by H.R. Damon Gonzalez, Jr.
Electronic Bill Payment and Presentment (EBPP) is the popular label given to a two-part scheme to distribute bills electronically and have them also be paid by electronic means. In the ideal world of EBPP, your insurance company, mortgage company, or power company (biller) will not create a paper bill but rather will get it to you in some electronic way. You (the payor) will, in turn, never make a paper payment. Instead, you effect an electronic funds transfer to the billerís bank account from your checking account.
The ideas are not completely new. The ability to pay bills electronically, Electronic Bill Payment, has actually been around for quite some time. The earliest programs were introduced almost fifteen years ago. Whenever it is available, this (second) stage of the EBPP process is part of the home-banking program offered by your financial institution. Although slow to catch on, adoption rates are accelerating.
On the other hand, relatively few bills are delivered electronically (at least in the Americas). Presentment, as this (first) stage is sometimes called, is fairly new on the block. Nonetheless, tying the two stages together into a seamless event for payors and payees is rapidly becoming the Holy Grail of electronic banking. Increasingly EBPP is also considered to be one of the keystones of the New World of electronic commerce.
EBPP supporters believe payors and payees will be the beneficiaries of this greatly streamlined process. Both will benefit from lowered costs. Cross-selling and other revenue opportunities for banks and billers are predicted to be significant. Only the traditional intermediaries have cause for concern.
Most importantly for the moment, EBPP has suddenly gotten to be the hottest new topic in financial service delivery to both consumers and the corporate customers of banks. The questions are: "How will it be made to work?" and "When will it become commonplace?"
The Inner Workings
At first blush, it is tempting to think that one, and only one, architecture can succeed in serving the universe of candidates for EBPP. However, an "electronic bill payment and presentment life-cycle" can actually take several forms depending on the inclinations of the players and the business model most suitable to each. In fact, timing and practicalities of the moment have given rise to various formulas for accomplishing EBPP. A good starting point for reviewing these scenarios is to understand the players and their roles. There are a number of both.
The Players
Note that the players are not necessarily relegated to a single set of unchanging roles with clear boundaries between each. A bank, for example, can be simultaneously a biller (your loan), an aggregator (all its loans), and a portal (supplier of a network). The permutations can be numerous.
EBPP Architectures
As weíve said earlier, there are several ways to do electronic bill payment and presentment. Biller-direct, e-mail bill delivery, thin consolidator, and thick consolidator are discussed below. Each has advantages and each has drawbacks. In the near term, expect that there will be instances of each undergoing testing trials sponsored by banks, billers, and aggregators alike. Here are some possible scenarios:
Biller direct. This approach is the fastest to implement, gives billers control over the bill, and allows them to maintain contact with the customer. This approach, already used by billers like AT&T and Discover, forces consumers to log in separately at each companyís site to review bills and authorize payment. This model will work well for corporate customers.
E-mail bill delivery. In this model, a consumerís e-mail box is the aggregation point. Billers send summary bills with an embedded URL link that brings consumers to the billerís site to review and pay the bill. Although this model improves on the biller-direct model by adding a single aggregation point, it is still insufficient. Most summary bills will be limited to text to accommodate consumers without format-able HTML e-mail clients. In addition, consumers will still need multiple log-ins, and there is no link to the primary cash account.
Thick consolidator. With this model, billers send summary and detailed billing data to an EBPP processor that forwards the summary items to consumers via a consolidator. Consumers can then view all their bills with a single log-in and check account balances when paying bills. However, because EBPP processors host both detail and summary data, billers fear losing control over the marketing and promotional capabilities of their bills.
Thin consolidator. In this variation on the thick consolidator approach, billers send only summary data to the EBPP processor; detail data is hosted at the billerís own Web site. The differences between thick and thin consolidation will be invisible to consumers. This model-advocated by CheckFree and now supported by TransPoint--stands the greatest chance of success because it offers consumers a single aggregation point for bills, and gives billers the greatest control of their bills.
Last Words
On reflection, it will be easy to see that each of the models for EBPP reviewed here will have both ardent supporters and vociferous detractors. Issues of practicality will run headlong into investment review models and marketing departments.
On the practicality side will be questions of reliability, security, privacy, social responsibility, ubiquity, integration with other financial offerings, availability, and ease of use. In the financial analysis quadrant will be difficult questions around net present value assessments that must consider imponderables such as the durability of transaction margins, the role of critical mass in adoption rates and the costs of massive education.
