InformationWeek

October 23, 2000

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Online Bill Payment: Ready To Break Through?

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More on online bill payment:

Network Computing: Handling electronic bill payments (09/18/00)

Network Computing: EBPP providers jockey for big payoff (09/18/00)

TechWeb Finance: Paytrust to mergewith PayMyBills.com (08/22/00)

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Ron Averett, president and chief operating officer at Princeton eCom, says his company is in a unique position to take on CheckFree and spur consumer online bill payment. Princeton eCom not only helps support a biller's bill-payment presence on the Web, it also lets users pay bills over the telephone, Averett says. "That's the real differentiator," adds Averett, who points out that Princeton eCom serves as an application service provider of sorts to bill distributors such as UPS.

The ASP model is gaining popularity in the consumer online bill-payment world. For example, Derivion offers online billing services to billers for much less than they would pay to build their own. "It significantly brings down the cost of entry" to an affordable $20,000 to $30,000, says Read Ziegler, chief marketing officer at Derivion. Ziegler says most billing solutions cost from $250,000 to $7 million initially.

Turning to an ASP also means that billers don't have to integrate online billing into existing billing systems, Ziegler says. What's more, an ASP can help billers reduce their time to market with an online-billing service.

Aggregation is another important piece of the online bill-payment puzzle yet to fall into place. While Gartner's research shows that most online bill payers prefer to use individual billers' sites, that will change as the aggregation of bills in one place proliferates, such as at a bank Web site. The benefit for users is obvious: no moving from site to site in order to pay bills. Paper bills could become a thing of the past.

Nearly every bill-payment company has some stake in aggregation. American Express, for example, has a Bill Center on its Web site where customers can see all their bills. VP Mentis sees billers partnering with each other and with online billing solutions providers to deliver aggregated billing. American Express is working with PayTrust toward that end, he says.

Standards are one hurdle blocking aggregation. Many billing solutions used today sprung up in a proprietary world. But for aggregation to truly come to pass, vendors must settle on standards to accommodate billers. Some of those issues will evaporate as the Extensible Markup Language expands beyond simple transactions.

Financial Fusion Inc., a subsidiary of Sybase Inc., has started offering account aggregation to banks. A maker of complete financial solutions, Financial Fusion says users want all account information, including E-bills, in one place. Financial Fusion recently signed a deal with First Tennessee Bank to provide the technology behind the company's banking, bill payment, and customer-care initiatives.

In anticipation of online bill payment's ascension, even the U.S. Postal Service is jumping into the game. For $6 a month, a user can send 20 transactions online. An unlimited number of transactions can be had for $4 a month and 40 cents per transaction.

It's in the Postal Service's best interest to make online bill payment work because its traditional mail business is likely to be eroded by online communications. The Postal Service expects its $35 billion first-class mail service to begin to drop off in 2003. In a survey by online human resources site Vault.com, 80% of the 1,004 people surveyed say they use E-mail in place of the Postal Service.

While some may shudder at the idea of the folks who brought us snail mail and legendary delivery glitches handling bill payment, the Postal Service's model merits consideration. It has many of the elements that critics say must be in place before online bill payment becomes ubiquitous, such as presentment and aggregation.

Just when the Postal Service, or any other billing service, will make serious money from consumer online billing remains to be seen. What's clear, though, is that billers and systems providers can't afford to dally. International Data Corp. expects that 14% of all bills will be paid electronically by 2004.

The push will come from banks that realize online bill payment has moved to must-have status. Says Saks' Rogers, "our competitors will offer billing on the Internet."