>>> I checked back to see if this had been put out for you all to
read. Sorry if it is old news :)
May 18, 1998, Issue: 682
Section: Trends
Financial Systems -- WWW.Bills.Com -- Bill-Paying On The
Web Is Already Here.Next Up: The Ability To View And Pay
Bills From Multiple Merchants.
Gregory Dalton
There's a new source for bottom-line cost savings and top-line revenue for
banks and merchants alike: online billing.
Though online billing is only beginning to be noticed by IS executives, its
potential is generating a great deal of interest among telcos, retailers, banks,
even midsize construction companies. All are developing technology and
business plans to enhance relationships with customers by transforming static
paper bills into dynamic opportunities for cross-selling and targeted marketing.
"I'm extremely excited about online billing," says Frank Delfer, consumer CIO
of AT&T. "We believe it's going to grow, and we're passionate about
supporting it."
Like a U-shaped magnet, electronic billing has two prongs: bill payment and
bill presentment. They're separate but integral parts. But so far, only one
part-bill paying-is exerting much pull on customers. In fact, the ability to pay
bills on the Web is already well-established. But the presentment of detailed
billing information in a standard format is only beginning to become a force in
Internet commerce.
Many consumers pay some bills at various Web sites or dial directly into their
bank's computers. But that process still usually involves ripping open a paper
envelope to confirm the amount of the bill and the particular goods and
services being charged. Certainly, customers of companies such as American
Express can pay and view detailed bills on the Web sites of individual billers,
but dialing into the Internet, then jumping to multiple sites to pay bills is hardly
more convenient than writing checks and peeling postage stamps.
In fact, presenting detailed billing information from multiple merchants in a
standard format all at one convenient Web site had, until recently, been
impossible. That was due to the challenges of melding data from various
legacy systems.
Banks and merchants are testing several approaches to providing customers
with hubs for billing and other types of E-commerce. Wells Fargo Bank, for
example, will next month begin testing a bill-presentment system from
MSFDC. A joint venture of Microsoft and First Data Corp., MSFDC
controls the billing data and connects to merchants via proprietary technology.
Last week, Merrill Lynch and Co., which provides some bill-paying
capabilities for its online brokerage customers, said it will join the MSFDC
pilot for bill presentment later this year. In addition, First USA, J.C. Penney,
and Shell Oil are also signed up to pilot the system. MSFDC, a relative
newcomer, does not yet have any live implementations.
In another effort, the mortgage and credit-card units of Chase Manhattan
Bank are expected to go live later this year with a competing Internet system
offered by CheckFree Corp. CheckFree is the dominant player in
Web-based bill payment, and it's also allied with Integrion, a consortium
co-owned by IBM, Visa USA, and 18 large banks. Three other
companies-BellSouth, GPU Energy, and CUNA Mutual Life
Insurance-already run live bill-presentment systems built with CheckFree's
tools and services.
Online Billing Surge
Although online bill presentment sits on the bleeding edge of E-commerce,
executives eagerly await it. AT&T, for instance, is expected to announce in
the next few weeks that it will begin providing its 75 million residential
customers with online-billing options. AT&T will use BillCast, servers that will
be formally announced this week from startup Just In Time Solutions. "We
have an aggressive plan for increasing the functionality of online billing," says
CIO Delfer.
Just In Time, which also built the back-end system for Intuit's billing site, is
among a flock of vendors swooping into the online billing market. Another,
MCI Systemhouse, earlier this month formed a partnership with
push-technology vendor NetDelivery Corp. The two companies plan to
provide banks with online billing capabilities. Jim Yent, Systemhouse's
managing director of financial services, says parent company MCI may even
try to become a consolidator of bills from various merchants. Similarly, Visa is
working with a software vendor to build a software prototype aimed at banks
that want to customize marketing messages to customers who regularly visit
bank Web sites to pay bills.
While these companies differ in their visions and technologies, they all agree
that standards are critical. Until very recently, there have been two competing
standards for personal financial transactions: Open Financial Exchange
(OFX), supported by Microsoft and Intuit; and Gold, supported by Integrion.
That changed last month, when the two camps announced they will work
together. Michael Lanza, CEO of Just In Time and a backer of OFX, says a
draft of the united specification for bill presentment is expected in June.
Because that development could overturn a key barrier to the growth of online
billing, early adopters of online bill presentment see growing interest among
customers. Florida Power & Light signed up 100 new customers for
electronic bill presentment and payment in March, bringing the total to 700
people since the service launched last June. Under Florida Power's program,
customers access their bills via CheckFree's Web servers, which hold data
updated daily by the Florida utility.
Seven hundred may not seem like a large number of users, but then, Florida
Power hasn't advertised the program. And executives at the utility say online
billing is gaining momentum. "As more banks and more billers start to come
online, it will start to explode," predicts Jill Sands, project leader for Florida
Light's online billing effort.
A report by BancAmerica Robertson Stephens concurs. The
financial-services company estimates that 1 million bills will be presented via
the Internet this year, growing in the year 2000 to 500 million invoices-about
3% of all consumer bills for that year (see box, p. 69).
The cost savings could be substantial. Just printing and mailing a bill costs
anywhere from 50 cents to $1.50 in postage, paper, and labor, nearly all of
which can be saved when that bill is presented online. Additional savings of 10
cents to 25 cents per bill can be saved on so-called lock-box operations,
which process checks mailed in by customers. All that could add up rather
quickly for a large company with millions of customers.
And that's just the beginning. Proponents of online billing seek not only to
boost the bottom line by cutting costs, but also to pump up the top line by
creating new revenue streams. "Bill presentment is hot," says Sharon Osburg,
VP of online service development at Wells Fargo. "It's the real hook to bring
in the mass market."
Explosive Combination
Already, nearly a half-million of Wells Fargo's customers bank online. Of
these, 300,000 use the Internet and 150,000 use PC software and access the
bank via a private dial-up network. But a whole new crop of customers will
be lured to Wells Fargo by the ability to conveniently view and pay their bills
online from their living rooms, Osburg says, adding, "WebTV coupled with bill
presentment will be dynamite."
One reason: the possibility of generating at least some revenue from the billing
department-typically a cost center-by opening new product channels. "A lot of
businesses could be spawned from bill presentment," says Osburg. For
example, customers who come to Wells Fargo's Web site to pay their bills
could receive a pitch for mutual funds or other financial products. And Florida
Power & Light is developing a "whole bunch of products to sell" for
customers who pay their bills online, says project leader Sands. Already, the
utility has a link from its section on the CheckFree site back to its company
store.
American Express is thinking along similar lines. For about a year, a small but
growing number of the company's customers have been using its Web site to
view detailed bills and pay them. This year, the company plans to experiment,
in a low-key way, with several new services aimed at generating revenue by
cross-selling American Express travel and financial services, says Larry
Kutscher, the company's VP of interactive development.
Another reason billers are so excited about electronic bills: They let billers
market much more accurately to groups within a diverse customer
base-groups that are difficult to reach with conventional technology. Flyers
inserted into bill envelopes cannot be targeted as precisely, and they certainly
can't be updated as dynamically, as can be Web bills. "It lets us do much
more intelligent targeting," says Chuck Hieronymi, senior VP at NationsBank.
Moving Target
Still, industry members disagree on which business and technology models will
make online billing a reality. The primary point of contention has the two main
corporate constituencies, bankers and billers, on opposite sides of the fence.
They're disputing where the billing data should reside and who should control
the new, interactive relationship with the customer. How this dispute will be
resolved is far from certain. That could make online billing a moving target for
many IS and business executives.
Today, three general models have emerged, each involving different bets on
technology:
-Direct billing from merchant to customer,
-Indirect billing via various types of intermediaries, and
-Client-based approaches involving E-mail or personal financial software.
The direct-to-customers approach is how online bill presentment got started.
Merchants such as American Express posted bills on their Web sites, where
customers could view and pay them. But today, billers grudgingly admit they
will have to work through intermediaries: Consumers want their bills gathered
at one site. Still, the direct model is expected to be the preferred route for
corporate customers that require customized manipulation of billing data. Such
data can be provided only by the billers themselves. It would be too difficult
for third parties to host the data and come up with the applications to analyze
it.
The indirect approach reflects the desire by virtually everyone in the
online-billing business to act as an intermediary between merchants and
customers, collecting some type of transaction-based fee for their trouble.
MSFDC, for example, plans to put itself in the center by taking massive
amounts of detailed bills from merchants and storing it at the company's
Denver data center. MSFDC will eventually charge billers a bill-posting fee
equivalent to postage. Banks will participate for free and in some cases will
receive a few cents per transaction if they can deliver payment to billers that
can't be revoked for insufficient funds.
The attractions of this model include outsourcing much of the headaches of
moving legacy data through a standard middle tier to the Web. Billers and
banks can connect their back ends to the consolidators via electronic data
interchange and worry less about newer technologies. Consolidators also let
billers achieve low costs by leveraging a platform that's shared by other firms,
generating higher overall transaction volumes.
MSFDC has two products for its clients. Its Biller Integration Server (BIS)
lets billers and aggregators weave together the Web with legacy billing and
accounting systems. BIS, now in testing, also lets users design bills. The
company's Microsoft Internet Financial Server Tool Kit integrates some bank
legacy systems with the Web; the next version, due this summer, is supposed
to add bill presentment. Also, MSFDC recently announced a program to help
systems integrators glue these pieces together.
CheckFree, a consolidator that also sells legacy-to-Web tools and services to
companies building their own internal online billing systems, advocates a
different kind of indirect model. Under its plan, intermediaries host only bill
summaries, while billers retain control of most of their data and contact with
customers. In this scenario-which is also backed by Systemhouse and Just In
Time Solutions-consumers would view a summary of all their bills at their
bank's Web site. Such an intermediary with limited data is sometimes called a
"thin consolidator." If individuals wanted detailed information about, say, their
phone bill, they would click on the bill and be sent to the Web site of their
telephone company. This approach appeals to billers because it boosts their
chances of marketing other products to their customers. Plus, they don't have
to hand over precious data to third parties. "We will keep the bill data," says
AT&T's Delfer. "If you start going down two different process paths, the data
will not remain the same."
Client-based solutions can take several forms. MSFDC has four approaches.
First, it plans to offer an HTML client that works with either Microsoft's
Internet Explorer or Netscape's Navigator Web browsers, reportedly in the
fourth quarter. Second, it's developing a thin client with controls for people
who want to do some analysis and storage of financial data. Third, starting in
the fourth quarter, the company will let users program their personal financial
software such as Quicken or Money to go to one preset Web site to grab
bills. Fourth, MSFDC also plans to offer an Internet-enabled TV client next
year. "We will have many clients because that is our expertise," says Warren
Dent, co-manager of MSFDC.
Other vendors are working on various client approaches, too. Trisense
Software Ltd., a startup in Minneapolis, released in March an E-mail-based
bill-presentment product called PaySense that is targeted at financial
institutions. Another vendor, Electronic Funds & Data Corp., also offers a
service that lets companies E-mail HTML bills to their customers. One user is
Riverhead Building Supply Corp., a $100 million company in Riverhead,
N.Y., that will start using the service to
E-mail bills to residential customers and general contractors this quarter.
No Clear Winner
Which approach will win out? Probably none: Some people will chose one,
and some will chose two or three. "Customers want to access their
information in multiple ways," says Kutscher of American Express.
To do that, and to hedge their bets in a very fluid and immature field, billers
and banks are keeping their options open regarding both technologies and
vendors. "We want to have the flexibility to send the bill where our customer
wants it," says Kutscher. "We're talking to all of the vendors."
So IS managers looking at online billing will need to balance the competing
interests of banks, billers, and consumers. Ask which of those is most
important, and you'll get contrasting answers.
"To make this industry work, you have to satisfy the biller," says AT&T CIO
Delfer.
No way, says Gary Craft, an analyst at BancAmerica Robertson Stephens
and the author of a report on online bill payment and presentment: "The banks
will be the most significant players."
A or B? Most likely, neither.
The smart money is on C-the customer.
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