(COMTEX)BILL PRESENTMENT AND PAYMENT -- Time To E-Pay The Bills -- Bill presentment
may jump-start e-bill paying, but can it also boost e-commerce as its
proponents claim?
Oct. 20, 2000 (InternetWeek - CMP via COMTEX) -- There aren't enough hours in
the day to list the reasons-some of them legitimate, some of them just plain
silly-that online bill payment hasn't taken off. Tops among the legitimate
barriers is the lack of bill presentment, which has thwarted efforts to move a
paper-based, mostly manual process online. Proponents of online bill payment say
that's about to change, and bill presentment may actually become the redeemer of
a marketplace that shows a lot of promise.
It's a sentiment that's well overdue. In the past year, three models for bill
payment over the Web have fought their way to the forefront, according to a
recent Gartner Group study. Different players dominate each approach: electronic
bill consolidation, total bill consolidation and biller direct. The last is by
far the most popular.
Electronic bill consolidators like CheckFree work as third parties with banks or
other bill payment providers to process bill payments for consumers. Total bill
consolidators such as Paytrust and Cyberbills offer a place where consumer bills
can be consolidated and paid. And biller direct is when consumers log directly
onto the biller's Web site and pay bills. Saks Inc. and American Express are two
examples.
Among electronic bill consolidators, CheckFree, with 80 percent of the
marketplace, continues to dominate. This despite the fact that its strategy is
strictly proprietary, leaving room for companies like Princeton eCom, Spectrum,
Metavante and MasterCard RPPS to create more open distribution networks for
e-bills. These companies are behind-the-scenes players that offer electronic
bill payment and presentment to consumers through third parties such as the U.S.
Postal Service or United Parcel Service.
In the total bill consolidator market, two of the major players-Paytrust and
Paymybills.com-eloped last August. This left the third member of the group,
Cyberbills, to fend for itself. These companies can accept e-bills from
companies like Princeton eCom and Billserv, and they use financial service
providers for distribution. According to Gartner, Paytrust and Cyberbills
delivered 396,000 e-bills in July, quadruple the number that CheckFree
distributed.
American Express, Citibank and Discover play among the billers in the
biller-direct model. Together, the three card issuers have slightly more than
7.5 million users signed to their online account management offerings, says
Gartner-although only 15 percent to 30 percent of those are considered active
users that visit the companies' Web sites monthly.
Biller direct has presumably outpaced the other two models and will continue to
do so-at least in the short term-because the applications are free. Also, using
the apps is practically a no-brainer, and billers generally update data daily
and offer better-than-adequate customer service.
Gartner predicts that the user base in this market will continue to swell to 20
million U.S. consumers by 2002, compared with the 2 million or so consumers
expected to follow the consolidator model in the same time period. By 2004,
though, the markets will flip-flop, according to Gartner. About 15 million users
are expected in the biller-direct market, while a whopping 25 million will want
to pay all of their bills at a single site.
While those numbers are promising, they still represent a four-year journey to
significant online bill payment. For now, consumers remain ambivalent about
shifting bill payment to the Internet. The Gartner study, based on research
conducted on 40,000 U.S. households last spring, says 50 percent of the 130
million adults who use the Internet today simply do not want to receive their
bills over the Net. Another one-third aren't sure.
The user community's enthusiasm for online bill payment has been dampened by
high fees-Gartner says that CheckFree makes $4 per user per month, while banks
generally charge $5 to $8 per month for the luxury of paying bills online
without offering too many benefits in the mix. While the advantages in B2B
online bill payment are obvious to the billers-lower cost, a more streamlined
process to support e-commerce, a vast reduction of paper and the elimination of
many errors associated with manual bill payment-consumer benefits have been more
elusive. It takes more than just the promise of never licking a stamp again to
get consumers to abandon snail mail for a more modern online approach.
The Yankee Group, a market research firm, says electronic bills represent only
about 1 percent of all bills today. If potential users have been reticent, then
billers have been downright stubborn. They haven't exactly flocked in droves to
online bill-payment providers. "It's not easy stuff," says Andy Mentis, vice
president, interactive capabilities at American Express.
According to the Gartner Group, CheckFree signed up just 187 major vendors,
while 32 billers have signed on with Princeton eCom, which says its system will
be ready by year's end. The billers argue that there simply aren't enough payers
online yet to justify their investment, while potential users, of course, say
they would be more inclined to pay bills online if more of their vendors went
online. It's a classic standoff that hampers all but the most necessary
technological advances. But in this case, riding to the rescue to break the
deadlock is a much-dreamed- about dynamic duo: bill aggregation and presentment
capabilities.
Gartner Group found that of the Internet users willing to pay bills online, more
than half want to see bills presented online. Billers like Saks are taking that
bit of market intelligence seriously. The company teamed with eDocs Inc. to
offer bill payment online to its millions of customers that shop at Saks and its
other properties such as Proffitts and McRae's. The venerable New York retailer
will use eDocs' BillDirect middleware.
While late to the Web, Saks is among the first billers to move forward with bill
presentment. The retailer does not view it as an investment that might one day
produce a return on investment, but considers electronic bill presentment and
payment (EBPP) a building block for e-commerce.
"EBPP is offering [billers] the ability to market to [users]," says Mitch Gross,
chairman, president and CEO at EBPP software provider Mobius Management Systems
Inc. "You need a way to get users to your Web site and EBPP is the way," Gross
says.
Saks hopes to draw more customers in and retain them through online bill
payment, thereby reducing the kind of churn that can kill a business-on the Web
and on Fifth Avenue.
"We evaluated [EBPP] from an operational standpoint and from a marketing,
sales-generating and customer service standpoint," says Mike Rogers, Saks'
senior vice president of credit. "The operational savings alone were enough to
justify pursuing an online bill presentment and payment strategy.''
Billers like Saks can offer billing services as a springboard to e-commerce. For
example, more and more Web sites will use bill paying as a service that lures
people to the site, and once they have them, use it as an opportunity to sell
more products.
"They can retain customers so they don't have to deal with 30 percent to 40
percent churn,'' says Ted Morgan of eDocs. "They can leverage a brand like Saks
and keep customers coming back; keep them from canceling their cards."
Saks is turning its billing initiative into a springboard for interactive-and
more immediate-customer service and targeted marketing. "The big benefit will be
the marketing element," says Rogers. "We can use presentation and marketing
information tailored to the individual."
That's the plan at American Express as well, where eDocs is playing a pivotal
role. "The Web gives us an opportunity to personalize data," says American
Express's Mentis. Once Saks' bill payment is up and running, customers will be
able to access the familiar-looking Saks, but highly enhanced, bill online.
"You can go for whatever statement type you want," says Rogers. "We're going to
make it better looking than our paper statement." And more interactive.
Customers can launch queries about their bills, clicking online items and
reaching a customer service representative by e-mail or live chat.
And customer service representatives in the company's call centers can access
the system and look at what the customer is seeing online, says Rogers. A demand
marketing function built into eDoc's BillDirect offering lets billers such as
Saks send targeted offers directly to a particular user.
According to eDocs' Morgan, BillDirect gives billers the opportunity to turn the
billing process into a revenue-generating operation (beyond the obvious
collection capabilities). Indeed, Saks plans to recoup its investment in two
years, says Rogers.
Bill presentment along the lines of what Saks plans to offer hasn't worked well
in the past with existing bill payment systems, because they haven't integrated
well with back-end systems. As a result, presenting bills online to some has
simply meant scraping information from billers' statements or scanning in those
statements, creating a more static format.
But products like eDocs' BillDirect are designed to work with legacy billing
systems such as Saks' Vision 21 billing system from Pace, existing relational
database management systems, a variety of e-mail systems and customer care
systems.
In particular, BillDirect, built on a three-tier client-server architecture,
wraps billing and customer care into a single package, bought off the shelf.
That "out-of-the-box" approach is what attracted Saks to BillDirect, says
Rogers.
EDocs has taken great care to shape the system into a complete solution that
offers users extraction and storage components, customer care, management and
tracking, content reformatting and security features such as authentication and
encryption. EDocs also has made BillDirect work with bill consolidators'
systems. Billers can send summary and detailed information to players like
Princeton eCom and CheckFree using OFX or whatever format the consolidator
specifies.
The full-featured BillDirect has attracted other billers such as American
Express, which has offered customers the ability to view billing detail online,
says Mentis.
American Express is using online bill payment and presentment to expand
relationships with customers. But presentment has to go well beyond screen
scraping, otherwise the data doesn't change rapidly enough to accommodate
rapidly changing information that appears on consumers' bills.
Many industry advocates believe that some of online bill payment's woes will
dissipate-and that features like presentment will advance if anyone can break
the stronghold CheckFree has on the market. While the company aggressively
pursues new avenues, it's bumping up against the perception that its actions
have kept online bill payment pricey, complicated and more manual than they have
to be.
Many of the CheckFree transactions are not electronic end to end. According to
Deutsche Banc Alex. Brown, Princeton eCom is in the position to edge past
CheckFree because the company offers an end-to-end solution that's compatible
with most billers and bill distributors, and lets them more easily share billing
information.
Ron Averett, president and chief operating officer at Princeton eCom, Princeton,
N.J., acknowledges that the less than 2-year-old Princeton eCom is in a unique
position to take on CheckFree and spur consumer online bill payment along.
Princeton eCom not only helps support a biller's bill payment presence on the
Web, it also integrates phone presentment. This kind of integration lets a user
pay bills over the telephone offline. The transaction is then updated in real
time on the Web site. "That's the real differentiator,'' says Averett, who
points out that Princeton eCom gladly serves as an ASP of sorts to bill
distributors like UPS.
The ASP model is gaining popularity in the consumer online bill-payment world.
For example, Derivion offers billers online billing services at a much lower
cost than building it themselves. "It significantly brings down the cost of
entry" to an affordable $20,000 to $30,000, says Read Ziegler, chief marketing
officer at Derivion. Ziegler says most billing software costs from $250,000 to
$7 million initially.
Turning to an ASP like Derivion also means that billers "don't have to integrate
[online billing] into existing billing systems," says Ziegler. What's more, an
ASP can help billers reduce their time to market with an online billing service.
Another important piece of the online bill-payment puzzle yet to fall into place
is aggregation. While Gartner Group's research shows that most online bill
payers today prefer to hit individual billers' sites, that will change as the
aggregation of bills in one locale such as a bank Web site proliferates. The
benefit for users is obvious: no flitting from site to site trying to pay bills.
Paper bills could become a thing of the past, and users could manage their
complete finances better.
Nearly every bill-payment company has some stake in aggregation. American
Express, for example, has a Bill Center on its Web site where customers can see
all their bills. American Express's Mentis sees billers partnering with each
other and online billing solutions providers to deliver aggregated billing.
American Express is working with Pay mTrust, toward that end, he says.
One thorn in the side of aggregation is standards. Many of the billing solutions
used today sprung up in a proprietary world. But for aggregation to truly come
to pass, vendors must settle on a standard or set of standards to accommodate
billers. Of course, some of the standards issues will evaporate as XML expands
beyond simple transactions.
Financial Fusion Inc., a subsidiary of Sybase Inc., has started offering account
aggregation to banks. A maker of complete financial solutions, Financial Fusion
believes users want all account information-including e-bills-all in one place.
The company uses the OFX protocol rather than the screen scraping favored by
competitors. Financial Fusion recently signed a deal with First Tennessee bank
to provide the technology behind the company's banking, bill payment and
customer care initiatives.
In anticipation of online bill payment's ascension, even the U.S. Postal Service
is jumping into the game. For $6 a month, a user can send 20 transactions
online. An unlimited number of transactions can be had for $4 monthly and 40
cents per transaction. The Postal Service will assign each user a unique
electronic "address."
It's in the postal service's best interest to make online bill payment work
because its traditional mail business is likely to erode by online
communications in the future. The service expects that its $35 billion
first-class mail service will begin to drop off in 2003. And e-mail and instant
messaging are on the rise as alternatives to snail mail. In a survey by online
human resources giant vault.com, 80 percent of the 1,004 persons surveyed say
they use e-mail instead of the Postal Service's offerings. E-mail accounts total
150 million right now, and instant messaging lured 30 million accounts to date.
While some may shudder at the idea of the folks who brought us snail mail and
legendary delivery snafus handling bill payment, the Postal Service's model
bears consideration because it has many of the elements that critics say must be
in place before online bill payment becomes ubiquitous, such as presentment and
aggregation.
Just when the Postal Service, or any other billing service, will make serious
money from consumer online billing remains to be seen. What is clear, though, is
that billers and systems providers can't afford to dally-nor will they want to,
if the predicted numbers are correct. IDC expects that by 2004, a seemingly
magic year in which online bill payment gets its due, 14 percent of all bills
will be paid electronically. The push will come from banks that realize that
online bill payment has moved from luxury service to must-have status.
After all, says Saks' Rogers, "our competitors will offer billing on the
Internet."
Teri Robinson is a freelance computer journalist based in New York. She can be
reached at teri8994@aol.com.
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online bill payment snapshot
Here's a look at some of the leading players in electronic bill presentment and
payment:
Billserv.com: Serves as an intermediary between billers and bill-presentment
aggregators, such as CheckFree and TransPoint. Companies could outsource to
Billserv.com to have it set up their Internet billing, then provide that
information to billing aggregators. Billserv is targeting midtier companies that
have been largely ignored. B2C play.
CheckFree: Consolidator of bills, recently acquired BlueGill and Transpoint.
Company has been very successful in the B2C space, but still must prove it has
the software/personalized service needed to succeed in B2B. Both B2B and B2C.
Cyberbills: Runs the consolidator sites StatusFactory.com and Apfactory.com.
Like CheckFree, it will need to prove that it has the software to compete with
the big boys in B2B bill management. B2C play.
Derivion Corp.: An e-billing solutions provider, the company's main product is
called "inetBiller." The company claims to have a billing site up in only 30
days. Has strategic alliances with First Union, CheckFree and Intuit. B2B and
B2C.
eDocs: Develops, markets and supports a software platform for Internet billing
and customer management. Its flagship product is called BillDirect. B2C play.
Mobius Management Systems Inc.: The company's electronic document warehouse
products store and integrate documents and transactions of different formats on
a wide variety of computing platforms and electronic storage devices. Click N'
Done is Mobius' big entry into the EBPP marketplace. B2C play.
Paytrust: Offers one-stop bill payment and management. Company says it can
deliver 100 percent of a consumer's bills through a single, secure Web site that
lets the customer make direct payments from his or her pre-existing checking
account. B2C play.
Princeton eCom: Customized turnkey solution offers total management of the
e-billing process, expediting payments, minimizing billing costs and integrating
with existing financial accounting systems. The main focus is on midtier
billers, but it also works with large companies. B2B and B2C.
Source: Deutsche Banc Alex. Brown
internetwk.com
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By: Teri Robinson
Copyright 2000 CMP Media Inc.
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