Citigroup Inc., which has spent two years trying to get its large and small commercial customers to embrace electronic bill presentment and payment, says interest has finally picked up in the last six months.
Initially, Citibank executives thought there would be more demand among small and midsize businesses. To its surprise, larger companies have been more receptive.
"Our thinking has evolved on this," said Kevin Tissot, a vice president in receivables management at Citibank. "What we found out was there was a real need for large corporate payers," which benefit more from e-billing systems' cost savings.
Citibank says it has 15 multinational customers in production with e-billing and another 10 getting set up on the system. The customers include British Petroleum and the International Air Transport Association.
Corporate demand is getting a lift from the finding that billers can get a return on their e-billing investment even if e-billing adoption among consumer and corporate bill payers is mild, Mr. Tissot said.
Through its corporate lockbox services, Citi provides payment information back to billers that they can apply to their accounts receivable systems. Mr. Tissot said that is a relatively passive role and that Citi wants to be more active, potentially by helping billers reduce costs by automating the posting and reconcilement of payments and by helping them resolve disputes more quickly.
This can be more important in business-to-business, he said. "When I receive that bill, I as a consumer will most likely pay it. There are a lot more disputes in the b-to-b space."
Dollar amounts are typically much larger and relationships much more complex, frequently involving goods and services delivered to different departments in different locations. When a dispute arises, the buyer may render partial payment or may withhold the whole payment, and in conventional paper billing it may not be clear to the biller what is being paid, what is being withheld, and why, Mr. Tissot said.
A key benefit of e-billing is that information about problems gets back to the biller faster, he said.
"The biller can be notified very early on in the invoice cycle whether there is a dispute," he said. That enables corporate managers to pin down the source of the problem and to deal with it. "Because you can do that within the invoice cycle, you can still get your money by the due date," he said.
Moreover, a bill that is originated electronically is more apt to be paid electronically. Even if the payer specifies a future date for settlement of the statement, the automated clearing house system notifies the biller of the information, improving the visibility of the payment. And when the payment comes in electronically to the biller's bank account, it clears immediately, eliminating the "float," the time that passes from when a payer puts a check in the mail till it clears through the bank.
"We look at e-billing as a receivables product," Mr. Tissot said. "We have this vision of having an integrated receivables solution of which e-billing is one of the cornerstones."
Citibank has offerings for its corporate customers both in the business-to-business and business-to-consumer markets, and in both it is offering to host presentment on its own Web site on behalf of the billers.
Some market-watchers say the Citi strategy is a welcome development in e-billing, positioning the banks themselves to act as consolidators of financial transactions on the Internet. The strategy is also employed by FleetBoston Financial Corp. and such other cash management banks as KeyCorp and PNC Financial Corp. (PNC and Perot Systems Corp. back the BillingZone venture).
But other observers question banks' moving beyond their traditional role of transaction processors to get involved in the complicated relationships between corporations and their customers.
Mr. Tissot said banks can do a lot to build a market he described as being "somewhat in its nascent stages."
"We are looking to provide financial services that serve our customers' financial supply chain," he said. "By presenting an overall receivables solution, we can transition our customers from traditional paper-based products to electronic payments over time. There has to be a transition plan to get paper customers over to the e-billing world. We aid this transition."
Citibank uses software from Bottomline Technologies Inc. of Portsmouth, N.H. Brian Hinton, a Bottomline vice president who oversees e-invoicing products, said that as a consolidator, Citi is "attempting to be the CheckFree of the business-to-business space" - to "consolidate many billers with many payers. We like that model. We share in the transaction revenue with them. It's a win-win for everybody."
Henry Ijams, the managing partner Paystream Advisors in Charlotte, N.C., said the emergence of such payment hubs will help the business-to-business market grow.
In the early stages of a market's development, Mr. Ijams said, "point solutions" are sufficient to connect a single large biller, or a single large payer, with its network of business partners, whether they are suppliers or customers.
But he warned that such an approach "could slow the adoption of the technology over time."
Say you have a second-tier auto supplier such as a fabric company selling to seat manufacturers, he said. "Each of these companies is going to tell me they want me to use their system. As the fabric company tries to make more connections to more of its customers, the process "becomes unworkable after a period of time."
The fabric company would be better off connecting to a single hub that can process invoices and payments for a variety of trade partners, Mr. Ijams said: "The value proposition can be much greater for a small company, because its costs can be much higher than for a large company" relative to sales.
Not everyone is sold on that argument. Avivah Litan, a vice president at Gartner Inc. and the research director of the firm's financial services practice, said companies may want to use a hub to provide connections to many business partners, but "they don't want to put their billing system at the consolidator. They don't want even to put their bill at the consolidator."
What they want, she said, is to deal with one another directly rather than through an intermediary. "You need a place to dispute the bill, and you would do that at the biller's Web site."
In that sense, companies in the b-to-b-space are just like consumer-facing businesses that use the biller-direct model, she said: "The overwhelming majority want to manage that function at their own site to the greatest extent possible."
