Electronic billing technology is not exactly long in the tooth as financial services go. But, in Internet time, five years is supposed to be more like 20, and both the industry and consumers have had ample opportunity to look at what the technology has to offer.
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Yet, like most new services, e-billing got off to a slow start. As the technology appeared, banks were still focused on making their Web sites transactional, never mind offering bill presentment and payment online. Consumers, meanwhile, needed to be further convinced that banking via the Internet was feasible. At the time, viewing and paying their bills online wasn't just a secondary issue; it was a non-issue.
Things have changed. According to Stamford, CT-based Gartner, more than 30 million people use e-billing services today, and the firm expects that number to reach 100 million by 2005.
Impressive figures, yes, but when it comes to where these users are accessing their bills online, the picture changes slightly.
Sixty percent of respondents to a Gartner survey said they go directly to their billers' Web sites to access their bills-not to their financial institutions' sites. That's a telling number, perhaps, at least in terms of lost opportunity. But Avivah Litan, a Gartner vice president, suggests that U.S. banks needn't worry that their bank competitors are beating them to the punch: "Since when do you go to your bank to get your bills?" she asks.
In other countries, where the banking systems tend to be more consolidated, consumers are growing accustomed to banks' role in electronic bill presentment and payment (EBPP). In the United States, however, people who use the service are much more likely to go to the billers' Web sites to review and pay their bills.
Gwenn Bezard, an analyst with Celent Communications, also sees some cultural differences in the uptake of e-billing technology. Europeans, he says, use direct debit a good deal. As a result, it is only natural that banks there play a greater role in consumers' billing practices.
Bezard says direct debit is a more passive payment method than e- billing proper, as bills are paid with limited customer interaction with their banks. Banks in America, meanwhile, seem more intent upon pushing e-billing rather than direct debit because e-billing services provide better cross-selling opportunities through banks' Web sites.
As far as Gartner's Litan is concerned, banks have missed the e-billing boat.
"They didn't take a direct interest in it," she says. "They never worked with CheckFree, for example, to make the system more easy to use."
When one considers the amount of trouble consumers have to go through to have their bills presented at their banks' Web sites, it's no wonder consumers prefer the biller-direct model. To further complicate things, most banks only offer e-bill presentment to people who already use their bill-pay service.
"Twice as many people are viewing their bills online than paying them online," says Litan. "Banks went about this all wrong."
Conversely, today's "bothersome" method of joining a bank's e-billing program does offer a benefit to the financial institution in terms of customer retention. After all, who wants to set up everything all over again to do e- billing at another financial institution? Still, the long-term value of such an inherently negative incentive is dubious at best.
"Part of the problem is that banks are going about it as a stand-alone service," says Aaron McPherson of International Data Corp. He says e- billing needs to be part of banks' broader online banking process, including account aggregation.
"It definitely seems like the biller-direct model for now is the best," McPherson says. "But consumers will respond well if they can consolidate a lot of their bills at one site."
Most industry insiders agree that aggregation still has a ways to go.
"The presentment model hasn't succeeded because there's no complete
solution available," says Celent Communications' Ariana-Michelle Moore. "And until most billers present their bills online, this won't work."
However, the days of comprehensive aggregation programs may not be far off, according to Hans Mykelbust, the solutions strategy manager of Metavante's electronic presentment and payment division. He says banks are the ones getting the billers involved in e-billing in the first place.
"Lots of times," Mykelbust says, "the banks are promoting this for their commercial customers, who are billers. Banks are trying to tighten their relationships with billers to build up adoption and demand for this service for when they offer it through their Internet banking products."
He agrees that the biller-direct model is very successful now, but gradually there will be an upswing in the banking model as financial institutions set up portals.
So why are we not at that point today?
IDC's McPherson acknowledges his surprise that e-billing technology has not expanded more. He attributes the delay to a lack of coordination among banks. This coordination was one of the reasons the Spectrum e-billing consortium was established by Wells Fargo & Co., J.P. Morgan Chase & Co. and First Union Corp. (now Wachovia). The founders of the group believed that, with a bank- centric model, financial institutions would be more willing to work together to create e-billing standards. Although Spectrum is beginning to gain steam at last, the consortium has moved at a snail's pace thus far.
"It's an involved process to set this up," McPherson says. "Different threads need to come together to make e-billing work."
On the plus side, EBPP is a technology that is seeing increasing demand by consumers. Its growing popularity is due in part to the fact that people aren't required to change their behavior significantly when switching to e- billing, says Litan. The fewer changes in consumers' habits required by a new product, the more appealing it is.
This is probably why the biller-direct model has gained such popularity. There were bumps along the way though. Initially, billers altered the appearance of electronically presented bills from their paper counterparts. Realizing this was not going over well with customers, they changed the look of the e- bills accordingly.
"When the bill providers kept the (appearance of the) bills the same online, there was more adoption," says Metavante's Mykelbust.
Better marketing will also fuel the adoption of e-billing, as demonstrated by industries that are doing better with the technology than others. Clearly, banks need to be more aggressive in their campaigns. In fact, everyone interviewed for this story agreed that card issuers and utility companies are doing better at selling e-billing because they are good at listening to-and selling to-their customers. You need only look at your next credit card or telephone phone statement to see the e-billing promotions.
As this publication and many others have reported, the anthrax scare brought a great deal of public attention to electronic billing. That awful threat undoubtedly contributed to the momentum e-billing services demonstrated going into 2002.
"Bill pay was well on its way because of the card industry," says Litan. "But people (in the Gartner study) said they signed up for e-billing because of the anthrax scare."
Gartner findings show that 2% of people using online billing today began doing so soon after the Sept. 11 terrorist attacks, while another 4% increased their usage.
"Two percent is not insignificant considering the relatively small (total usage) numbers we're dealing with," Litan says. "(The anthrax threat) moved people into e-billing more immediately because the Internet looked safer and more reliable."
Celent's Bezard agrees, saying it was the reliability factor more than anything else that helped spur adoption. "The interruption of the paper check process played a major role in the banking industry to make people aware (of e- billing and e-payments)." Prior to Sept. 11, the industry was comfortable with the paper check process. It is a strong system, Bezard says, but it is also vulnerable in certain ways.
After all, isn't one of the primary reasons for using e-billing and e- payments to eliminate the use of paper in statements and checks? Yes, but that hasn't happened yet.
When billers stop sending paper statements to customers who are actually enrolled in e-billing and when banks are ready to stop selling checks, then maybe some of the cost savings from e-billing will become manifest. So, in the final analysis, e-billing is more about customer retention at this point than anything else.
"E-billing was never really a cost-savings initiative for banks," says McPherson. "It was a new source of revenue and a way to bind customers to the bank."
Billers themselves also view e-billing as a customer relationship strategy. They're certainly in no hurry to eliminate paper statements, which typically are used for advertising. The statement is often the only contact billers have with their customers, and McPherson says most of these billers don't think advertising online is up to snuff yet.
Despite any perceived shortcomings, e-billing technology is earning its place as a core capability for the majority of financial institutions and billers.
With an anticipated slowdown in many areas of financial IT spending projected for this year, the value of EBPP technology may help it escape the budget-cutter's knife.
"E-billing use doubled during the downturn," Litan observes, "and will only go up."
