The Check Is in the E-Mail

New alliances and software give online bill payment a second wind.

Electronic billing is back—and this time, it means business.

Although its taken a lot longer than some financial industry experts expected, many companies and banking institutions are finally rolling out electronic bill presentment and payment, or EBPP, platforms this quarter. Their goal: to develop software that lets businesses and consumers see current and past bills and transact payments online, as well as dramatically lower bill processing costs. Research from Giga Information Group Inc. estimates that such technology can reduce bill-paying costs by 50 percent to 90 percent.

The list of companies ready to introduce EBPP systems as the year opens includes many household names.

Sears, Roebuck & Co. will roll out EBPP to its customer base this month. Also this month, Texaco Inc. will offer to its 14,000 retailers across the United States a Texaco-hosted EBPP system. Xerox Corp. plans to implement EBPP this quarter in three of its customer billing systems, thereby reaching the majority of its commercial customer base.

One of the largest printers of invoices and bills, Xerox, of Stamford, Conn., has also developed a product that it plans to sell to companies wanting to do EBPP in-house. BillXchange sits between a legacy system and EBPP applications and turns printed bills into e-bills. That service was released this fall.

Banks in the Picture

Banks, too, are moving fast into EBPP. Cleveland-based Key Corp. expects to complete the rollout this quarter of EBPP services based on software and services from BillingZone LLC for its corporate customers. Citigroup Inc., of New York, has allied with electronic billing software provider Princeton eCom Corp. but hasnt released a rollout date for its corporate customer offering.

Bank of America Corp. and Wells Fargo & Co., both of San Francisco, are each developing consumer EBPP functionality. Bank of America, which has partnered with technology provider CheckFree Corp., is in the process of a phased national rollout that will culminate next month. Both companies are also working on corporate customer-based initiatives.

The process of developing, launching and managing an EBPP platform, however, is easier said than done.

On the consumer side, its a chicken-and-egg situation. There must be a critical mass of both billers and consumers for the model to work, and consumer adoption has been, at best, slow.

A study by Gartner Group Inc., of Stamford, reports that almost half of 130 million U.S. adult Internet users do not want to receive bills online. Of those who have signed on, the experience has often proved cumbersome and time consuming.

Businesses, for their part, have been interested in EBPP at least since the rise of the Internet—particularly in EBPPs promise of huge operational cost savings.

Two things have held EBPP back, according to James Van Dyke, an analyst at Jupiter Communications Inc., in San Francisco. First, when companies could have implemented EBPP a few years ago, many opted not to because, with year 2000 remediations under way, they didnt want to burden their IT departments with another major implementation.

Second, until recently the market was confused by two competing EBPP platforms—one from TransPoint LLC, a company formed by Microsoft Corp., First Data Corp. and Citigroup, and another from CheckFree.


Some of the confusion began to clear early last year, however, when TransPoint and CheckFree merged. Around the same time, Bank of America, which had merged with NationsBank to form the largest banking company in the United States, standardized on CheckFrees payment processing platform.

"Now, there has been so much consolidation around CheckFree, its looking like they might be the Microsoft of EBPP world," Van Dyke said.

Even with big players emerging, just planning an EBPP implementation is complicated. The vendors that currently sit between the billers—primarily telecom companies, utilities and financial institutions—and the paying customer form a fairly complex web thats not easily untangled.

There are biller service providers that aggregate and process bills for businesses and consumers; payment processors that handle the back end of moving money and may bill service providers; and EBPP software providers that automate all or part of this process, either through licensed software or as ASPs.

Consumer account aggregators can be portals, such as Yahoo; financial institutions like banks or brokerage houses; or other businesses that want to jump into the game (the U.S. Postal Service added EBPP to its Web site late last year).

To make matters worse, appropriate standards for financial transactions, workflows and processes have yet to be developed and adopted. And connectivity to back-end legacy systems is more difficult than anyone initially thought.

"The original justification was operational cost-cutting. That was largely a failure," said Richard Medina, an analyst at Doculabs Inc., a Chicago-based independent research and advisory company specializing in e-business. "This stuff is hard; its difficult to do. Its difficult to get a successful implementation, and you still dont get the paper cutback."

Electronic payment—the first half of EBPP—has been around for at least 15 years. In 1987, in response to a request by four major banks, MasterCard International Inc. created Remote Payment Service, or RPS, a hub that processes electronic bill payments. Others in the industry followed suit with their own electronic payment platforms.

Presentment, on the other hand—where invoices that are tied to a companys back-end financials and accounting systems are created and settled electronically—is in its embryonic stage, said Steve Ellis, manager of the Wholesale Internet Solutions group at Wells Fargo.

"People were talking about EBPP being the killer app a few years ago," Ellis said. "What people found out is its a lot of work to make the payment function connect with presentment."

The Future

The next critical threshold will be making online bill presentation practical, according to Curt Welling, CEO of Princeton eCom, in Princeton, N.J. "The reality is there isnt any bill distribution going on, or if it is, its at a very miniscule level," Welling said.

To be fair, there are companies, called total bill consolidators, that scan paper bills and present them electronically. CyberBills Inc., which relies on financial services providers to distribute its service, built a warehouse designed to open and scan paper bills. The San Jose, Calif., company then processes and pays those bills, often through generating paper checks.

Alex Paidas, business development manager of the e-business group at Texaco, of White Plains, N.Y., piloted the implementation of a CyberBills program at a number of the petroleum refiners retail outlets.

What CyberBills offered that other vendors didnt, Paidas said, is the ability to process paper bills, which is still a necessary part of his business.

"I bank with online banks, and they dont have the ability to do that," he said. "[Paper processing] is a whole other level of functionality. So much of whats out there is still on paper."

But two interests are still pushing to make electronic presentment a reality. MasterCard, of Purchase, N.Y., last year released the presentment piece of its version of RPS, which connects biller service providers with customer service providers. That initiative, completed last September, is still in the early stages.

Competing with MasterCard is Spectrum EBP LLC, a Union, N.J., company whose hub technology enables billers to connect with consumers to allow them to receive and pay bills electronically.

Formed last spring, Spectrum is a bank-centric company. Its goal is to sign on as many big financial players as possible and to create an industry-standard EBPP technology. With its service not yet fully out of development, Spectrum has signed on 20 top financial institutions. Wells Fargo, Chase Manhattan Bank Corp., First Union Corp. and FleetBoston Financial Corp. have equity stakes in the company.

Many banks are interested in EBPP because they dont want to lose the lucrative electronic bill payment business they have had for more than a decade to third-party aggregators.

When Murali Chirala, co-founder and president of CyberBills, went to banks to pitch the companys EBPP solution a year ago, he met with skepticism. Today, banks are interested, Chirala said.

"Theyre not only seeing pressure from portals but from the credit card side of their business," said Chirala. "Credit card companies are trying to increase their base and theyre moving aggressively [into EBPP] to do that."

A good number of companies are forming alliances with vendors to move ahead with EBPP implementations.

Pam Schaard, director of IS for BTI Telecom Corp., in Raleigh, N.C., got a call from the owner of the regional teleco last January. He requested that an EBPP system be installed within a week. After some intense vendor research, Schaard partnered with eDocs Inc., an EBPP software provider, and BTI went live on April 15, 2000, with a full EBPP system housed on a new portal that offers news feeds and other business services. Some 65 percent of BTIs business customers are up and running through the portal.

BTI has been aggressive by any standard. Schaard said part of the companys success in getting to market so quickly is that it has few legacy systems. It also didnt hurt that she threw convention to the wind.

"People are getting really hung up on standards," Schaard said. "This is a new and evolving technology. Youve got to be willing to change and maybe throw that [initial] piece out when you do find a good standard.

"You have to have a very good contract [with partners] and dont take so much time to do it," she said. "Keep yourself on a tight schedule. This stuff changes so rapidly. If you take six months or a year, so much is going to change its not worth doing it."

Test-driving EBPP

Some bigger companies are moving fast but not that fast. Both Sears and Texaco rolled out pilot programs to their employee base before rolling out to the general public. Partnering with CheckFree, Sears developed a thick model of aggregation for its employee base and will move to a thin model for public release this quarter.

With the thick model, CheckFree hosts Sears bills and presents those bills to the customer. When Sears moves to the thin model, it will host its own bills on, and CheckFree will process them for settlement.

Many companies that started out with the biller direct, or thick, model risk being disintermediated, said Andrew Crowe, director of credit e-commerce for Sears, in Hoffman Estates, Ill.

"EBPP is a must-have," Crowe said. "Its up there in one of the top priorities as something that everyone has or will have. That opportunity [that EBPP] presents with stickiness—that once-a-month interaction with a customer—is important. With everything else, there is no guarantee when they will come back, or if they will come back."