Online billing slowly gains momentum: Page 3

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The future of EBPP: "You've got bills!"

The EBPP players
Five industries account for the majority of the 17 billion bills sent to consumers annually.

Source: Gartner Group Inc.

Once customers and vendors are used to EBPP, billing vendors plan to take the service to new heights. The next frontier, many believe, is a move into e-mail-based billing. Today, most billers send automated e-mails to customers in the EBPP program with links directing them to a Web site where their bills are hosted. But in the future, some vendors may chose to e-mail entire bills directly to their customers to further streamline the process, reduce overhead, and continue the trend toward increased customer service.

Killen & Associates believes that by 2005, adoption of e-mail-based billing delivery will account for 38% of all electronic billing, up from 18% in 1998.

Companies like MessagingDirect Ltd. of Edmonton, Alberta, one of the first to promote e-mail-based billing, stand to gain significant market share if they market themselves aggressively before other billing vendors get into the field, Killen says.

"The present approach of consolidating bills on a Web site or presenting a particular biller's bills at a Web site has problems. If everybody decides to go get their bills at the same time, you have a scalability problem. Whoever builds these consolidating Web sites has to consider peak periods," Killen says. "Getting consumers to go to a Web site is a more passive approach. A more active approach [of e-mailing bills to the customer] is better."

But not all billers agree. The e-mail method of bill payment won't pan out, Verizon's Rudluff believes, because there is no payment methodology for e-mail and presentation methods are limited.

"Can you imagine a scanned 15-page telephone bill presented in an e-mail? It would go on forever and be unmanageable," he says. //

Karen D. Schwartz is a freelance writer specializing in business and technology. Based in the Washington, D.C. area, she can be reached at

"After a year-long B2B EBPP pilot, the findings were: Invoice receipt could be guaranteed worldwide, dispute resolution was easier, and administrative processing costs were reduced. "

EBPP in the B2B marketplace

Although more than 90% of all electronic bill presentment and payment (EBPP) transactions take place in the business-to-consumer (B2C) arena, there is still a growing need for EBPP solutions in the business-to-business (B2B) marketplace. Businesses in the United States generate approximately 12 billion bills for other businesses, making the potential impact of EBPP huge. B2B billing over the Internet will become so popular, in fact, that it will begin to surpass the use of electronic data interchange (EDI) e-billing by 2002, even among major billers in the utilities and telecommunications industries, according to Gartner Group Inc., of Stamford, Conn.

The average cost of producing a printed business bill is $1, compared to a cost of about 33 cents when delivering a bill over the Internet--figures similar to those in the B2C space. But the challenges in implementing a successful EBPP system in the B2B space are different and center on the processing of invoices. Major obstacles include bills with multiple pages, the need to communicate with a variety of accounts payable systems each with a different structure, and the need to have multiple levels of authorization.

"B2B invoices are much more complex, both in terms of the size of the invoices and type of data. Where business-to-consumer bills are often small in length such as a cable or telephone bill, business-to-business invoices can be hundreds to thousands of pages of complex data," explains Dan McGurl, CEO of Bottomline Technologies of Portsmouth, N.H., which offers e-billing software for the B2B marketplace. "And in the B2B space, there are a significant number of adjustments or disputes related to invoices that have to be resolved before bills can be paid."

Those are just the types of issues Hamilton Sundstrand Corp., a Windsor Locks, Conn.-based aerospace manufacturer, hopes to address by turning to EBPP. The company, which does business with 300 to 400 vendors, joined a pilot program in 1998 spearheaded by Northern Trust Bank of Chicago, along with Frito-Lay Inc., Kraft Foods Inc., Nabisco Inc., and PepsiCo Inc. During the year-long pilot, the five companies used e-billing software created by Northern Trust, which has since been purchased by Bottomline Technologies, to transmit bills to payors. The system allowed the companies to post invoices and accept payments via direct debit.

In the case of Hamilton Sundstrand, the pilot was conducted with 10 customers, some international and some domestic. The most important finding, says CFO Tom Rogan, was that invoice receipt could be guaranteed worldwide. Other findings included easier dispute resolution and reduced administrative processing costs.

When the pilot ended in January 2000, executives at Hamilton Sundstrand chose to continue with e-billing, adding more live customers to the 10 pilot customers. The system has been so successful that parent company United Technologies Corp., of Hartford, Conn., has adopted it as well.

Here's how it works: Hamilton Sundstrand sends invoices to Northern Trust in an EDI file, which is translated into HTML and posted on a Web site maintained by Northern Trust. Customers access the site using a two-tiered password to review invoices, note disputes or changes, send e-mails to the appropriate sales or financial representative, approve invoices for payment, and make payment via direct debit or credit card. Payments are credited to Hamilton's account, and a payment acknowledgement is than sent to the customer.

"They are in total control of the invoice," Rogan explains. "If there is a short shipment or pricing error, we can work through the dispute before our terms expire with the customer. And it reduces the amount of reconciliation we have on both sides."

Although Rogan wouldn't divulge the software licensing fee or the transaction fee, the cost to the company is clearly not free. Gartner Group estimates that B2B e-billers spend an average of $490,000 in the first year of implementation, which includes hardware, software, labor, and integration.

"But people have to realize that there is an enormous benefit here in reducing the size of accounts receivable of any company by removing all the disputes from the process," Rogan argues. "If disputes are uncovered earlier in the process, we have a better chance of collecting our receivables and fixing problems. The savings in working capital will more than offset the cost in transaction fees we may pay."

Although adoption of EBPP is slow in the B2B sector, it is gaining converts rapidly--so rapidly, in fact, that Gartner Group expects billers' volume of electronic payments received and sent out in the B2B space to rise from 14% in 1999 to more than 60% in 2009.

"Acceptance of EBPP in the business community is just beginning," says McGurl of Bottomline Technologies. "But there is no technology hurdle to overcome. It's a mindset. This is a major change to the process of a large organization."

"Currently, we have about 3% of our customer base on EBPP, which is a carry-over from the Northern Trust pilot days," says Barbara Reid Macy, manager of electronic commerce in Hamilton Sundstrand's finance division. "A new system upgrade in September [2000] should increase the current percentage to 10. The plan is to grow this to 20% by Q1 2001." --Karen D. Schwartz

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