WORDS FROM THE EDITOR:

Fed Statement Means Savings

A few months ago, I switched to electronic banking, and I quickly determined I would never turn back. No more check-writing marathons with their hand cramps and the pasty taste of stamps and envelopes.

I was beginning to wonder why I still needed mailed statements, but it turns out they’re required — though not for long. The Federal Reserve is now poised to give its blessing to email and Web postings as an acceptable alternative to paper.

On September 15, the Fed issued new proposed rules governing lending, leasing, savings, funds transfer and equal credit disclosures that previously were required to be provided “in writing.” The new rules grant that “information produced, stored or communicated by computer is also considered to be a writing.”

Once the new rules take effect—as soon as early next year—banks, brokerages, lenders and other financial institutions will have a collective chance to cut billions of dollars in paper, postage and handling costs. So significant was this announcement that it helped convince Ted Prince, CEO of Insci, that he needed to change the name and focus of his company. “Insci-statements.com” will still sell enterprise report management software, the kind featured in this month’s cover story, but they’ll also use the technology as part of an outsourced “statement portal service” priced on a per-transaction basis.

“We think the future revolves around corporate portals, and this service will provide portal-to-portal delivery of statements and reports,” says Prince. He adds that wireless technology will also figure in future services. “PCs are becoming obsolete, and you’ll see statements delivered to smart phones and [personal digital assistants] as well as desktops.”

No matter where statements are delivered, the only caveat in the Fed’s ruling is that customers have to agree to receive them electronically. Marian Lewandowski, senior VP of Xenos Group, a Toronto-based supplier of online document presentment software, says, “I think 2000 is going to be a transitional year in which you’ll see companies getting more aggressive about incenting or disincenting customers to accept statements online.”

Lewandowski says that the Fed rulings are significant, and predicts the momentum they generate will spill over into other statement-intensive businesses. Along with projects with bank customers such as KeyCorp and Bank of New York, Xenos’ technology is used to post seven million Bell Canada statements a month.

It may take a while for online billing and statement presentment to take hold, particularly in consumer markets, but plenty of Web startups are adopting it right away. Talk.com, for example, is one of the most efficient discount long distance providers—thanks to purely electronic billing and statement presentment to its 1.2 million accounts. As a condition of service, charges are automatically billed to credit cards, and statements are available in “real time.” These electronic billing records can be transformed into online phone directories and reports, making it even harder to miss the paper alternative.

Personally, I wouldn’t try to make sense of my bank statement on a two-inch-square cell phone display, but I’m already doing plenty of business via the browser. Continental Airlines gives me 1,000 extra frequent flyer miles every time I book an e-ticket online.

Back on the banking front, I’m sending electronic payments to my mortgage bank, American Express, Visa, my utility and my local and long-distance phone companies, but I still get paper mailings. I can pull up past statements through the American Express Web site. If the others follow suit, I’ll be happy to let them be my electronic filing cabinet.

Take your cue from the Fed and from this month’s cover story: use technology to cut costs while improving customer service.

—Doug Henschen, Editor-in-Chief