Despite the touted benefits of ease and convenience, research indicates that electronic bill payment and presentment activity in both consumer and corporate markets is extremely low. TowerGroup, based in Needham, MA, projects that in 2001, less than 1% of U.S. bills will make an electronic "round trip" between biller and payee. Gartner Research, based in Stamford, CT, sees a similar level of consumer participation in EBPP during 2001. Approximately 1% of the adult population, between three and four million American adults, will use EBPP services this year, according to Susan Landry, research director for Gartner Financial Services.

EBPP Delivery
width="175">Methods for Delivering EBPP Services
  • Biller Direct Model—The biller posts the bill on an individual Web site where consumers go to pay the bill.
  • Consolidator Model—Bills arrive at a central Web site where the consumer pays them.
  • Scan and Pay Model—The consumer redirects bills to a company that scans the bills, translates them into electronic format and posts bills on an individual Web site.
  • Aggregator Model—A provider goes to the biller-direct Web site, “scrapes” the bill, and brings it back to a central site where the consumer can view and pay.
  • E-mail Model—Although not a reality yet, this model is emerging. Consumers would receive a complete bill via email. Currently, some EBPP providers send email bill notification, and the consumer clicks on a link to go to the pay site.

Source: TowerGroup

But today's small audience hasn't deterred major players in EBPP, including big U.S. banks. By TowerGroup estimates, larger financial institutions will invest an average of 20% to 25% of their annual IT budgets on electronic billing within the next four years.With an e-billing market that Gartner expects to reach 16 million American adults by 2005, the stakes obviously are growing. Pete Soraparu, executive director of programs for the Bank Administration Institute, describes the future EBPP landscape: "When you have the technology available, all it takes is a combination of putting the markets together around it, and you can make a lot happen pretty quickly."

Bank of America has taken an aggressive approach to implement EBPP offerings, according to a spokesperson. "We really saw the demand for the service growing, and we felt we needed to not only move quickly, but to provide a very robust end-to-end solution, and the way we chose to do that was through CheckFree."

BofA began rolling out the product out last November and completed the rollout this February. The company is investing heavily in the future of EBPP as well. In February, BofA launched a $45 million, two-year campaign to promote online banking and EBPP products. So far, the EBPP program has attracted 870,000 customers, and March e-bill payments totaled $3.6 million, the BofA representative says.

To deliver EBPP services, today's strategy involves partnerships on a multitude of levels. Larger banks use a variety of vendors, including CheckFree, Paytrust, Princeton eCom, Avolent,, Bottomline Technologies and Derivion, to name only a few. The Spectrum consortium, founded by Wells Fargo, First Union and J.P. Morgan Chase, is offering partner banks the opportunity to join its bill-routing operation. Through increasingly complex mix-and-match collaborations, banks are striving to present "best of breed" services; however, no financial institution appears to be leading the pack. "I wouldn't say there's one major player yet just because the volume is so low at this point," says Elizabeth Robertson, senior analyst at TowerGroup and author of a recent EBPP report.

In the field of e-billing vendors, one industry leader is apparent-CheckFree. But even a company with sure footing needs to realize the dangers, says Jim Magers, senior vice president of product at CheckFree. "It's an unusual space in that it looks easy from a distance, but then when you get in and try to do it well, it's surprisingly hard," he says. "We're constantly attacked by competitors wanting to enter this space-some big, some small. And we certainly take them all seriously and do what we can to maintain our market share and our leadership role."

As banks enter the EBPP market, they stand to gain from this expanding network of vendors, especially when courting valuable corporate customers. As more companies consider e-billing ventures, they look to a trusted source-a role that's tailor-made for financial institutions.

Citibank is seizing this opportunity, according to Nancy Goodman, director of electronic bill payment and presentment. "There are so many players. Any one individual biller is looking at setting up contractual arrangements with all the different places that consumers may want to be able to pay a bill. A consumer might want to go to CheckFree, they might want to go to their home banking provider, they might want to go to Yahoo!, they might want to go to Paytrust, and there are new ones every day. So the biller says, 'Oh, my gosh. How am I going to do this?'"
That's where Citibank steps in, Goodman says. "What we're saying to our corporate clients is, 'We understand this is complex. Leave it to us, and we'll take care of it for you.'"

The aim of simplifying the EBPP process was what inspired the creation of Paytrust, says Edward McLaughlin, the company's chief executive officer. "I think this is an environment people try to make complex, and they talk about the standards, and channels and the networks, and all of it. But, if you net it out, paying bills online has to be better than your mailbox. And I think a whole lot of the solutions that have been presented before weren't better than the mailbox."

TowerGroup's Robertson agrees on the method for EBPP's ultimate success. "Basically, the goal is to bring all of a consumer's financial transacting activity into a single, convenient access point."

Given today's models, EBPP may remain a complex realm, at least for the next few years. As more banks enter the arena, greater competition between FIs is sure to follow. But will the future also bring feuds between a crowd of vendors, all scrapping for a bigger piece of the banking action? It's an unlikely scenario, says Errol Hau, CheckFree's director of product marketing.

"I think the market is maturing to the point where there are a lot of niches within EBPP-a lot of segments," he says. "One of the shifts is that EBPP was one thing to everyone, and it was very much presented on what I call a super-segmented level. In other words, there was no segmentation. But now where the competitive battles are taking place are within specific segments. People have carved out areas of specialty for themselves, and that is where their focus is. So if you're not in that segment, then you're probably not going to see a lot of those competitors."

As EBPP gets off the ground, partnerships between banks and vendors provide an important stepping stone. The trend will continue, TowerGroup's Robertson says, but the scenario could change somewhat in coming years. "I think that banks will want to outsource at least certain portions of [EBPP]," she says. "Some of the larger ones may want to control significant portions internally, but that would be in the long run, once there are more significant levels of activity."

For the time being, banks and vendors seem to share a collective spirit, embracing partnerships and following Hau's advice: "We need to work together. It's the only way this is going to happen."

Role Models

Financial services institutions can serve in multiple roles to deliver EBPP servicesFSIs as EBPP Service Providers

  • Consumer Service Provider—The FSI provides front-end services for customers to receive and pay bills electronically. This is achieved through a variety of platforms, including CheckFree and Paytrust.
  • Biller Service Provider—The FSI supplies its corporate clients with services for electronic bill delivery to both consumer and business customers.
  • Biller—The FSI sends its own bills to customers and corporate clients. Examples include credit card bills, mortgage bills and delivery of bank statements.
  • Switch Participant—EBPP switch services function in much the same way that ATMs deliver cash, transferring information through a switch-like network. In EBPP, switch participants include banks, billers, consumers and service providers.

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