|
September 2001
TABLE OF CONTENTS
Electronic Bill Presentment
How to Use The BPTR Discussion Bulletin Board
The BPTR is best viewed through a Web browser.
Click here to open this issue in your browser.
Subscribe/Unsubscribe/Change of Address:
Click here to go directly to our subscription change form.
For information about advertising in the BPTR, click here to reach the Townsend Group, DMIA's advertising representatives.
EDITORIAL STAFF:
Dennis McGarry, CDC
Managing Editor
Jennie Gordon
Design & Layout
Submit articles, questions, or letters to:
BPTR Editors/DMIA
433 E. Monroe Ave.
Alexandria, VA 22301-1693
P: 703/836-6232
F: 703/836-2241
mailto:dmcgarry@dmia.org
©Copyright 2001 by DMIA. All rights reserved. Published in the United States of America. This publication may not be reproduced, stored in a retrieval system, or transmitted in whole, or in part, in any form or by any means, electronic, mechanical, photocopied, recorded, or otherwise, without the prior permission of DMIA, 433 E. Monroe Ave., Alexandria, VA 22301-1693.
http://www.dmia.org
By Colt Hitchcock
Electronic Bill Presentment and Payment (EBPP) is an Internet-based solution that allows companies to present recurring bills and statements to customers via the Internet and process electronic payments the same way. With a traditional paper-based application, it costs most companies between $.85 - $1.75 to print, fold, insert, meter, mail and process a payment. The equivalent EBPP solution lowers that cost to between $.15-$.65. While EBPP delivers significant, hard cost savings over the traditional print and mail process, it is the indirect and strategic impact of EBPP that is critical. Customer service, cash flow, operational efficiency and 1:1 marketing are among the areas positively impacted by EBPP.
Business Models
Two primary business models are emerging in the world of EBPP. The Biller-Direct Model includes two parties—the biller and the end-user (payer). And the Aggregator Model, which includes the use of a third party that handles the bill transaction. Both models are explained here:
BILLER-DIRECT
In this model, the billing company or a Bill Service Provider (BSP) that publishes its own bills, presents them to the customer, and allows payment – all via its web site. Typically, the web "document" is derived from the print stream or database files using, predominantly, html and xml languages. These languages allow the web document to be truly flexible and dynamic in content. For instance, a single click on a technology stock in a portfolio statement might hyperlink the customer to a newsletter the business provides on technology issues.
The biller-direct model has many advantages for the biller. It provides complete control over the content being displayed. Unlike the aggregator model, the biller controls both the content and the presentation.
EBPP can be a key component in an e-commerce strategy. Scores of companies have established expensive web sites without much ROI. Using a biller-direct EBPP component, billers can leverage regular customer visits to their web site to promote additional products or services, allow for customer-initiated self-care and generally strengthen the customer relationship.
One drawback to the biller-direct model is the ease of use for the consumer. The average consumer pays 17-20 bills per month. As EBPP adoption grows and consumers find themselves paying more than 5-7 bills at individual biller web sites, they will demand some sort of consolidated solution. Remember that today, issues of cost and security aside, the traditional curbside mailbox serves as a rudimentary consolidation for most consumers. In a biller-direct model, consumers have to navigate a number of web sites and manage their passwords for each biller’s presentment. As consumers see more buy-in from the billing community and improvements in security, growth in the "consolidation" of these various presentments at a single site will continue.
Another drawback to biller-direct can be the high cost of hardware and software, as well as the time to implement. Many of the premium software solutions carry six-figure price tags and require at least six months to implement. In addition, the biller bears a high operating cost for the system/server hardware and the 24/7 web hosting requirements. Given these high costs, several Bill Service Providers (BSP’s) are available who will provide EBPP solutions on a "fee for service basis." While an initial investment is required, the overall cost of entry is substantially less than the in-house ownership alternative.
For the biller who has to bear the costs of printing, folding, inserting, metering and mailing, biller-direct offers the greatest cost reductions and most benefits of any EBPP model. In the near term, it is a winning strategy for billers until consumer adoption grows substantially.
| Figure 1. Biller-direct Process Flow |
THE AGGREGATOR MODEL
In the aggregator model, a biller sends the billing data to 3rd party usually called an aggregator or consolidator. This 3rd party takes responsibility for receiving the data and preparing bills for presentment and payment. The aggregator model is sometimes called the "Portal Model."
The primary difference between a biller-direct model and a aggregator model is the -storage location of bill detail and bill summary data – as well as where the bill is actually paid.
In the biller-direct model, the biller continues to host the bill detail. On the other side, in the aggregator model, only the summary information (customer name, account number, amount due, etc.,) is presented at the portal or aggregator site. This is sometimes referred to as a "thin consolidation." To get the bill detail, the consumer or payer links back to the biller site. Either the biller or the aggregator can handle payment.
| Figure 2. Consolidated Model Process Flow |
"Thick consolidation" is the term used to describe transactions where both the bill summary and detail are forwarded to the portal or aggregator. In a thick consolidation, the portal typically handles the payment.
The biggest advantage to the aggregator model is the convenience offered to the consumer. Consumers can access multiple bills from one site with a single user i.d. and password. Examples of aggregators (or portals) include CheckFree, Intuit (Quicken) and AOL.
One of the major drawbacks to the aggregator model for the biller is the loss of control (especially in the thick consolidation transactions). The consumer’s eyes are on the portal site, not the biller site. Also, there is opportunity for competitive advertising to appear as a banner around the biller’s bill presentment on the portal. So, the biller has to weigh the gain in consumer adoption through the convenience the portal delivers against the loss of control over the presentment site.
Another drawback to the consolidation model for the biller is the loss of funds. In a biller-direct model, funds are typically run through the biller’s bank. This preserves the transaction volume and supports the biller-banking relationship. In a consolidated environment, funds are typically routed through the consolidator’s bank. The biller’s banking relationship is diminished and charges may increase.
Where Does the Bank Fit In?
As the "preferred portal" for many payers (approx. 40%), banks have tried to capitalize on the growing use of the Internet to pay bills. The primary product, a Home Banking solution, allows bank customers to register on a bank web site and enter their biller name, account number, amount and date to pay.
This "pay anyone model", a solution provided to the Bank by companies like CheckFree and Princeton e-com, allows a bank to facilitate bill payments made by their customers. At present, adoption is approximately 10%. The biller community is not in favor of this approach; it is convenient for the consumer but very disadvantageous to the biller since the biller is still required to print and mail the bill.
| EBPP Benefits BILLER For the biller, EBPP delivers a multitude of benefits:
PAYER
|
Where is EBPP Headed?
EBPP B2C adoption rates have reached between 4-10% for a number of vertical industries. B2B adoption rates are slightly higher. However, adoption rates are much lower than the 12-15% initially forecasted for 2001 by most consulting firms. It is clear that the downward slide of the technology market, coupled with confusion about EBPP technology choices, led to what some forecasters have called the "trough of disillusionment." Despite the fact that EBPP adoption rates are below forecasts, everyone agrees that it is only a matter of time before growth sets in.
Today, the biller controls the intellectual property contained in their "bill." For now, they can control where and how the consumer will view and pay that bill. The key for billers is not whether EBPP will be a key part of their marketing strategy, but when. Billers need to position themselves today to help their customers adopt the technology. Otherwise, they are likely to lose customer contact to businesses willing to embrace the web as a better means of managing the customer relationship.
Colt Hitchcock is the vice president of technology & marketing for the EPX Group in Portland Maine.
He can be reached at chitchcock@outsourcecommunication.com, or on the web at www.outsourcecommunication.com
Want to join a discussion on this article? Click here to go directly to the BPTR Discussion Bulletin Board.
BACK TO TOP
The BPTR Discussion Bulletin Board
The BPTR Discussion Bulletin Board is an online, interactive forum where you can post messages, read messages and reply to messages related to topics discussed in the Business Printing Technologies Report. At the end of each article in the BPTR, you will find a link to a related discussion. Just click on those links to go directly to that particular discussion forum. Once there, you can also check out the "FAQ" link to read more details on the different features of the BPTR Discussion Bulletin Board.
To use the BPTR Discussion Bulletin Board you must first register.
Print these instructions or open a second browser window so you'll have something to follow while you register.
Here's how to register:
- Click on the "register" link near the top right of the BPTR Discussion page, or click here.
- Read the Rules, Policies, and Disclaimers and click the "Agree" button.
- Enter a username and password of your choice. Usernames can be up to 25 characters and passwords can be a maximum of 13 characters.
Please use only letters and numbers. Passwords are case-sensitive.
- Enter your email address.
- You may enter more information for your profile if you wish.
- IMPORTANT: To avoid having to retype your username and password each time you post a message, make sure that the "Store Username & Password in browser memory for 1 year" option is set to "yes".
- Click on the "Submit Registration" button.
- Click here to register now.