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July 27, 1998

Payment By Electrons

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The liberated statement data is then stored in a database. Storage methods vary, but all essentially provide a relational index to the extracted data for retrieval. Some store detail data in relational forms, while others store the data in a structured object or other proprietary format within the relational database.

Special Delivery
Once billing data is extracted, it can be delivered to the customer in many ways, depending on the needs of the biller and the customer. There are two scenarios for how the rest of the transaction is completed: directly or through a consolidator.

In the first scenario, the biller has a direct relationship with the consumer for bill presentment. The consumer might also be involved with the bank that handles the transfer of funds. In this case, it's the biller's responsibility to provide the infrastructure through which bills or statements are presented. The benefit associated with this scenario is that billers maintain contact with their customers.

In the direct-billing model, there is no intermediary between the biller and the customer to format and present billing data. Electronic payments also lack a natural intermediary in the direct-billing model, unless payments are made by a secure credit-card transaction or through a third party, such as a bank or CheckFree Corp.

Applications can deliver billing information to the customer by push (an E-mail message), by pull (a secure Web application or proprietary software), or by a combination of the two. In the case of a Web billing application, the data extracted by the parsing process is exposed through a Web application development interface.

Maintaining a direct relationship with the customer doesn't necessarily mean building the application yourself. For example, many service bureaus that handle outsourced printing of payroll and billing are also handling the outsourcing of electronic-billing applications.

In the second scenario, a consolidator--such as MSFDC (a joint venture of Microsoft and First Data Corp.) or CheckFree--provides an outsourcing service to the billers. The consolidator furnishes the infrastructure and the technology that are required to assist billers in making their bills and statements available to their customers.

Today, such consolidators host the bills on their Web sites; in the future, the Web sites of the banking institutions will be the central place for hosting the bills, with the consolidator acting behind the scenes for processing the transactions. The advantage of this approach is that the billing organization need not be concerned with developing the infrastructure or the expertise to process the transactions.

Even if a biller uses a consolidator to perform the electronic-billing function, its billing data still needs to be parsed and extracted as it would in a direct-billing application. The main difference is that the Web server application of the direct model is replaced by a proprietary application server that formats data for the consolidator--the Biller Integration System for MSFDC, or an OFX server for CheckFree. The billing information is then presented to customers through their bank's electronic-banking interface, or through another consolidator's service, such as Intuit.

Most For The Least
A third scenario that may emerge is consumer-side consolidation. In this case, the consumer connects to infrastructure provided by billers and consolidators through desktop, enterprise resource planning, or other software related to payment. Rather than relying on multiple proprietary and Web interfaces or a single bill consolidator, the customer could use the method that provides the most information for the least amount of money. This route is probably most appealing to personal financial software companies such as Intuit.

Conventional wisdom has it that electronic billing will take off only when customers can pay most of their bills online. This would favor the consolidators. However, since most consolidators limit the amount of billing information that can be passed to the customer, direct billing will probably remain important--especially for customer service and direct marketing.

Jeetu Patel is the chief technology officer and Linda Andrews is a technical writer at Doculabs, an independent product-assessment and advisory firm. They can be reached at 312-433-7793, or at info@doculabs.com. The company's Web address is www.doculabs.com. Sean Gallagher is managing editor of InformationWeek Labs.

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Read sidebar, "Testing The Billing Tools."