web sites of
individual billers, but dialing into the Internet, then
jumping to multiple sites to pay bills is hardly more
convenient than writing checks and peeling postage
stamps.
In fact, presenting detailed billing information from
multiple merchants in a standard format all at one
convenient Web site had, until recently, been
impossible. That was due to the challenges of melding
data from various legacy systems.
Banks and merchants are testing several approaches to
providing customers with hubs for billing and other
types of E-commerce. Wells Fargo Bank, for example,
will next month begin testing a bill-presentment system
from MSFDC. A joint venture of Microsoft and First
Data Corp., MSFDC controls the billing data and
connects to merchants via proprietary technology. Last
week, Merrill Lynch and Co., which provides some
bill-paying capabilities for its online brokerage
customers, said it will join the MSFDC pilot for bill
presentment later this year. In addition, First USA, J.C.
Penney, and Shell Oil are also signed up to pilot the
system. MSFDC, a relative newcomer, does not yet have
any live implementations.
In another effort, the mortgage and credit-card units of
Chase Manhattan Bank are expected to go live later this
year with a competing Internet system offered by
CheckFree Corp. CheckFree is the dominant player in
Web-based bill payment, and it's also allied with
Integrion, a consortium co-owned by IBM, Visa USA,
and 18 large banks. Three other companies-BellSouth,
GPU Energy, and CUNA Mutual Life Insurance-already
run live bill-presentment systems built with CheckFree's
tools and services.
Online Billing Surge
Although online bill presentment sits on the bleeding
edge of E-commerce, executives eagerly await it. AT&T,
for instance, is expected to announce in the next few
weeks that it will begin providing its 75 million
residential customers with online-billing options. AT&T
will use BillCast, servers that will be formally announced
this week from startup Just In Time Solutions. "We have
an aggressive plan for increasing the functionality of
online billing," says CIO Delfer.
Just In Time, which also built the back-end system for
Intuit's billing site, is among a flock of vendors
swooping into the online billing market. Another, MCI
Systemhouse, earlier this month formed a partnership
with push-technology vendor NetDelivery Corp. The
two companies plan to provide banks with online billing
capabilities. Jim Yent, Systemhouse's managing director
of financial services, says parent company MCI may
even try to become a consolidator of bills from various
merchants. Similarly, Visa is working with a software
vendor to build a software prototype aimed at banks
that want to customize marketing messages to
customers who regularly visit bank Web sites to pay
bills.
While these companies differ in their visions and
technologies, they all agree that standards are critical.
Until very recently, there have been two competing
standards for personal financial transactions: Open
Financial Exchange (OFX), supported by Microsoft and
Intuit; and Gold, supported by Integrion. That changed
last month, when the two camps announced they will
work together. Michael Lanza, CEO of Just In Time and a
backer of OFX, says a draft of the united specification
for bill presentment is expected in June.
Because that development could overturn a key barrier
to the growth of online billing, early adopters of online
bill presentment see growing interest among customers.
Florida Power & Light signed up 100 new customers for
electronic bill presentment and payment in March,
bringing the total to 700 people since the service
launched last June. Under Florida Power's program,
customers access their bills via CheckFree's Web
servers, which hold data updated daily by the Florida
utility.
Seven hundred may not seem like a large number of
users, but then, Florida Power hasn't advertised the
program. And executives at the utility say online billing
is gaining momentum. "As more banks and more billers
start to come online, it will start to explode," predicts Jill
Sands, project leader for Florida Light's online billing
effort.
A report by BancAmerica Robertson Stephens concurs.
The financial-services company estimates that 1 million
bills will be presented via the Internet this year, growing
in the year 2000 to 500 million invoices-about 3% of all
consumer bills for that year (see box, p. 69).
The cost savings could be substantial. Just printing and
mailing a bill costs anywhere from 50 cents to $1.50 in
postage, paper, and labor, nearly all of which can be
saved when that bill is presented online. Additional
savings of 10 cents to 25 cents per bill can be saved on
so-called lock-box operations, which process checks
mailed in by customers. All that could add up rather
quickly for a large company with millions of customers.
And that's just the beginning. Proponents of online
billing seek not only to boost the bottom line by cutting
costs, but also to pump up the top line by creating new
revenue streams. "Bill presentment is hot," says Sharon
Osburg, VP of online service development at Wells
Fargo. "It's the real hook to bring in the mass market."
Explosive Combination
Already, nearly a half-million of Wells Fargo's customers
bank online. Of these, 300,000 use the Internet and
150,000 use PC software and access the bank via a
private dial-up network. But a whole new crop of
customers will be lured to Wells Fargo by the ability to
conveniently view and pay their bills online from their
living rooms, Osburg says, adding, "WebTV coupled
with bill presentment will be dynamite."
One reason: the possibility of generating at least some
revenue from the billing department-typically a cost
center-by opening new product channels. "A lot of
businesses could be spawned from bill presentment,"
says Osburg. For example, customers who come to
Wells Fargo's Web site to pay their bills could receive a
pitch for mutual funds or other financial products. And
Florida Power & Light is developing a "whole bunch of
products to sell " for customers who pay their bills
online, says project leader Sands. Already, the utility
has a link from its section on the CheckFree site back to
its company store.
American Express is thinking along similar lines. For
about a year, a small but growing number of the
company's customers have been using its Web site to
view detailed bills and pay them. This year, the company
plans to experiment, in a low-key way, with several new
services aimed at generating revenue by cross-selling
American Express travel and financial services, says
Larry Kutscher, the company's VP of interactive
development.
Another reason billers are so excited about electronic
bills: They let billers market much more accurately to
groups within a diverse customer base-groups that are
difficult to reach with conventional technology. Flyers
inserted into bill envelopes cannot be targeted as
precisely, and they certainly can't be updated as
dynamically, as can be Web bills. "It lets us do much
more intelligent targeting," says Chuck Hieronymi,
senior VP at NationsBank.
Moving Target
Still, industry members disagree on which business and
technology models will make online billing a reality. The
primary point of contention has the two main corporate
constituencies, bankers and billers, on opposite sides of
the fence. They're disputing where the billing data
should reside and who should control the new,
interactive relationship with the customer. How this
dispute will be resolved is far from certain. That could
make online billing a moving target for many IS and
business executives.
Today, three general models have emerged, each
involving different bets on technology:
-Direct billing from merchant to customer,
-Indirect billing via various types of intermediaries, and
-Client-based approaches involving E-mail or personal
financial software.
The direct-to-customers approach is how online bill
presentment got started. Merchants such as American
Express posted bills on their Web sites, where
customers could view and pay them. But today, billers
grudgingly admit they will have to work through
intermediaries: Consumers want their bills gathered at
one site. Still, the direct model is expected to be the
preferred route for corporate customers that require
customized manipulation of billing data. Such data can
be provided only by the billers themselves. It would be
too difficult for third parties to host the data and come
up with the applications to analyze it.
The indirect approach reflects the desire by virtually
everyone in the online-billing business to act as an
intermediary between merchants and customers,
collecting some type of transaction-based fee for their
trouble. MSFDC, for example, plans to put itself in the
center by taking massive amounts of detailed bills from
merchants and storing it at the company's Denver data
center. MSFDC will eventually charge billers a
bill-posting fee equivalent to postage. Banks will
participate for free and in some cases will receive a few
cents per transaction if they can deliver payment to
billers that can't be revoked for insufficient funds.
The attractions of this model include outsourcing much
of the headaches of moving legacy data through a
standard middle tier to the Web. Billers and banks can
connect their back ends to the consolidators via
electronic data interchange and worry less about newer
technologies. Consolidators also let billers achieve low
costs by leveraging a platform that's shared by other
firms, generating higher overall transaction volumes.
MSFDC has two products for its clients. Its Biller
Integration Server (BIS) lets billers and aggregators
weave together the Web with legacy billing and
accounting systems. BIS, now in testing, also lets users
design bills. The company's Microsoft Internet Financial
Server Tool Kit integrates some bank legacy systems
with the Web; the next version, due this summer, is
supposed to add bill presentment. Also, MSFDC
recently announced a program to help systems
integrators glue these pieces together.
CheckFree, a consolidator that also sells legacy-to-Web
tools and services to companies building their own
internal online billing systems, advocates a different
kind of indirect model. Under its plan, intermediaries
host only bill summaries, while billers retain control of
most of their data and contact with customers. In this
scenario-which is also backed by Systemhouse and Just
In Time Solutions-consumers would view a summary of
all their bills at their bank's Web site. Such an
intermediary with limited data is sometimes called a "thin
consolidator." If individuals wanted detailed information
about, say, their phone bill, they would click on the bill
and be sent to the Web site of their telephone company.
This approach appeals to billers because it boosts their
chances of marketing other products to their customers.
Plus, they don't have to hand over precious data to third
parties. "We will keep the bill data," says AT&T's
Delfer. "If you start going down two different process
paths, the data will not remain the same."
Client-based solutions can take several forms. MSFDC
has four approaches. First, it plans to offer an HTML
client that works with either Microsoft's Internet
Explorer or Netscape's Navigator Web browsers,
reportedly in the fourth quarter. Second, it's developing
a thin client with controls for people who want to do
some analysis and storage of financial data. Third,
starting in the fourth quarter, the company will let users
program their personal financial software such as
Quicken or Money to go to one preset Web site to grab
bills. Fourth, MSFDC also plans to offer an
Internet-enabled TV client next year. "We will have
many clients because that is our expertise," says Warren
Dent, co-manager of MSFDC.
Other vendors are working on various client
approaches, too. Trisense Software Ltd., a startup in
Minneapolis, released in March an E-mail-based
bill-presentment product called PaySense that is
targeted at financial institutions. Another vendor,
Electronic Funds & Data Corp., also offers a service that
lets companies E-mail HTML bills to their customers.
One user is Riverhead Building Supply Corp., a $100
million company in Riverhead, N.Y., that will start using
the service to
E-mail bills to residential customers and general
contractors this quarter.
No Clear Winner
Which approach will win out? Probably none: Some
people will chose one, and some will chose two or three.
"Customers want to access their information in multiple
ways," says Kutscher of American Express.
To do that, and to hedge their bets in a very fluid and
immature field, billers and banks are keeping their
options open regarding both technologies and vendors.
"We want to have the flexibility to send the bill where
our customer wants it," says Kutscher. "We're talking to
all of the vendors."
So IS managers looking at online billing will need to
balance the competing interests of banks, billers, and
consumers. Ask which of those is most important, and
you'll get contrasting answers.
"To make this industry work, you have to satisfy the
biller," says AT &T CIO Delfer. |
