Business Case For Electronic Bill Presentment/Payment
Grows
April 2, 1998
RETAIL DELIVERY SYSTEMS NEWS via NewsEdge
Corporation -- If customers are billed via the Internet,
they also will use the medium to pay those bills, goes
the business case for making Internet bill presentment
and payment available.
The concept is sound, but banks seem hesitant to jump
aboard as the industry struggles to define itself. Why
should they even be involved in bill delivery, banks ask.
Banks will have to be involved in the transaction in
some form, says Anthony Potts, business manager, bill
payment for Integrion Financial Network in Philadelphia.
More than 8 million households use online home
banking, he says. Providing bill payment and
presentment is "a logical extension to those offerings
and involves an incremental buildup of the
infrastructure banks have invested in" for their online
banking services, he says.
Integrion is jointly owned by 18 of North America's
largest banks, representing more than 75 percent of
American households.
Integrion's agreement with CheckFree [CKFR] for
back-end electronic billing and payment processing
services for Integrion's member banks, and its role as
CheckFree's preferred front-end system for routing
transactions, should further reduce costs for banks and
drive more business for electronic bill payment, Pott
says.
The Integrion shared infrastructure for electronic
commerce provides a point-of-contact between legacy
and front-end systems. NationsBank [NB] and Banc One
[ONE] already are using the infrastructure and another
eight banks are scheduled to go online this year, Potts
says.
Consumers Have The Ultimate Say
Large market entrants like MSFDC are helping to solidify
the technology, but consumers ultimately will determine
how the services will be delivered and which payment
forms used.
New forms of payments, such as electronic cash and
electronic checks have yet to materialize, leaving many
software providers like Reston, Va.-based CyberCash
[CYCH] looking for new ways to grow their business.
The three most compelling online payment choices are
automated clearing house credit cards and cash, says
Nancy Goldberg, vice president, general manager,
interactive billing and payment services for CyberCash.
ACH transactions are cheap, relatively quick and may or
may not be legitimate funds available, she explains.
Most importantly, the method is in widespread use and
is viewed in the same way as a check by billers. Credit
card payments require a more elaborate infrastructure
and are more expensive to implement, but they
guarantee funds are valid. Electronic cash also
guarantees funds, but it is more complex for consumers
to use and hasn't been widely adopted in the United
States as it has in overseas markets, Goldberg explains.
CyberCash is purchasing Oakland, Calif.-based
ICVERIFY Inc. for $16 million in cash and 2.3 million
shares of CyberCash common stock. ICVERIFY brings
to CyberCash its software platform on which ICVERIFY
created NetVERIFY, a merchant payment system.
Banks and billers have various options to facilitate
presentment, payment and posting to reach customers,
Goldberg says. They can pull the customer to the site,
push the statement through E- mail or subscribe to
multiple Web sites.
"Checks are the universal medium of exchange for bill
payment," Pott says. Any electronic system has to
mimic those characteristics.
Billers should switch from paper-based bill payment to
electronic means to realize the potential economic
savings, he says. Billers pay up to $1.50 to create and
send an electronic stub. Those services can be
performed for as little as 40 cents in an electronic
envir-onment, he says.
Banks spend less than 5 cents to answer inquiries
online. If a customer service representative answers that
same question in a call center environment, the cost is
$5 and jumps to $50 if a second call is needed, Potts
says. Economic savings are not the only considerations
billers/banks face to implement automated systems.
Protecting the product brand and enhancing customer
relationships is just as important. "Most billers will
support a number of sites [for bill presentment] probably
three, not 30."
Expectations Define Needs
Potts says banks must have different expectations for
electronic bill presentment/payment based on the
following roles they will play:
* Banks as billers - want to reduce the cost of sending
bills and processing remittances and leverage cross-sell
opportunities.
* Retail banks - want to increase PC banking usage and
customer retention and reduce the cost of PC banking.
* Wholesale banks - want to deepen and expand
relationships with billers; act as a payment originator for
the biller; and ensure the broadest reach of customers.
The biggest cost for the biller is getting customer
information out of its system, says Warren Dent,
manager of MSFDC a Microsoft [MSFT] and First Data
Corp. [FDC] joint venture. MSFDC is an end-to- end
system for bill presentment/ payment.
MSFDC's model lets consumers initiate instructions for
direct debit approval. "A lot of consumers don't like to
use direct payment if the payment amount is variable,"
Dent says. Only 4 percent of direct debit billers
authorize such payments, he says.
MSFDC receives an electronic signal to authorize for the
transfer of funds, which it, in turn, sends to the biller as
an alternative.
Payments then are cleared through the Federal Reserve
or an ACH in as close to a 24-hour time period as
possible. MSFDC has pilots with four banks for its
settlement arrangement.
Most bills won't be paid in real-time. Real-time
settlement is more expensive for billers to implement,
people aren't used to paying in that environment, and it
is unnecessary in most instances, Dent says.
If a consumer's payment isn't valid, for instance, a utility
company like General Electric Co. [GE] can turn off the
electricity, explains Goldberg. "Once we get into
one-time transactions, it will get more interesting, " he
says. (Warren Dent, MSFDC, 425/936-1109; Nancy
Goldberg, CyberCash, 703/715-7853; Anthony Potts,
Integrion, 215/575-4516.)
Electronic Billing And Payment Methods
Bill Delivery
* Single log-on for consumer
* Fully Bank-Branded Site
* Biller-Branded transactions
* Relationships preserved between
biller/consumer/bank
* Integrated Banking, Billing and Payment Functionality
* Efficient Access for Participating Banks
* Control Over Network, Security and Authentication
* Consumers' bills aggregated by Integrion
Bill Creation
* Multiple Partnerships to Ensure Choice for Billers and
Access to Every E-Bill for Banks
* Choices Will Include Partnerships With: Solution
Providers Like JITs, eDocs, BlueGill
* Integration Providers Like Anderson Consulting
* Service Bureau Creation Run by CheckFree/bank
Bill Payment/Remittance
* Access to state of the art pay any capability
* High Quality Processing of Payments through Existing
Bank CheckFree Links
* High Quality Processing of Remittance Information
through
CheckFree Links With Merchants
* Customer Care/Audit Trail Maintenance Billing and
Payment for All Banking Source: Integrion
[Copyright 1998, Phillips Publishing] |
