E-billing: The check is in the ether: Page 3

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Rugullies says if the technology works, Ganesan's vision is a winner. "It's a fantastic model, if they can pull it off," she says. CheckFree's two chief competitors, TransPoint and CyberCash, have not yet reached this level of functionality yet, say analysts.

The banks' role
Although First Union and other prominent banks would like to become the place consumers pay their bills electronically, they are not necessarily a critical part of the EBPP picture. Banks are needed only to transfer the funds from the customer to the biller. It is likely banks will be cut out of the process to a great degree because most are only starting to get involved now, according to Michael Killen, president of Killen & Associates, a Palo Alto, Calif., market research firm. But banks won't go down without a fight.

Commercial banks are trying to sell themselves as electronic billing clearinghouses; among those developing EBPP strategies are First Union, Bank One, Chase Manhattan Bank and PNC Bank. "They're making the argument to billers, 'Why would you want to deal with CheckFree and all those others? You can get these services just from us," says Killen.

Of course, even banks that have success with this approach are likely to outsource their bill payment services to a provider such as CheckFree, although that function will be transparent to the user. But as EBPP gradually proliferates, billing costs will go down, and that will shrink the bank's slice of the pie.

"Many banks bill the billers on a cost-plus basis. If the base [cost of e-billing] shrinks, the banks will have a problem. This business is getting too competitive. There will only be a handful of survivors," says Killen. Although EBPP is still in its infancy, the stakes are already in the ground and they're flying the flag of CheckFree and a few others.

Giga terms the third and last scheme, which is not yet prevalent, the "invited push" model. This involves delivery of bills directly into consumers' e-mail boxes. This is not to be confused with e-mail notification of bill delivery, in which consumers receive an e-mail message alerting them that an e-bill is waiting for them at a Web site. Rugullies believes billers will stay away from "invited push" for at least a year while vendors address technical barriers to adoption.

No matter which model a biller chooses, there are three steps to EBPP. First, data from the biller's systems (often a mainframe) must be extracted and transformed into a Web-compatible format--no small feat. Then the data must be pushed into electronic bill templates, which reside on a bill-presentment server. Finally, the funds must be collected electronically. Software and services are available for each step in the process.

Lessons from the trenches

Sidiropoulos, the independent contractor for SCE's pilot, wasn't the first to grasp that cost savings isn't the best reason to implement EBPP. Nancy Miller, payment options specialist at Portland General Electric Co., says customer choice was the overarching reason to offer customers electronic billing. "We're always looking for more ways to serve the customer," says Miller, in Portland, Ore.

Jim Vander Biezen, manager of billing services for Nicor Gas, a division of Nicor Inc., says he became interested in EBPP a few years ago when he read in the newspaper that his company's service area-greater Chicago-was one of the highest consumer Internet usage areas in the country. "Electronic bill payment fit our consumer demographic," says Vander Biezen. Nicor, based in Naperville, Ill., went into production with its e-bill application last September. CheckFree is the bill payment provider.

"Billers want to provide customers with an enhanced experience-more information about their bills than they could previously get and more accessible information. They want to use this to grow customer loyalty," says Rugullies. This is particularly important to utility companies, which are struggling to differentiate themselves after industry deregulation introduced competition in the mid-1990s.

But, as any biller will tell you, implementing EBPP is not a trivial matter, in terms of both complexity and cost. First, the biller must perform data extraction and transformation for Web-compatible bill presentment, at a cost of about $50,000 to $100,000. Second, providers such as CheckFree, CyberCash Inc. and TransPoint will charge set-up costs of about $35,000 to $50,000, not including maintenance fees. Finally, most providers also charge 25 to 30 cents per round-trip transaction (from the presentment of the bill to the consumer to the corresponding payment to the biller).

The costs can easily run double or triple these amounts, especially if you decide to go with more than one bill payment provider. SCE did just that-inking deals with both CheckFree and TransPoint. This was a conscious choice-and not just because it's unclear which provider will take hold in the future. SCE simply wanted to offer SCE customers more choice, according to Reinhold. "We don't yet know which provider will take hold. From a biller's perspective, why limit your options?"

Sidiropoulos thought both CheckFree and TransPoint would be a good bet. "There will be customers that will buy anything Microsoft sells," he says, referring to one of TransPoint's co-owners. "But CheckFree was making a success of this long before anyone else hit the market. The combination seemed like the best of both worlds."

Despite being higher in cost and hassles, it was lucky that SCE elected to go with both providers for its pilot project. Last October, TransPoint announced there would be a two-week blackout period to conduct maintenance, during which no transactions would be executed. The blackout stretched to more than three months; TransPoint did not put its service back online until Jan. 14 of this year. In the meantime, SCE's online billing application marched ahead, with CheckFree as the service provider.

U.S. businesses send or receive some 26 billion bills, account statements, and payments annually. And they pay some $17 billion in postage alone, according to the U.S. Postal Service.
According to Ralph Young, executive vice president of TransPoint, SCE experienced an extended outage while TransPoint was upgrading the pilot code to v1.0 production code. "v.1 code was a comprehensive upgrade and its development took longer than expected. This resulted in an unexpected delay in the SCE pilot," says Young, in Englewood, Colo. Young says although he wishes the pilot upgrade could have been completed more quickly, he's pleased to deliver SCE superior code.

But that mishap didn't make SCE dump TransPoint. It will continue to move forward with both providers, in order to hedge its bets and offer customers the most choice. Reinhold is philosophical about the delay. "When you're developing a complicated new product that's software dependent, you have to take the time to do it properly. Pilot projects are the times to iron those things out," he says.

File format folderol

The single greatest challenge for IT managers in preparing for EBPP is selecting the format in which data will be sent to the bill payment provider. Web-compatible data formats include flat file, EDI (electronic data interchange) and OFX (Open Financial Exchange). The options are many and the choice is not always obvious.

According to Sidiropoulos, SCE initially hoped to transmit bills to CheckFree and TransPoint in EDI format, since it was already exchanging information with its largest business customers that way. But this strategy failed.

E-biller lessons learned
Do your due diligence. There are so many players it can be quite difficult to keep abreast of all of them. But keep up to date with industry news; that way you'll be ahead of the curve as standards emerge.

Understand the different data formats (such as EDI, flat-file, APF, OFX) for bill data prior to choosing one. Also, make sure you nail down who will be responsible for the ongoing data transmission to the E-bill aggregator (such as CheckFree or TransPoint).

Recognize that e-billing can be a politically charged affair. Many different corporate groups from marketing to IT to billing may try to seize ownership of the program. Assemble representatives from various departments to ensure user acceptance.

Maintain a strict project plan and be sure to manage all outside resources to ensure compliance with the plan. To test the process flow, include a pilot test in the plan and accept nothing less than perfection before customer launch.

Everyone's EDI is designed differently. Some companies have difficulty transmitting data via EDI, according to Sidiropoulos, in which case they frequently select files, which is the route SCE chose. SCE contracted with Princeton TeleCom Corp. to transform the data into the proper format to be sent to the bill payment services.

Portland General Electric, by contrast, is able to transmit its data using EDI, because its EDI forms were designed to contain all of the bill's elements. "Since we already had EDI it was easier to transmit data that way," says Miller.

As with any e-commerce application, security is paramount. The type of security infrastructure needed at the biller's end depends on a whole host of variables, such as where the bill payment mechanism and bill data reside. Suffice to say, U.S. bill aggregators such as CyberCash use strong, 128-bit encryption to protect the billing site. (The export of strong encryption algorithms is illegal.) Since the most common Internet browsers support 128-bit encryption, consumers should feel as safe with their online billing data as they are beginning to feel with their online purchases.

The payoff

And it is consumer comfort level that will determine the adoption rate of EBPP. In the near term, users agree, the best bet is to aim low.

Nicor Gas has very limited aspirations for its EBPP application. Since it rolled out the pilot, currently only about 900 customers have signed. Says Vander Biezen, "It's a fraction of 1% of our total customer base. But that's okay. We recognize this is in its infancy."

Nicor encouraged its employees, who are also customers, to participate in the pilot project that went live last September. Troy Davis, a spot gas buyer for Nicor, signed up for the EBPP option because he wanted one less check to write every month. "I would love to pay all my bills this way. It would save me a couple of hours every month," says Davis.

One wrinkle: Shortly after he signed up for the service, Davis forgot his password. It took three months for CheckFree to send him a written statement containing his password. He alerted Vander Biezen to this glitch; CheckFree is working on a solution.

Broad user acceptance of e-billing won't come overnight, says Portland General Electric's Miller. "This is a totally different way to think. It will be up to the customer to go get their own bills." At least it's an escape from that monthly paper chase. //

Lauren Gibbons Paul writes frequently on e-commerce issues. She can be reached at laurenpaul@sprintmail.com.

EBPP vendors
Bill data extraction and transformation

@Work Technologies Inc. / WorkOut
Bell & Howell Co. / IMPACT
BlueGill Technologies Inc. / 1to1Server
edocs Inc. / BillDirect
Electronic Funds & Data Corp. (EFD) / BillTools, BillSite
Novazen Inc. / Novazen Electronic Bill Presentment & Payment
TriSense Software Ltd. / PaySense

Electronic Data Systems Corp. / iBilling
Pitney Bowes Inc. / Digital Document Delivery
Princeton TeleCom Corp. / Presentment Server
International Billing Services (IBS) / Electronic Billing Solution

Bill presentment
@Work Technologies Inc. / WorkOut
BlueGill Technologies Inc. / 1to1Server
Edify Corp. / Electronic Banking System
edocs Inc. / BillDirect
Electronic Funds & Data Corp. (EFD) / BillTools, BillSite
Just in Time Solutions (JIT) / BillCast
NCR Corp. / SmartEC Billing Plus
Netscape Communications Corp. / BillerXPert
Novazen Inc. / Novazen Electronic Bill Presentment & Payment
Oracle Corp. / Oracle Internet Bill & Pay
TriSense Software Ltd. / PaySense

CheckFree Corp. / CheckFree eBill
International Billing Services (IBS) / Electronic Billing Solution
Pitney Bowes Inc. / Digital Document Delivery
Princeton TeleCom Corp. Presentment Server
TransPoint / TransPoint e-bills

Bill payment
Oracle Corp. / Oracle Internet Bill & Pay
TriSense Software Ltd. / PaySense

billserv.com / eBilling
CheckFree Corp. / CheckFree E-Bill
CyberCash Inc. / Interactive Billing and Payment
TransPoint / TransPoint e-bills

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