Posted: 03/2000
To Billing Portal, or Not to Billing Portal
By Peter Lambert
Thanks to the massive reach of user-friendly World Wide Web browsers, now more than ever before, telecommunications and Internet service providers (ISPs) stand to save money and improve the usefulness of their billing processes by switching from paper to electronic billing. Yet strategic decisions about how to make the switch may grow more daunting this year as new electronic billing technologies gain traction and the number and kind of potential billing partners and competitors multiply.
In addition to multiple electronic bill presentment and payment (EBPP) technologies from which to choose, other strategic factors began to surface in late 1999, as banks, personal financial management (PFM) software and service providers, major web portals, electronic commerce companies and payment processing companies formed an array of online billing service partnerships designed to create "pay anyone" web sites that aggregate and present in one place the 15 to 20 bills, including telecommunications bills, that the typical consumer pays every month.
Theoretically, such aggregation will create a convenience magnet that could substantially boost the number of consumers paying bills online, now estimated at between 6 million to 7 million by Sterling, Va.-based industry researcher Current Analysis Inc. (www.currentanalysis.com).
"Especially now that Y2K spending is over, corporations have a mandate to establish e-commerce and to reduce customer churn and to cross-sell and up-sell products via online payment," says Joseph Marino, Internet commerce analyst for Current Analysis. "The pay-anyone holy grail will probably manifest through portals, because portal brands like Yahoo!, Quicken, AOL and MSN have power to attract, while nobody is going to his utility's web site, unless he is really bored."
Telecommunications, utility, insurance and other billers currently spend upwards of $40 billion annually to process paper bills, according to EBPP software developer Just in Time Solutions (www.justintime.com).
To cut those costs, many telecom companies are assessing EBPP systems. Most plan to launch EBPP initially using a direct-to-customer model, either over their own branded web sites or via emerging billing application service providers (ASPs) that enable the biller to brand and control the outsourced EBPP site.
However, if they expect to convert a substantial portion of their customers to online paying, all billers may need to find ways to develop and control their own EBPP systems while also finding paths to cooperate with and leverage the drawing power of multiple, cross-industry bill payment portals.
According to some industry players, a set of technical standards designed to combine direct and portal approaches may have arrived in the form of the Online Financial Exchange (OFX) standard.
Portal Power
Over the past year, the number and flavors of pay-anyone portals have grown. Denver-based TransPoint (www.transpoint.com), a venture of Microsoft Corp. (www.microsoft.com), First Data Corp. (www.firstdatacorp.com) and Citicorp (www.citibank.com), has attracted scores of banks, utilities and telecommunications billers, including GTE (www.gte.com) and BellSouth Corp. (www.bellsouth.com) to its EBPP consolidation service. That service is available via Microsoft's MSN Money-Central PFM services web portal (www.moneycentral.msn.com). With a similar strategy, Intuit Inc. (www.intuit.com) and America Online Inc. (www.aol.com) agreed last November to leverage Intuit's Quicken suite of PFM products to create a bill tracking and payment service on AOL, which boast's more than 20 million users. Also, by last November, Princeton eCom Corp. (www.princetonecom.com) had racked up 280 financial institutions in its Pay Anyone service. In December, leading online payment processor CheckFree Corp. (www.checkfree.com) had agreed to acquire Internet billing and statement software application provider BlueGill Technologies Inc. (www.bluegill.com) to expand what it can do for more than 400 banks, 77 billers and 3 million consumers using its services.
Graph: Thin Consolidator
Competing for consumers and billers, but also cooperating on standards, leading portal and bill consolidation players including CheckFree, Intuit and Microsoft have cooperated in developing OFX, a set of financial data exchange protocols emerging from a growing alliance of software, hardware and service companies (www.ofx.net). OFX initially enabled data exchange between consumer PFM systems and banks and now, through a model known as "thin consolidator," enables individual billers to distribute condensed bill summaries to banks and other bill consolidation sites around the web, any of which is empowered to process payments.
Spectrum EBP LLC, the latest venture to back OFX, includes 11 banks and is led by three of the world's largest institutions representing some 60 million customers: The Chase Manhattan Corp. (www.chasemanhattan.com), First Union Corp. (www.firstunion.com) and Wells Fargo & Co. (www.wellsfargo.com). Current Analysis' Marino expects Spectrum "will launch some version of the service in February, targeting the top 10 to 15 markets where online penetration is highest, and become a driver of portal consolidation with OFX."
In December, Wells Fargo successfully completed OFX connection certification of its own billing and payment operations with the wholesale Spectrum hub portal.
A month later, First Union partnered with Derivion Corp. (www.derivion.com); Derivion to provide EBPP to small and medium-sized billers using both Derivion's inetBiller service offering and the Spectrum partnership. Derivion claims it can get billers up and running in 30 to 60 days, including designing the online bill, setting up interfaces to the existing billing system, presenting the bills, promoting the service, and launching the customer enrollment process. Baltimore Gas and Electric Company (BGE) of Baltimore, Md., a long-time customer of First Union, has already contracted with Derivion to implement inetBiller.
According to Brian Valente, marketing vice president for Just in Time Solutions, supplier of EBPP software components to Spectrum and individual billers including AT&T Corp. (www.att.com), OFX is catching fire because it offers a workable compromise between the biller control inherent in the direct model and the consumer reach inherent in the distributed portal model.
Just as electronic PFM systems like Intuit's Quicken have led millions of consumers to change fundamental behavior around paper checkbooks and paper personal investment portfolios, EBPP is now drawing people away from paper bills, says Valente. Just in Time research, he says, shows that consumers want a single "electronic mailbox" where they can sign up for all bills, access them with a single name and password, and handle all payments.
However, Valente adds, such a scenario appears to run against the typical biller's wish to "control the conversation" with customers. That is the EBPP conversation through which the biller can promote other products, offer discounts and otherwise personalize services for the purposes of customer retention and service revenue expansion. Because emerging EBPP platforms tie into the biller's customer care systems, direct presentment of EBPP also extends personalization by enabling customers to submit address changes, trouble tickets or requests for account credits electronically.
It is this kind of personalization power that is most touted by such EBPP software providers and service bureaus as Aptis Inc. (www.aptissoftware.com), a subsidiary of Billing Concepts Corp. (www.billingconcepts.com); DCA Services (www.dcaweb.net); Derivion; Info Directions Inc. (www.infodirections.com); Teleflex Systems Inc. (www.teleflex.com), WebEasy Inc. (www.webeasy.com) and Just in Time.
However, because EBPP promises the biller increasing savings on bill processing as the number of users increases, the biller also wants as many of its customers to adopt EBPP as possible, a goal the portals could aid.
OFX offers "the best of both worlds," Valente says, because it not only distributes a bill summary to consolidators for payment, but also provides automated links back to the biller's site for detailed presentment to the customer, who is there available for biller promotions. "For recurring bills that don't change much, the customer may not seek the details, but even then [when the customer looks no further than the consolidation portal], the biller accrues cost savings," he says. "For complex bills like telecom, we've found a direct correlation between typically variable bills and the desire to actually view the bill."
With OFX, say Valente and others, the portal becomes primarily another option for payment, while presentment remains the purview of the biller's site.
"Even with OFX, the biller still has the need for robust presentation, since OFX is primarily a payment convenience vehicle," says Rick Nagel, vice president of sales and marketing for DCA Services. "And with many consumers reluctant to trust the Web, there are still issues around third parties earning trust."
Conversation Control
With or without distribution of billing data to portals via OFX, the two key selling points of EBPP remain in effect: first, dollar savings to the biller on bill processing, collection errors and customer care and, second, the ability to personalize and promote services.
According to industry officials, up to 80 percent of customer service calls are bill related, and several sources pegged those telephone call center costs at $5 to $8 per customer call. Through substitution of those calls with emails, EBPP could cut those costs to pennies per query. Further, because EBPP offers a more fluid, real-time system than paper for keeping records up to date and accurate, EBPP services like Princeton eCom claim error rates of under 1 percent.
Yet such savings may pale in comparison to the additional revenue that a biller can drum up through the personalized promotion, discounts and customer care. EBPP's potential for personalization, particularly with business to business customers, may be limited only by the biller's imagination.
For example, says Just in Time's Valente, for a small law firm, a telco could present a bill that includes subtotals presorted according to each client of the law firm.
"The direct model is easier, because the biller knows his environment and faces no third-party clearinghouse integration head-aches, and the biller can decide how much he wants to make available to the customer," says Terry Burnside, vice president of the Internet development group at Aptis, 27-percent owner of Princeton eCom.
For business-to-business customers, the hierarchical structure of Aptis' TotalBill database system can scale up to hundreds of cost centers, allowing a corporation to bill internally to every department or user. "Particularly in telecom, convergence doesn't make billing easier," says Burnside. "Demand is actually to break out bills even more.
Indeed, the flat-rate billing model dominant in Internet services may soon be on its way out, as the Internet Protocol Detail Record Working Group (www.ipdr.org)--an an alliance of major hardware, software, services, billing, consulting and database companies formed last July--issues IPDR standards for collecting and exchanging data call information, modeled on the call detail records that supply the meat of telephony bills. With reporting on IP traffic measured in packets, megabytes and content type in hand, "service providers can find out what they're really selling, and Internet bills can be based on usage," says Burnside, whose company is an IPDR member and offers both Internet and telephony billing platforms.
"OFX is here to stay, but I think the direct model will always come first, because billers need to keep control of customer community," he adds. "If you have the potential to capture an audience on your own web site, you're not going to give that away."
For that very reason, credit card companies may be slow to join the portal wave, says Current Analysis' Marino. "Banks, who are major credit card issuers, may well find a way to bring credit card payment into the consolidation picture, but credit card companies know things like what you bought your daughter for her birthday, so that's a lot of valuable information to protect."
With e-commerce and EBPP, similar consumer intelligence can be wielded by telecommunications carriers, he says. "On its own site, a telecom company can catch you and say, 'We see this number of calls to this Chicago area code, and we can offer you a discount on those calls,' and you may enjoy that, because your daughter just started college there. So the ability to personalize to raise retention is there, but to do that, the consumer has to come to your site."
Beat 'em, Join 'em
If telecommunications service providers were to remain the only billers offering EBPP, adoption of the direct model alone would remain a no-brainer. That, however, is already not the case.
Like other billing application providers, Derivion, a partner with Intuit, is targeting not only telecommunications, but also cable, utility, insurance and financial services billers. Princeton eCom claims a growing number of cross-industry customer service outsourcers among its customers. Nor are these multi-industry billers all small. Baltimore Gas & Electric, for example, serves 1.2 million customers. Add to that the swelling ranks of PFM products now going online to portals. Intuit's Quicken.com claims a potential EBPP audience of 14 million current users of Quicken PFM software, and major portals including AOL, MSN, Spectrum and Yahoo! are positioned to draw millions more. In a late 1999 report, Current Analysis underscores the need for the banks themselves "to establish content relationships with most major Web destinations (PFM, portals, online home banking) to attract enough billers to the service that, in turn, would make the service attractive to bill-paying customers."
With so many banks and portals entering the pay-anyone race, "the reach for a biller will depend on its working with a range of sites," says Just in Time's Valente. "The OFX model allows consumers to choose where they pay their bills."
To accommodate both the direct and distributed models, EBPP software providers are developing modular systems. For example, Just in Time's Billcast server software package is broken into a baseline product with separate modules for payment, translation and distribution riding on top. "Billers typically launch and test in the direct model on their own sites, and they can then add the module for distribution to any range of OFX compliant consolidators," Valente says.
"As electronic billing accumulates more than two or three bills, consumers will be more willing to act," but most billers will need to maintain both models, he says. While consumers may value bill consolidation enough to pay all their bills electronically at one site, business customers value not consolidation but the ability to analyze bills for sophisticated accounting.
The cross-industry bill consolidation trend may be hard to buck, at least in the consumer market, if banks and other entities succeed in establishing a thin consolidator footprint. Indeed, for high-volume consumer EBPP, OFX "could become something to leverage to simplify collection for telcos," says DCA's Nagel. On the other hand, he adds, while "carriers will offer discounts to people paying online, the portals may charge the consumer for the aggregation and payment services, so many consumers may prefer the direct model."
For now, analysts expect lots of EBPP activity this year, but believe with so many industry agendas in play, a final solution will take a while to surface. "Telecom alone is already a bill consolidating force, with local, long distance, data and other services," Marino says. "Online billing across multiple industries will heat up in 2000, but despite the excitement, you probably won't begin to see where things really are going for another 18 months."
Peter Lambert is features editor for PHONE+ magazine.
