One of the more interesting aspects of Internet commerce is how it amplifies and sometimes distorts worldly concerns.

For instance, many of the same people who think nothing of throwing credit card receipts in the trash have expressed reluctance to send card numbers over the Internet.

Now, as such concerns are addressed and more electronic transactions begin to flow, people are turning their attention to privacy issues as they relate to on-line bill presentment and payment.

The nation's big billers-utilities, telephone companies, credit card issuers, insurance and brokerage firms, mortgage banks, and more-all are eyeing the benefits of on-line billing. They, of course, stand to save millions of dollars through a streamlined receivables process and better cash management.

But of equal interest to billers are the cross-selling and marketing benefits of on-line bill processes.

Once bill-paying customers are at a biller's Web site, they can be presented with all kinds of loyalty-building features, including specially tailored services and targeted pricing.

But behind this apparent largesse, one should beware. Privacy risks can enter the on-line billing equation-particularly when third-party "concentrators" get involved.

Concentrators exist in many forms. They can be banks, software companies, or computer services specialists. By delivering bills and processing payments for numerous billers through their Web sites, these companies aim to give consumers one-stop shopping for satisfying recurring payment obligations.

But some billers have a problem with the concentrator model because it eliminates many of the biller's customer-loyalty-building opportunities. When paying bills, the customer sees the concentrator's logo and messages. The biller becomes just a name on a list.

More importantly, bill concentrators can raise privacy concerns that might stymie consumer acceptance of on-line bill payment.

The issue of who owns the information gathered through a Web site and who is responsible for protecting consumer privacy is muddled when concentrators get involved.

Consumer information may be voluntarily given, but it may also be collected through click-stream analysis, actiongraphics, and more. What part of a Web site does a person tend to visit first, and what is bought? What bills does a consumer pay first, and which payments are made late? All these questions can yield information useful to concentrators and billers alike.

But customers like to have some control over who is using information they consider personal. And-as demonstrated by the negative press that hit Experion when the company sent credit reports ordered through the Internet to incorrect addresses-it does not take much to set off a hue and cry from the public.

There essentially are three ways to protect consumer privacy on the Internet: self-regulation by companies that hold or gather consumer information, creating technology that somehow regulates privacy, or government intervention.

Most companies would favor some combination of the first two, and many elected officials would as well.

When embracing the payment concentrator model, billers essentially give up the opportunity to engage in self-regulation. All that stands between a biller and a posse of irate customers and lawmakers are a contract and trust that the concentrator will not abuse the privacy of consumers.

Besides forgoing self-regulation, billers also give up the ability directly to install stronger security measures that will help protect their customers' privacy.

Contracts notwithstanding, a biller must ask itself how far it can trust another company always to do the right thing on its behalf. It also must ask whether the concentrator can be trusted to be in compliance and error- free.

This is no time to gamble. The legislative hawks are circling. Internet bill presentment and payment are best practiced close to home, at a biller's own Web site, under the biller's own prudent jurisdiction.

Technologies exist today to support the biller-direct model. If there is a need for consolidation, let it be at the consumer's Web-connected PC, or so-called Webtop.

Recent advances in secure Internet payment processes and software, including electronic checks, have placed nonproprietary and inexpensive payment capabilities in the hands of consumers.

All the bill-paying customer needs is a browser and Web access. And all the biller needs to do is deploy electronic cash register software that can accept electronic checks on its Web server platform. The cash register uses advanced encryption to securely deliver electronic fund transfer requests directly to the biller's bank for processing.

Cash register software also supplies the electronic payment information a biller needs to update its accounts receivable system and post the payment.

To make this even easier, leading browser software packages, including those from Microsoft Corp. and Netscape Communications Corp., feature bookmark features that let customers group their obligations in one payment folder on their own Webtop, instead of relying on a third-party payment service.

Even newer technology lets Web users "subscribe" to specific Web sites, such as their utility's, their phone company's, etc. Once subscribed, billing information can be downloaded to the customer's PC at predetermined intervals, providing an "off-line" medium for viewing payment obligations where the information is constantly updated.

When you combine these new technologies with the added value that bill payers derive from paying directly at a biller's site, the consolidation offered by concentrators becomes a rather deflated selling point. Mr. Crone is vice president and general manager of Cybercash Inc., a payment technology company based in Reston, Va. Mr. Hudson is a partner in Sheppard, Mullin, Richter & Hampton, a Los Angeles-based law firm.

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