March 16, 1999
Dodge's E-conomy
Bill-Paying Via the Internet Offers
Wins for All (Except the Postman)
By JOHN DODGE
Special to THE WALL STREET JOURNAL INTERACTIVE EDITION
"You've got bills."
Piles of them are sitting in your Internet-bill box awaiting attention. Poof: With a mouse click or two, they're viewed, considered and paid. Out of sight, out of mind. Of course, you'd better have the funds to cover all that cash going out at once, but the sting of that is balanced by the new practice's convenience and savings.
Internet bill presentment is one of those technology-driven processes where everyone wins -- except, perhaps, the U.S. Postal Service, which today handles about 15 billion paper bills annually (out of nearly 200 billion total pieces of mail). Billers reap dramatic savings, harried consumers win back some time and a few dollars, and another brand-new Internet industry soars to prominence.
"This is one of those unique 'twofers,' " says David Samuel, vice president of customer care at BEC Energy's Boston Edison, a utility with 650,000 customers. "It benefits customers and lowers our costs."
Billers -- from municipal water departments to the largest telephone companies -- stand to gain substantially from delivering bills and receiving remittances via the Internet instead of the mail. Handling a bill via the dead-tree method costs a biller an average of between $1 and $1.50 -- double that if there is an error, such as a wrong address or amount. Internet-bill presentment and payment promises to cut those costs to between 35 cents and 75 cents per bill.
That adds up quickly: GTE Corp., with 16.5 million telephone customers, estimates Internet billing will save it $6 million by 2003, says Wayne Irwin, assistant vice president for Web commerce. And Mr. Irwin's figures don't assume a huge rate of Internet adoption by GTE customers. His estimate is based on the assumption that a third of the 35% of GTE customers that will have Internet access by then will opt to pay electronically. The savings alone -- not to mention the attendant marketing opportunities -- should compel any company that sends several thousand monthly bills to embrace electronic bill presentment.
Learn more about John Dodge and search past columns in the new Dodge's E-conomy Center.
Here's how it will work: Companies electronically funnel bills into consolidators such as CheckFree Holdings Corp. or TransPoint, a joint venture between Microsoft Corp., Citigroup Inc.'s Citibank and First Data Corp.
Consolidators then provide software so bills can be viewed and handled intelligibly. (Check out the demos on their Web sites.) They also perform the scattershot task of sending bills to wherever consumers pick them up -- banks, portals or personal-finance sites such as www.Quicken.com or www.MSMoney.com (which is currently being redesigned and is thus out of service).
Even if bills are posted to the biller's own site -- the general practice today -- a third-party software developer is involved. For instance, Princeton Telecom Corp., of Princeton, N.J., handles bills at Boston Gas's site, www.bostongas.com, where you can view them and pay online or by phone. However, aggregating a consumer's bills in one place -- probably a bank site -- is the wave of the future.
The myriad of dependencies and absence of technical standards has slowed acceptance of the technology, the basics of which have been in place for years. "It's been set to take off for 10 years with several false starts," says Larry Greenberg, chief information officer at Princeton Telecom. "The reason we're back again is bill presentment and the Internet."
I've paid bills electronically for years via my bank over a dedicated dial-up line. But I still get bills the old-fashioned way. I can't wait for electronic presentment over the Web because paper, which I recycle, has taken over my office. The less paper I have to deal with, the better. And getting on the Web is simpler and easier than calling the bank over a dedicated phone line.
Historically, a problem with electronic bill payment has been the length of time banks and all the players in between take to complete transactions. My last mortgage payment, for example, took a 12-day trek through the Himalayas to travel 20 miles between banks, resulting in a $50 late charge. My protests to Fleet Financial Group fell on deaf ears.
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My consumption of stamps dropped dramatically when I started paying bills electronically -- and I find it hard to sympathize with the post office given how it made us buy all those silly one-cent stamps for the recent postage hike. The Internet delivers power to the people that never crossed the collective mind of the radicals in the Sixties and Seventies. Could bill paying actually be fun -- at least for a while? I think so. Join a discussion with me and other Interactive Journal readers.
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The Internet should speed up payments -- if banks get their act together. For instance, TransPoint promises that a bill submitted before 5 p.m. Mountain Time (TransPoint is in Boulder, Colo.) will be paid the next day. For TransPoint's punctuality pledge to be meaningful, banks must speed up their end of the process.
"You can schedule bill payments and will no longer have to subtract [a certain] number of days before it has to be paid," says Ralph Young, TransPoint executive vice president. (We'll see.) TransPoint plans to launch its service next quarter and says it has signed up 37 billers. If you pick up bills at your bank's site using TransPoint's software, you'll never see it: TransPoint stays in the background, allowing the bank, portal or everyday Web site to do the branding and enjoy the benefits of associated Web marketing.
CheckFree, for its part, claims to have signed up a quarter of the top 100 billers in the country and has been delivering bills over the Web for two years. If you do business with any of 23 billers at CheckFree's site (www.mybills.com/ebills), you can try it out. The company also says it has signed a deal with a big portal site -- it won't say which one -- to aggregate bills for consumers, and will use the Microsoft Network as well.
Another bill consolidator in the presentment food chain is Billserv.com Inc., which will cater to small and medium-sized billers such as municipalities. Its eServ service went live earlier this month and the company is in the process of signing up its first customers. But it doesn't replace TransPoint and CheckFree; rather, Billserv hooks into CheckFree, signing billers that the latter would perhaps overlook with so many larger companies wanting in.
Favorable presentment economics kick in when the biller sends 1,000 or more monthly bills -- and at 10,000 bills, the costs drop to 75 cents a bill, says David Jones, BillServ's senior vice president and founder. "It's kind of a chicken-and-egg problem," he says. "Billers need to be presenting, and won't put out their bills until they've got a lot of consumers requesting them. Consumers won't look at it until a lot of billers make it available."
Perhaps so, there's hardly a large biller that isn't keenly aware of the potential and the competitive imperative that goes with it. CheckFree customer BancOne has been running a presentment pilot and will start offering its service to its retail banking customers next month, according to Bruce Luecke, president of BancOne's interactive delivery services. But adoption could be slow: Only 275,000 of BancOne's retail customers -- about 4% -- use online banking services, and only a third of those pay bills electronically.
Mr. Luecke says BancOne will probably add billing from TransPoint, with which it has already teamed up for a pilot program, and look for other partners. "We have to accept bills from wherever they come," he says. "There needs to be more cooperation to grow the market."
Despite structural hurdles, the pilot tests are turning into real services as the technology pieces fall into place. Billers will lure consumers with advertising and a slew of promotions. By some estimates, half of all bills will be presented and paid electronically over the Internet by 2008.
And if Internet billing is slow to take off, computer-hating Luddites could be lured by the chance to save a tree. GTE alone sends out 53.5 million bills annually, consuming 1.6 million pounds of paper. That's 2,073 trees.
Here come the heavies: Mainstream brands are getting traction on the Web and in some cases, overtaking "online upstarts," claims ActivMedia Research's new report on "The Top of the Top 100" retail Web sites. "These deep-pocketed traditional offline giants are capable of elbowing their way to the front by virtue of their real-world muscular reach and promotional power," says the report.
Among those getting mindshare and dollars are companies like Walt Disney Co., Intimate Brands Inc.'s Victoria's Secret, Egghead Inc., Gateway Inc., Dell Computer Corp., Micro Warehouse Inc., and the Sabre Group.
True enough, but counting out the "upstarts" seems wildly premature.
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