InformationWeek
Defining The Business Value Of Technology
September 13, 1999
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Consumers lack incentives and vendors wrestle with interoperability as online billing struggles
When online billing emerged a couple of years ago, proponents said merchants would soon be saving most of the cost of printing and mailing paper statements and processing the checks that were mailed back. But companies venturing into this area of E-commerce are finding out that online bill presentation has not lived up to its promise. The savings are elusive, the technology is complicated, and consumers and companies are not exactly screaming to receive their bills through their PCs rather than their mailboxes.
"It's complicated because there are many different variables you have to interweave," such as business rules and data formats, says Barbara Macy, invoice manager at aerospace manufacturer Hamilton Sundstrand Corp., which started an Internet billing pilot last year for business customers that is still getting off the ground. "Some of the customers were slow to warm up to it."
The two main companies selling online billing technology and services, CheckFree Corp. and TransPoint LLC, no longer promise big cost savings. That's because potential users of Internet billing realize that savings can be hard to achieve after they buy the necessary technology and integrate their legacy billing systems with the Internet.
"It is actually a cost" in the short term, says Dennis Jawor, director of treasury operations at Consolidated Edison Co. of New York, which began using the TransPoint system in May. About 1,000 customers are using it to pay their utility bills, but the company won't break even until that number reaches 100,000 people, a level Jawor says it hopes to reach within a year. "It costs us 50 to 60 cents to send a paper bill and process a payment," he says. "This service has to come in at half that cost and we will get back the application and integration costs."
CheckFree and TransPoint provide technology to billers that lets them present data from their legacy billing systems on the Internet, and both vendors have various services to host billing data for companies. Once a company has done that work to integrate their information systems, they send their bills to CheckFree or TransPoint, which make them available directly to consumers via their own Web sites or pass the invoices off to various billing consolidators, such as an Internet portal or a bank.
CheckFree, which was founded in 1981, had been serving people who receive a paper bill and then choose to pay online. With the explosion of the Internet as a medium for financial management, the company naturally moved to the online presentment side of the business. It's E-Billing technology is now being used by more than 20 companies, including Chase Manhattan Corp. and MCI WorldCom. Another 30 or so are in various stages of deploying the system.
The vendor reported preliminary earnings of $10.5 million on revenue of $250 million for the year ended June 30. The company's finances took a beating this summer when its stock dropped nearly 24% on June 23 after three banks--Chase Manhattan, First Union, and Wells Fargo--announced an online-billing venture that may rival CheckFree and TransPoint.
TransPoint started as a joint venture between Microsoft and First Data Corp., a leading processor of credit-card payments. Citibank joined as a partner last year, bringing its experience and network for handling many forms of payments. So far, TransPoint has five billers in production, including Con Edison and GTE Corp. Ralph Young, executive VP of marketing at TransPoint, says about 15 companies will be live by Nov. 1 and that 23 billers are committed to the TransPoint Biller Integration System. As a private company, TransPoint doesn't release financial results.
Photo by Dwight Cendrowski
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aying bills is painful--and companies that specialize in sending out bills are learning that doing it over the Internet is more of a chore than they originally thought.
With cost savings still rather elusive, the main selling point for online billing is the benefits of having interactive relationships with consumers and the prospect of selling them additional goods when they come to pay their utility or credit-card bill every month. "The cost savings aren't great," says Ron Kerver, E-commerce director at Consumers' Energy Co. in Dearborn, Mich., which uses CheckFree's technology. About 4,000 of the utility's 2.3 million customers are viewing and paying their bills online. "We're offering our customers the added convenience," he says, adding that online billing is a way to learn how to interact electronically with customers.
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