TLindt, I'm Sure You Saw This CKFR/MSFDC Bit...
But, I wanted to post it nonetheless. Snagged it off www.wired.
com...
Ebilling Business Booms
by Randolph Court
5:04amÿÿ30.Apr.98.PDT
Despite being able to pay your phone or credit card
bills online, the experience has been a bit like pushing
a shopping cart with one wobbly wheel. The money
flows out electronically -- but your mailbox is still
jammed with paper bills.
To wit, billers still have to print the bills, stuff them in
envelopes, and spend up to US$1.50 to get them to
you.
Soon they won't have to.
A key piece in the online billing puzzle is beginning to
fall into place. Thanks to an electronic version of
what's called "bill presentment" -- or the act of giving
your bills to you -- you'll soon be able to find your
bills in one place online, pay them electronically, and
record them in your financial software all at once.
Thanks to a handful of firms working to define
electronic billing standards and close the whole loop,
billers can not only take money out of your bank
account, but leave bills for you where you bank online.
"This is a very young industry, and it will probably
grow up very quickly," said Cary Whaley, of the
National Automated Clearing House Association,
which promulgates rules and operating guidelines for
electronic payments.
The industry has gotten a major boost from Microsoft
Corp., which stepped into the ring last summer
through a joint venture with First Data Corp., one of
the world's leading providers of transaction
processing services. The venture is called MSFDC and
has announced pilot programs with banks like Wells
Fargo, Banc One, KeyBank, and Norwest -- and a slew
of billers, including JC Penney, Shell Oil, Advanta
Corp., and Chase Credit Card.
Meanwhile, electronic commerce processing company
CheckFree Corp. has its systems up and running and
has hammered out agreements with more than 350
financial institutions, like established bill processors.
On Tuesday, CheckFree reported its first profitable
quarter since going public in November 1995, earning
$57,000 on record revenues of $170.4 million in its third
quarter, compared to a $4.8 million loss on revenues of
$121.4 million in the same quarter last year.
And, in a sense, the company did it with one hand tied
behind its back.
The lion's share of CheckFree's ecommerce revenues
are generated through old-fashioned electronic
payment services -- customers receive their utility bill,
for example, and then go online to pay the bill
electronically through their bank using front-end home
finance software like Intuit Corp.'s Quicken.
"What's been missing in the equation is presentment
of the bill online," said Laurinda Wilson, a CheckFree
spokeswoman.
CheckFree actually brought a presentment service,
called E-Bill, out of the pilot phase and onto the market
in March 1997. But the service barely registered on
some of the most important radar screens. The
emergence in June 1997 of the Microsoft-First Data
joint venture, MSFDC, dramatically changed that.
Gary Card, an electronic commerce analyst with
BankAmerica Robertson Stephens, projects that by
2000, some 5 billion bills per year will be available on
presentment servers, and about 10 percent of them --
500 million -- will actually be paid online. For the
companies providing the services, that will amount to
a $400 million market, with the clear potential to grow
into a $4 billion to $6 billion market by 2005, Card said.
Though billers are gung-ho to cut costs associated
with mailing paper bills, banks have had less incentive
to get into electronic payments and have moved more
slowly -- until Microsoft cast its giant shadow on the
scene.
"For the bankers, that was monumental," said
Robertson Stephen's Craft. At first, the formation of
MSFDC "frightened the banking industry," Craft said.
"A lot of people viewed it as a threat."
Whaley, of the National Automated Clearinghouse
Association, said: "Traditionally, banks have been the
sole entry point into payment networks. [They] were
concerned that the entry of third parties might mean a
loss of control.... Initially, just because of who
Microsoft and First Data were -- the largest software
company, and the largest independent payment
processor -- there was a fear that entity could operate
in a vacuum, without financial institutions or any
additional infrastructure."
But MSFDC has gone to great lengths to make its
service financial institution-friendly, Whaley said. "It
gives banks as much control as they want," he said.
In the MSFDC electronic bill presentment and payment
model, billers give MSFDC detailed billing information
-- if it's a credit card bill, that means what you spent,
where, and when; if it's a phone bill, it means all of
your call records, etc. MSFDC then aggregates the
data and serves it to banks' Web sites, where
customers go to pay and keep track of everything.
MSFDC collects a fee from the biller roughly
equivalent to the cost of a postage stamp for each bill
it presents, saving the biller the rest of its paper billing
costs. The banks get to offer a new service to their
customers at low costs (MSFDC offers the service to
banks for nothing), and gain marketing opportunities
that come along with increased traffic to their Web
sites. Consumers get the convenience of being able to
take care of all of their bills in one place.
CheckFree's model is similar except for one important
difference. CheckFree advocates an "open system"
where billers only send CheckFree a billing summary --
the company name, the date, and the total amount of
the bill. CheckFree presents that summary information
to the banks or some other aggregator, like Quicken, or
potentially even a Web directory like Yahoo. The
customers can still go to that one site to take care of all
of their bills, but if they want detailed information
about the bills, they have to click through to the
billers' sites.
MSFDC, which has an advisory board made up of the
Federal Reserve, Chase Manhattan Bank, American
Express, and the National Automated Clearing House
Association, among others, to help it with its policies
and practices, says it will not use any of the detailed
billing information for any sort of marketing or data
mining. None of the parties involved in the
transactions will have access to anyone else's
information.
"The data is stored under lock and key," said Jessica
Ostrow, MSFDC's vice president of marketing. |
