Published in Transform by Joe Devlin Click here for list of articles
  July 2001 Why replacing paper-based remittance systems with electronic remittance is so difficult-and how to go about pulling it off
IntroductionMain ArticleMixing PaymentsGauging EBPPThe Check & List Problem
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Banks and billers face a muddled environment of electronic and paper-based processes. The latest technology merges mixed payments and streamlines conventional transactions.


      The Changing Face of Billing

The Changing Face of Billing

"The typical paper-based billing process is made up of a series of time-honored steps handled in sequence by various manual and computer-aided methods. First a firm's billing information is aggregated, stored and sourced for billing data. Then actual paper bills are printed, mailed and delivered. When received by customers, these bills are then reviewed, exceptions are noted and contact with payees may be necessary to resolve differences. Next, checks are written, records are maintained, postage is applied and payments are delivered. Finally, the biller and the payer's bank or financial institution exchanges payment data for mainstream account reconciliation." Buy Now, Pay Now: Internet-Enabled Billing Comes of Age,"   Zona Research, March 2001.

Sounds complicated, huh? It's expensive, too. The round-trip cost of generating a single paper bill, invoice or other form of remittance and processing the payment and paperwork that comes back is approximately $1.90.

Remittance technology providers are chipping away at payment processing costs with better automation software, and more powerful optical and intelligent character recognition engines. But the best way to cut the cost of billing is to do it all electronically. Analysts such as Jupiter Communications estimate that billers could save almost 80 percent (for paper, postage, handling) per payment, approximately $1.20 per bill, by using electronic bill presentment and payment (EBPP). U.S. businesses could save nearly $18 billion per year.

What's Taking EBPP So Long?

So, why isn't this already done? All the stakeholders agree that EBPP is going to be huge. So huge, in fact, that everyone is wrestling to keep control over as much the data as they possibly can. As a result, billers now receive no more than 12 percent to 18 percent of their payments electronically, according to Zona, Redwood City, CA.

Further adding to the difficulty is the fact that consumers and the businesses that service those consumers have very different views about the best way to handle electronic bill presentment and payment. Consumers and businesses want their banks to be the organizations that consolidate bills online. Banks would be glad to do so, but the credit card companies, telecommunications companies, utilities and retailers that send out bills are not eager to release valuable customer information to financial institutions.

One solution the this dilemma is to setup independent consolidators that can route bills and payments between large numbers of stakeholders. A fair number of small business and financial institutions without the resources to set up their own payment network have expressed interest in such an approach. Larger billers just don't want to cede control of their existing customer data and customer interactions. To do so takes away the potential of a great many cross-selling and upselling opportunities.

"Banks were smart to stay away from EBPP for a year or two until the smoke cleared," says Errol Hau, director of product marketing at CheckFree, a leading provider of electronic billing and payment services. "To get into EBPP, you need to go out and partner with half a dozen companies to put together an end-to-end solution. What the banks decided to do was to just dabble. They started by giving people online bank statements with bill payment capabilities. The assumption was that the actual bills would remain on paper."

Internet-Enabled Remittance Systems such as EBPP

Cheaper Alternatives

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