SEATTLE — Nacha is pushing forward with a program aimed at making online bill presentment less costly for banks to offer their customers.
The Herndon, Va., electronic payments association said Monday at its annual payments conference here that its Electronic Billing Information Delivery Service has shown enough potential to make it more widely available to its members.
The goal of the project, which started as a pilot program in 2008, is to expand automated clearing house transaction volume by letting billers send invoices to customers' online banking portals via the ACH network. Customers can then sign up to pay their bills as ACH transactions.
Whereas banks have to pay a transaction fee to initiate an ACH transaction for their customers in most bill-payment situations, with EBIDS the billing company actually pays a fee. "It does flip the model," said Chris Huppert, senior vice president in the wholesale Internet and treasury solutions group at Wells Fargo & Co. "If I'm cutting a check for a college kid to pay his rent, I'm still offering him that service for free. That's not very smart for us."
A program like EBIDS gets around scenarios in which a biller such as a landlord is unable to accept electronic payments, forcing a customer's bank to more expensively generate a paper check, because all banks are connected to the ACH network.
Wells Fargo and Dollar Bank participated in the EBIDS pilot on the consumer side, presenting bills to their customers. The telecommunications provider Verizon Communications Inc. participated as a biller and JPMorgan Chase & Co. served as the biller bank. The Federal Reserve Bank of Cleveland has been providing the technology infrastructure to operate the program.
Program operators said Bank of America Corp. also is joining.
Through their biller banks, businesses would send bills over the ACH network that typically they would mail to customers in a paper statement or present on their own websites.
Customers would receive the invoice as a message at their online banking site and could opt to manage and pay such bills as an ACH transaction from that site. They also can access full bill information by visiting links included in the ACH addenda field.
The benefit for consumers, supporters say, is being able to manage and pay one's bills from one site instead of logging into several individual billers' sites to check and pay the amounts due. They potentially could have access to more billers because most banks are connected to the ACH network. It also alleviates some of the cost burden banks face in offering bill-pay services to customers.
During the EBIDS pilot, participating biller Verizon paid 10 cents per bill it sent to the customers' bank. It also paid 3 cents per bill to the Cleveland Fed, which operated the EBIDS system. Those fees were in addition to the regular ACH transaction fees Verizon normally pays to JPMorgan Chase.
Huppert said such fees will not make his bill-payment service profitable but will offset some of the costs of offering it. Bob Meara, a senior analyst with the banking research firm Celent, said, however, that EBIDS could represent "the evolution" of bill payment from "a cost center to a revenue center."
"Banks are hungry for fee income," he said. "This is an alternative. Instead of banks paying CheckFree or Fiserv or Metavante or paying their bill-pay provider, the bank now has the opportunity to make a little money with each bill presentment and a little money with each bill payment." It also gives banks an opportunity to strengthen customer ties by serving as the central place for consumers to access most or all of their bills in addition to charging fees to billers.
The fees that Verizon paid were for the pilot only.
Nacha still is finalizing the program's details, but the costs will be comparable to the pilot, said Janet Estep, the president and chief executive of the association.
Fifteen billers also have joined a directory service that The Clearing House Payments Co. LLC, which operates one of the country's two ACH networks, will manage. "We wouldn't be entering into this if there was significant interest from our own banks," said David Fortney, a senior vice president with The Clearing House in New York.
During the two years Verizon participated in the pilot, it conducted 4.5 million transactions, said Angeline DePauw, director of electronic remittance for Verizon. A transaction was defined as enrolling a consumer in the program, acknowledging the consumer was enrolled, presenting a bill and paying a bill.
The jury is still out on whether Nacha can amass enough billers to make such a service cost-effective and whether consumers want to access all their bills through their bank's website. From a consumer perspective, EBIDS faces competition from many providers of personal financial management software programs, which often aggregate a person's bills at one site.
Current bill-presentment products have not taken off like many proponents have expected, according to Estep. "It really isn't meeting the needs of customers who do find it advantageous to see all their bills in one place," she said. "Electronic bill payment is gaining traction but bill presentment still has fairly low market penetration," Estep said.
Pat Thelen, executive director and ACH product executive for J.P. Morgan Treasury Services, said a program like EBIDS can help cut costs by further eliminating paper from the billing process.
