Online billing slowly gains momentum: Page 2

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Choosing an approach

One of the most popular approaches to entering the EBPP world is through a BSP like billserv. The BSPs take a company's print stream and parse it into eXtensible Markup Language (XML), PDF, or HTML, depending on what the developer chooses to use. The data is then presented at the biller's Web site or a hosted distribution end point such as a bank or one of the dozens of billing portals.

"If they come in through the biller's site, they are really coming into our solution," Derivion's Ziegler explains. "The customer then reviews the bill, clicks a pay button, chooses how he wants to pay, and then we batch that data and process the transaction."

By using the BSP model, North Pittsburgh Telephone was able to get the EBPP system running fairly quickly--within 60 days--without an in-house IT staff. "And we didn't want to reinvent the wheel," Carpenter adds. The BSP model is also attractive because there is virtually nothing for the telephone company's staff to do once final modifications have been made. "The product is pretty much stand-alone and will require maintenance only when we change the format of our bills," he says.

Sallie Mae's reasons for turning to a BSP were similar. By using billserv as its intermediary, Sallie Mae gives its customers the opportunity not only to pay their loans electronically but also to pay other bills posted to places like CheckFree, the U.S. Post Office, Yahoo!, and TransPoint, at the same time. "All we have to do is send our bills to billserv. They distribute them to all the front ends so our borrowers can get our bill from anywhere they want to get it from. And we don't need any additional software or hardware," Vellayan says.

Verizon Communications went a different route, preferring to develop its own electronic billing system so it could gain the type of interactivity executives felt was missing from other EBPP solutions. The company funnels its bills through CheckFree and TransPoint. Rudluff says Verizon chose these two consolidators because of their reach and ease of use and because the company believes most customers will eventually pay bills through consolidators. "We've developed our own gateway to push the bills out to those consolidators and to our direct bill site," Rudluff explains. "We just pull the raw data from our back-end systems and pump it through a database and present the information to our customers."

Consumer acceptance challenges billers

Lessons learned about EBPP

  • Make sure you have a strong and well-trained customer service unit. Failing to do so may result in frustrated borrowers and a lower adoption rate.
  • Be sure the billing software provider or ASP is scalable and reliable.
  • Don't expect customers to come to you. Instead, actively market your EBPP service.
  • Don't expect EBPP to always be a money-making proposition. Instead, consider it a necessary action to increase customer service and to stay competitive.
  • Develop a systematic way of recording payments and providing information to the borrower.
  • Thoroughly test the system before fielding it.
  • Don't underestimate the time and effort it takes to provide all of the special notices and messages required by law in electronic format.
  • There is no doubt that the adoption rate among billers--especially those in the Fortune 500, which can expect larger economies of scale by going to EBPP--is on the upswing. A recent Gartner study finds that billers expect their volume of consumer electronic payments to grow by nearly 550% in 10 years, from 9% in 1999 to 47% in 2009.

    That growth will be almost completely driven by the billers themselves, who have many incentives to offer these systems and thereby convince customers to use them. The primary driver for most companies is the expectation of cost reductions at some later date, followed by customer service, staying competitive, and cross-selling, Litan says.

    So far, only about 1% of customers given the option of paying bills electronically have decided to do so. "Simply put, most consumers do not find online billing payment compelling and have no incentive to switch from their trusted checkbooks," Litan says. She says the primary barriers to using electronic bill payment services include a strong preference for using old checkbook methods and a reluctance to pay for such services. To address this issue billers are beginning to offer the service for free as long as the bill is paid through the biller's own Web site.

    "Billers have a lot of motivation to do this, but it's not clear if customers will accept it without some incentive," Litan says. A Gartner Group survey of 40,000 households showed that today, nearly 50% of adult billpayers simply don't want to use EBPP. Unless billers provide monetary incentives, the adoption rate will continue to be slow, Litan says. "And they had better do it soon because they won't get anywhere until they do," she says.

    But time--and incentives by billers--will help convince some consumers to pay bills online. Litan predicts that by 2002 the number of U.S. households using online bill payment will increase to 15 million, from three million in 1999.

    So far, less than 1% of Sallie Mae's customers have chosen to pay loans electronically, but Vellayan expects the number to grow to at least 2% to 5% by the end of 2000 once the company begins a marketing campaign. By 2001, she hopes that as many as 10% of customers will pay bills electronically.

    North Pittsburgh Telephone's Carpenter is similarly optimistic. Starting at ground zero in September 2000 when the system is fielded, Carpenter hopes that 10% to 15% of the company's 72,000 customers will begin to use electronic billing immediately.

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