E-billing: The check is in the ether

The nation's largest utilities are leading the electronic bill presentment and payment (EBPP) charge. But a lack of standards, a confusing marketplace, legacy data hassles, and, yes, even the Y2K problem are hampering widespread adoption. So don't shred any checks just yet.


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In this article:
Southern California Edison
Electronic bill presentment and payment involves three distinct processes:
Three approaches to electronic bill presentment and payment
The banks' role
E-biller lessons learned
EBPP vendors
You may think paying your monthly bills is a grind, but it's nothing compared to the money and effort companies expend generating those bills and processing the payments.

Consider this. If the nation's utility companies switched overnight to delivering bills to customers and receiving payment only in electronic format, the utilities could save $1.2 billion annually, according to estimates by Killen & Associates Inc., a Palo Alto, Calif., market research company.

Consultant Tony Sidiropoulos, EBPP pilot project manager for Southern California Edison
Photo: Kim Kulish/SABA

But independent consultant Tony Sidiropoulos says that among the many excellent reasons for biller companies to convert to an electronic means of dealing with bills (electronic bill presentment and payment, or EBPP, is the fancy term), reducing costs is not the best one--at least in the short term.

Last September, an EBPP pilot project Sidiropoulos led for the nation's second largest utility company, Southern California Edison (SCE), of Rosemead, Calif., went live. And although he used the promise of cost savings to justify the project to senior management, Sidiropoulos believes giving customers more options is the best reason to do electronic bill presentment.

Six months after the pilot went into production, "[SCE] has not realized any cost savings. That will only come after a certain volume of customers sign up for [EBPP]. But Southern California Edison is committed to giving customers choice," says Sidiropoulos, whose consultancy is in Pasadena, Calif.

AT A GLANCE: Southern California Edison
Size matters. With 4.2 million business and residential customers, SCE, in Rosemead, Calif., is the nation's second-largest electric utility company.

Hedging its bets. A year and a half ago, SCE embarked on an electronic bill presentment project. Because it was not clear at the time--as it still is not now--who would prevail as the provider of EBPP services, SCE inked deals with both TransPoint and CheckFree.

Bill Reinhold, director of mass markets for SCE, and a member of the utility's EBPP project team, echoes that sentiment. "[EBPP] gives customers a lot more control over their remittance relationship."

Indeed, the top reason for implementing e-bills-especially among public utilities rushing to gain a toehold in the era of deregulation-is customer care. Both business customers and consumers are clamoring for more options for paying their bills.

EBPP is still in its infancy. Of the 7,500 major billers worldwide that account for about 60 percent of all repetitive bills, only 50 have initiated a strategy to issue bills electronically, according to Killen & Associates. These early adopters include phone, credit card, cable and insurance companies, as well as public utilities. But it's not just customer demand for better service that's driving EBPP. E-billing does offer the potential for great cost savings down the road. Producing, delivering, and accepting payment via an e-bill costs only slightly more than half as much as the cost to produce a paper bill.

"It costs about 58 cents for an e-bill vs. about $1 for a paper bill," says Ken Kerr, research analyst for Gartner Group Inc., a market research firm in Stamford, Conn. But until a critical mass of customers elect to pay their bills electronically, the biller company will experience an increase in costs.

Beyond customer care-and those cost savings down the road-marketing is another major reason to do EBPP. "Ten years ago, the only purpose of a bill was to collect money. Now, the bill has two purposes: Collect the money and sell," says Michael Killen, president of Killen & Associates. Companies can address their customers-or sell space to third parties for this purpose-much more efficiently electronically than on paper.

"Marketing is a real benefit," agrees Sidiropoulos. "On the Internet, the insert mentioning a refrigerator rebate still lives," he says. And for non-utility EBPP implementers, the potential to cross-sell and up-sell (that is, sell additional or more expensive services and products), and third-party advertising is even greater because they are less restricted in these activities than are utilities.

So what stands in the way of this more efficient way of dealing with bills? Plenty.



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