InformationWeek
Defining The Business Value Of Technology
|
October 23, 2000 |
 |
Online Bill Payment: Ready To Break Through?
Vendors hope improved technology and lower fees will overcome consumer's reluctance
By Teri Robinson, reprinted from Internetweek
| More on online bill payment: |
|
|
 Send Us Your Feedback |
here aren't enough hours in the day to list the reasons why online bill payment hasn't taken off. Among the barriers: a lack of bill-presentment technology, which has thwarted efforts to move a paper-based, mostly manual process online; consumer ambivalence; and high fees. But proponents of online bill payment say those barriers are about to fall as players in the market up their efforts.In the past year, three models for bill payment over the Web have fought their way to the forefront, with different players dominating each approach, according to a recent Gartner Group study. The models are electronic bill consolidation, total bill consolidation, and biller direct. The last model is by far the most popular.
Electronic bill consolidators such as CheckFree Corp. work as third parties with banks or other bill-payment providers to process payments for consumers. Total bill consolidators such as Paytrust Inc. and CyberBills Inc. offer a place where consumer bills can be consolidated and paid. In the biller-direct model, consumers log on to a biller's Web site directly and pay bills. Saks Inc. and American Express Co. are examples.
CheckFree dominates among electronic bill consolidators with 80% of the market, despite the fact that its strategy is strictly proprietary, leaving room for competitors such as MasterCard, Metavante, Princeton eCom, and Spectrum to create more open distribution networks for E-bills. These companies are behind-the-scenes players that offer electronic bill payment and presentment to consumers through third parties such as the U.S. Postal Service and United Parcel Service Inc.
In the total bill consolidator market, two of the major players, Paytrust and Paymybills.com, said they would merge last August. This left the third member of the group, CyberBills, to fend for itself. These companies accept E-bills from companies such as Princeton eCom and Billserv, and they use financial service providers for distribution. According to Gartner, Paytrust and CyberBills delivered 396,000 E-bills in July, four times the number distributed by CheckFree that month.
American Express, Citibank, and Discover are among the big players in the biller-direct model. Together, the three credit-card issuers have slightly more than 7.5 million users signed to their online account-management offerings, Gartner says--but only 15% to 30% of those are considered active users who visit the companies' Web sites monthly.
The biller-direct method has presumably outpaced the other two models and will continue to do so--at least in the short term--because the applications are free. Also, using the apps is relatively simple, and billers generally update data daily and offer better-than-adequate customer service.
Gartner predicts that the user base in this market will swell to 20 million U.S. consumers by 2002, compared with the 2 million or so consumers expected to follow the consolidator model in the same time period. By 2004, though, the markets will flip-flop, according to Gartner. About 15 million users are expected in the biller-direct market while 25 million will want to pay all their bills at a single site.
For now, though, consumers remain ambivalent about shifting bill payment to the Internet. The Gartner study, based on research conducted on 40,000 U.S. households last spring, says half of the 130 million adults who use the Internet today don't want to receive their bills over the Net. Another one-third aren't sure.
Users' enthusiasm for online bill payment has been dampened by high fees. Gartner says CheckFree makes $4 per user per month; banks generally charge $5 to $8 per month to pay bills online without offering many other benefits, other research has found. While the advantages in business-to-business online bill payment are obvious to the billers--lower cost, a more streamlined process to support E-commerce, a vast reduction of paper, and the elimination of errors associated with manual bill payment--benefits to consumers have been more elusive.
Gartner found that of the Internet users willing to pay bills online, more than half want to see bills presented online. Billers such as Saks are taking that request seriously. Saks teamed with eDocs Inc. to offer bill payment online to customers who shop at Saks and its other properties. The New York retailer will use eDocs' BillDirect middleware.
Saks is among the first billers to move forward with bill presentment. The retailer doesn't view the effort as a move that might one day produce a return on investment; it considers electronic bill presentment and payment a building block for E-commerce. Saks hopes to draw more customers and retain them through online bill payment.
continue on to page 2
Back to This Week's Issue
Send Us Your Feedback
Top of the Page
Featured Microsite
