• Industry Comparison Table (PDF, 10 K)
• SIDEBAR: Insurers Join the Next Wave of EBPP

After four years of being hyped as the next "killer app," electronic bill presentment and payment - the ability to view and pay bills online - is still a solution in search of a problem. In contrast to consumer adoption of online stock trading, few consumers have embraced online bill payment.

Of the 25 million Americans using e-banking services, only 3 million have opted to receive bills online, according to research by Gartner, Stamford, CT. Only 200,000 have their bills delivered to one online location via the so-called consolidator or aggregator model.

"The main reason people don't pay bills online is that there's no incentive to change," says Avivah Litan, a research analyst at Gartner. While consumers can save a considerable amount on brokerage fees by trading stocks online, it costs consumers to pay bills online; Litan notes that banks charge customers $6 a month, on average, for electronic bill payment service.

"It's not just the price that's an impediment, it's a matter of convenience," Litan adds. "Consumers have to boot up their computers, log on and sign up for [one or more] programs. Even once they're set up, they have to get to the right site and the right page and then seek out the right bills."

Despite these obstacles, Litan says developments such as continuous broadband Internet access, improved sign-up and delivery methods, and value-added services like bill analysis will make online billing more attractive to consumers. Gartner projects that the number of people receiving bills online - either directly or through a consolidator - will rise to 40 million by 2004. Presentment and payment providers - an $86-billion-a-year conglomeration of banks, high-tech firms and third-party service providers - still see gold in the 17 billion paper bills and statements generated in the United States each year.

Full conversion to electronic bill presentment and payment (EBPP) could save businesses $5.5 billion a year, or about 33 cents per bill, primarily in mailing and printing costs, according to TowerGroup, a banking technology analysis firm in Needham, MA. Of course, the providers of EBPP technologies and services would also benefit, reaping more than $15 billion annually in spending on telecommunications, bill creation and payment software, and ancillary services, according to TowerGroup's estimate. Banks, too, would see revenues jump by $7 billion a year - from consumer fees plus advertising (from the banner ads that would replace today's envelope stuffers).

Banks are also angling for revenues from the business-to-business side of e-billing, applying the technology to the B2B marketplaces sprouting up across the Internet. For example, Key Bank, Cleveland, and ABN AMRO, Netherlands, have added Billing-Zone, an online service for presenting and paying invoices, to their cash management offerings.

Biller Direct or Consolidator?

Getting consumers and businesses to buy in to the concept of online bill payment has presented a kind of Catch-22. "You need to have customers before billers will participate, but customers won't participate until there are enough billers," says Paul Ayres, senior vice president of Key Electronic Services, a unit of Key Bank.

As online presentment and payment have become more commonplace, organizations such as the U.S. Postal Service, telecommunications companies, financial services firms and Internet portals are positioning themselves as bill consolidators. "Post offices are a natural consolidator in the physical world," said Bill Robertson, executive vice president of NetDelivery, Boulder, CO, a supplier of Web-based document delivery software.

The Postal Service, which with $16 billion in bill-related revenues has the most to lose from a switch to e-billing, has launched its own consolidation service in partnership with CheckFree, Norcross, GA, an e-bill payment powerhouse. In Canada, E-Post - an electronic bill delivery service launched by the Canadian postal authority and powered by NetDelivery software -has garnered the support of 100 of the country's 400 major billers in its first year. Similar postal initiatives are under way in Sweden and Norway.

But much as the consolidators want to bring more billers on board, many smaller companies are hesitant. "A lot of billers [aren't] comfortable pushing e-summary records out to unknown entities," says Rod Cosler, vice president of treasury management services at Chicago-based Bank One. Cosler adds that companies are generally more comfortable with a "biller-direct" approach, in which they host bills at their own sites.

Bank One is supporting both the biller-direct and consolidator models. It offers CheckFree's bill payment service to retail customers at its BankOne.com and WingspanBank sites. The company offers corporate customers the bill presentment services of software provider billserv, San Antonio, TX. By adding billserv to its own automated clearinghouse, credit card processing and lockbox services, Bank One is able to offer businesses an integrated collections portfolio. "Part of it - the Internet front-end development tools - is managed by billserv. The payment and remittance processing is bundled through Bank One," Cosler explains.

Citibank has taken a more tactical approach. Last fall, it bought an equity stake in Paytrust, Lawrenceville, NJ, an account aggregator that had acquired the bill presentment company PayMyBills. Citibank created a branded version of the PayMyBills service called Citibank Bill Manager. The financial services giant says "tens of thousands" of its credit card customers have signed up.

"We view the relationship with Paytrust as an opportunity to give our credit card customers the ability to view and pay all their bills and statements [online]," says Susan Ehrlich, director of e-billing at c2it.com, the Internet payments arm of Citibank.

Mirroring the Bank One/billserv partnership, Citibank relies on Paytrust to navigate the maze of bill presentment technologies. If a business is unwilling or unable to present a bill electronically, Paytrust instructs the business (with the customer's consent) to mail it the paper bill. Paytrust scans the bill and transmits the image to Citibank Bill Manager, where it can be viewed online along with the customer's other bills. This approach, which is really a cross between the biller-direct and consolidator models, leverages and enhances Citibank's online banking relationships, Ehrlich says.

Making a Statement

While much of the talk about electronic presentment technology centers on bills, electronic statement presentment can help companies reduce printing and postage expenses while also improving customer relationships. "Organizations are [now] focusing on documents other than bills," says NetDelivery's Robertson. "Although we all have to pay bills, it's not the most interesting aspect of our month."

Southwest Bank of Texas, Houston, is among the many organizations making use of presentment technology for monthly statements. By 1999, Southwest Bank of Texas was already mailing customers statements with check images. Emailing complete statements was the next logical step.

"If we could cut the time from a statement drop to the customer's hands, that would be an added value," says Pervis Fly, a vice president at Southwest. Customer response has been favorable, according to Fly, who estimated that savings on mailings for the first year were $58,000. In the process of developing procedures for obtaining customer approval to receive statements electronically, Southwest Bank managers discovered that the bank's call center already had approval and verification procedures in place.

Key Bank has employed statement presentment at its McDonald Investments brokerage unit, and according to Ayres of Key Electronic Services, printing costs have been cut in half without a compromise in customer service. Enterprise document management software from IBM was combined with Documorph, an online presentment tool from Xenos Group, Toronto, to deliver monthly electronic statements. About 15,000 customers signed up during the service's first year.

Key Bank is ready to extend the service to its checking account customers. "We've learned enough to know that we need to go beyond the scope of our McDonald statements," says Ayres.

While many institutions are just beginning to experiment with electronic statement presentment, SunTrust Banks, Atlanta, is embarking on a second-generation program to provide its trust clients with feature-rich online statements. Trust clients - high-net-worth individuals and institutions - are finicky when it comes to service, and statements are no exception. "This is the fifth time we've redone our statements," says Dennis Dills, information systems officer for private client services. "This time, we wanted to address how the customer views the data and make it friendly."

The statements - soon to be available electronically - employ richer fonts, a summary page, an asset-allocation chart, duplex (double-sided) printing and barcoding. The previous statements were so primitive that SunTrust hesitated to place them online; it did so only at the insistence of institutional clients, who were clamoring for any type of online capability.

"The [older, online] presentation is raw," says Sherry Harvey, product manager for private client services at SunTrust. "It is presented in a single PDF file, and there's no ability to manipulate data."

The "raw" state of early online billing initiatives hasn't helped the appeal of EBPP, according to Darryl Dobin, executive vice president of customer operations at Avolent, a San Francisco-based e-billing, invoicing and customer care vendor. Avolent has launched a Rapid Adoption Program and accompanying services to help its clients improve customer acceptance.

"We're not counting on the notion of 'Build it and they will come,'" Dobin explains. "The adoption program is a packaged set of ideas, concepts and approaches that have worked well together. The first step is to segment your customers and focus on the people who are most likely to adopt."

In addition to targeting known Internet users, those who are paying electronically and those who have communicated via email, Dobin says companies should concentrate on high-value customers who are using multiple services. Mailed bills can include targeted inserts, he says, and customer service reps can be armed with customer data and trained to appeal to likely adopters during service calls. Online, Web site home pages should have highly visible links to enroll for online service, and the sign-up process should be as simple as possible.

After implementing these programs, in April 2000, Avolent customer NuVox Communications, Columbia, SC, is said to have dramatically increased EBPP adoption rates. As of January, the broadband telecommunications provider reported that 24 percent of its customers were signed up, vs. typical adoption rates of 1 percent to 4 percent, according to Avolent.

"What is crucial for companies offering this service to realize is that it goes way beyond cost savings on postage," Dobin says. "You can save $1 per month sending out bills and accepting payments online, but you can also eliminate customer service calls - which cost anywhere from $7 to $15 - and you can provide additional services that will make it harder for customers to walk away."

Gartner's Litan echoes Dobin's call for more aggressive efforts to recruit customers and easier, more valuable services that will keep them involved.

"Avolent is doing some neat things to allow customers to slice and dice bills so they can sort by charge amounts, by date or by payee," says Litan. She also notes a program recently introduced by CheckFree in which e-bills and e-payments can be handled via email. The system even integrates person-to-person payments with existing accounts and electronic billing and payment systems.

"Vendors are making it easier to sign up and use these services, and they're adding intelligence to their applications," Litan says. "These are the kinds of improvements that are needed to make electronic billing more attractive than paper."

Steven Marlin (smarlin@cmp.com) is executive editor of CMP's BankSystems & Technology magazine.

Insurers Join the Next Wave of EBPP

Banks and financial services have led the way in deploying electronic bill presentment and payment technology, but a recent study by Xplor International sees insurers leading the next wave.

Released in April, Xplor's 2000-2001 Technology Directions Survey showed a marked increase in adoption of EBPP among insurers, with 11 percent reporting EBPP programs in place and 17 percent reporting pilot programs under way. This compares with only 4 percent of insurers in Xplor's 1999-2000 study reporting that they had EBPP systems in place and an additional 4 percent piloting the technology.

In the latest survey, insurers were second only to banks and financial services firms in using or adopting EBPP, but they were a distant second. By contrast, a whopping 48 percent of banks and financial services respondents said they had bill presentment programs, and an additional 10 percent said they were piloting the technology.

The study's EBPP data is based on interviews with 155 user company members of Xplor, Torrence, CA, an association that addresses the use of electronic document technology within large organizations (user company members average 3,566 employees).

Auto insurer Amica Mutual, of Lincoln, RI, with a national presence and 3,300 employees, is one of the many insurance companies embracing bill presentment technology. The company uses software from CheckFree i-Solutions, Norcross, GA, to create electronic bills. These are distributed by CheckFree to some 275 portal sites, where they can be viewed and paid online.

"The actual bill is retained here at Amica," says Richard Edwards, assistant vice president at Amica. "CheckFree gets summary information and an encrypted URL that the customer clicks on to see the electronic representation of the bill." Edwards says Amica's e-billing program began in November and that about 3,000 customers had signed on through March.

"We get several thousand payments from customers through CheckFree each month," says Edwards. "We're hoping to sign up more of those customers for electronic bill presentment." -SM