EBPP from Red Herring ...
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Derivion gets paid -- online
By Julie Landry
Redherring.com
January 17, 2000
Nobody likes paying bills -- they're time-consuming, labor intensive, and messy. Those are the problems Derivion hopes to solve.
Derivion gets paid -- online
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The Atlanta-based company is one of a crop of companies hoping to help corporations deliver bills online. Last week, Derivion raised $40 million from strategic and venture investors including Capital Z, Zurich Financial Services, GE Capital, and Chase Hambrecht & Quist (NYSE: HQ), bringing its total funding to date to $54 million.
The company's largest round to date will enable it to add a third data center and triple its staff size by year end, with the aim of providing low-cost billing services, known as electronic bill presentation and payment. Derivion offers outsourcing services and relationships with financial institutions that allow companies to move their billing processes online. The round-trip cost of calculating, printing, mailing, and processing a single bill costs about $1.00, says Derivion CEO Greg Rable. He claims his company's solution brings that price to about 50 cents.
Yahoo offers its billing through a deal with CheckFree.
Banks want first dibs on handling customer billing.
Bottomline Technologies integrates payment systems with e-checks.
Although that seems like a benefit at which any business would jump, Derivion still must hard-sell corporations, many of whom still are considering whether or not to use electronic billing or who are wary of integrating new systems with legacy financial applications. To help close the deal and entice small and midsize companies to sign up, Derivion charges a $25,000 setup fee covering three years, also taking a per-user monthly cut. About 20 companies have signed up so far, including Baltimore Gas & Electric, the Kissimmee Utility Authority of Florida and Toronto telecom reseller Futureway Communications.
OLD DOG, NEW TRICKS
E-billing sounds like a good idea, but the reality is customers also must change their bill-paying habits. For now, it hasn't caught on. Only 3 percent of American households pay bills online, according to a recent Yankee Group survey.
Raising customer awareness about e-billing are recent marketing efforts by services such as Paymybills.com and Cyberbills, which Yankee analyst Paul Hughes dubs "optical scanning" services because their electronic billing is really just scanned copies of bills. Mr. Hughes says many customers already pay bills online thanks to Yahoo's (Nasdaq: YHOO) BillPay, provided by Checkfree (Nasdaq: CKFR), and an Intuit (Nasdaq: INTU) bill-paying system through America Online (NYSE: AOL).
However, here's the chicken-and-egg problem: a vast majority of customers must choose to pay online, but they won't until enough of their bills are available on the Internet to make it worthwhile. That's why Derivion chose to focus on billing solutions. "You have to enable the billers first," says Mr. Rable. For now, the company is content to serve utility, communications, and financial companies, which Mr. Rable says account for more than 70 percent of all recurring bills.
THE RACE IS ON
Gas, water, and electric companies already offer simple per-minute usage bills, which will make their switch to Internet billing a snap, Mr. Rable claims. Utilities account for about 25 percent of all recurring bills, and 27 percent of utilities will bill online in 2002, predicts market researcher Killen & Associates.
However, there's a world of billers out there that fall outside of Derivion's range, and there are plenty of companies willing to pick up the slack. Startup Billserv.com focuses on a broad range of billers, including loan agency Sallie Mae. Princeton eCom, which has maintained an electronic-payment clearinghouse business for more than 15 years, has retooled itself as an e-biller as well, serving 18 customers, including regional banks and utilities. According to Yankee's Mr. Hughes, none of the three have a particular lead in the market.
To keep up with its fast-moving competitors, Derivion must continue selling aggressively. To that end, Derivion announced last week First Union (NYSE: FTU) plans to offer a cobranded version of Derivion's billing solutions to its more than 150,000 commercial clients. Mr. Rable expects the First Union deal to become one of Derivion's largest revenue sources.
Will online bill payment eventually pay off? Join the ongoing startups discussion in our Private Companies discussion forum. Or visit the forums home page.
Derivion
Princeton eCom
Billserv.com
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Jim in CT .. |
