One of the growing areas of investment in the financial services industry is bill payment services. The joint initiative from Microsoft and First Data Corporation (known as MSFDC) is one of the new organizations focused on this business segment.
What is Electronic Bill Presentment and Payment (EBPP)? (Yes, it is another acronym to learn):
The creation and delivery of richly formatted bills, statements, notices and associated advertising in an electronic format via the Internet, to consumers and businesses, and the return of payment and remittance information to the biller or biller's agent.
The reason some players in the marketplace are hyping EBPP is because they believe that :
1. it will be a powerful, easy-to-use tool for the creation of richly formatted electronic bills,
2. it has compelling cost savings for billers, as well as revenue opportunities in the sale of advertising space, and
3. it can make the best possible use of the ubiquitous, low cost network to link billers and consumers, the Internet.
While the slow growth of companies such as CheckFree have confirmed consumers' interest, although minimal profitability, the growth and cost of consumer PC-initiated payments has motivated billers to find a more efficient means to receive and process payments and remittance information. The current sense is that there is a compelling business proposition, in that 15 billion bills are mailed annually in the U.S., billers spend more than $10 billion printing bills and processing remittance and payments, and consumers spend more than $4 billion mailing payments back to billers.
In 1997 it was estimated that between 6 and 9% of all bills paid were paid electronically, and with bill payment checks currently representing between 15 and 20 billion transactions a year, this segment represents a large opportunity for movement from paper payments to some other type of electronic payment. With bill paying, and in particular recurring payments (a big portion of the bill pay opportunity for organizations such as MSFDC), MasterCard has its own plans for gaining a piece of this large check market.
MasterCard has announced that it will lower the interchange cost on such business segments as insurance, power and gas, cable TV, and communications so that consumers may pay by credit card and the biller can feel that it is affordable to accept this form of payment. It would appear that both credit and ACH or pre-authorized debit will all be competing for this consumer "payments" segment.
