Recent criticism of electronic bill payment operations has not shaken the conviction of banks and service providers that the services have consumer appeal.

But the complaints, rooted in the fact that the payments are often paper-intensive on the commercial end and thus error-prone, may spur improvements in such services, observers said.

Consumer dissatisfaction with electronic bill payment services was brought to the fore in a recent Wall Street Journal article, which chronicled a nightmare incident in which a customer-initiated bill payment was not completed by a service provider.

"If the banks expect not to lose their investment," they'll have to provide better customer service, make error correction extremely easy, and ride herd over the third-party providers, said Edward Furash, a Washington- based banking consultant.

He warned that as bill payment services attract more consumers, banks and their service partners will be "no longer dealing with the computer junkie who'll put up with these gaffes."

The bill payment processors have been hardest hit with consumer criticism that centers on snags in the payment process.

Two major processors - Checkfree Corp. and Intuit Services Corp. - issued statements this week that defended the effectiveness of their respective services and rebutted criticism of their performance.

But despite assurances that payment processors will meet the expectations of consumers, experts said bankers still need to take a more active role in setting standards for electronic payments and in encouraging merchants to accept them.

Consumer usage for electronic bill payments has not been high enough to encourage widespread acceptance by common billers. On the other hand, consumers might be more apt to pay bills electronically if more billers accepted such payments. This Catch-22 puts the pressure on banks and service providers to get the ball rolling.

David Weisman, an analyst with Forrester Research of Cambridge, Mass., encouraged banks to band together in urging the acceptance of electronic payments, and in setting standards for payment process. To refuse to do this would be to risk "being marginalized by the service providers."

Gary Arlen, president of Bethesda, Md.-based Arlen Communications Inc. noted that "A problem right now is banks may know how to get started, but not how to maintain or grow the service."

According to a statement from Columbus, Ohio-based Checkfree, electronic bill payment is already popular. The payment processor, which claims a 60% market share, said it processed more than $10 billion in payments through various services in 1995. These payments involved more than 6 million households.

However, since much of the bill payment business still involves a payment processor cutting a check and sending it to a biller on a consumer's behalf, some observers fear the system is still exposed to glitches such as those detailed in The Wall Street Journal.

Bruce Burchfield, chief executive of Intuit Services, which is based in Downers Grove, Ill., estimated that about 80% of his company's bill payment transactions are paper-based.

Nonetheless, he said the market is quickly coming to realize that electronic bill payment "is not a cottage industry."

Nevertheless, if the industry is to grow further in the short term, experts said consumer satisfaction with the services has got to be improved.

Consumer complaints "add to a general malaise. Consumers think this is not an essential product," Mr. Arlen said.

Banks need to turn the tide by making their services very cheap or free and "look foolproof," he added.

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