The idea of using the automated clearing house system to deliver consumer bills to banks has been kicking around the industry for several years. Nacha, the electronic payments association, is now seeking participants for a pilot test.
Advocates say the system it has developed, called Ebids — for “electronic billing information delivery service” — could give electronic bill presentment a needed boost.
But critics say Ebids may have sat on the shelf so long because it is better for billers than for banks.
Rob Unger, Nacha’s senior director for electronic services, said the ACH network is ideal for delivering consumer invoice details, because it already connects to almost every bank in the country. “A lot of the infrastructure is already in place,” he said.
Many banks already deliver electronic bills through their online bill-payment Web sites. The current model requires banks to work with a vendor of bill-pay processing, such as CheckFree Corp. or Metavante Corp.; the vendor routes the invoice details from the billers to the banks.
Though CheckFree and Metavante say demand for e-bills is steadily growing, many more bills are delivered by mail but paid online than are both delivered and paid electronically.
Mr. Unger said the vendors’ proprietary systems discourage wider use of bill presentment. “CheckFree and Metavante own their own railroad tracks, but to get to the next level we need an interoperable, standard approach,” he said. Ebids “is a model that changes the paradigm for online bill payment.”
The basic idea behind Ebids is to attach several addenda files to an ACH payment file. The value of the payment is set at zero; the invoicing details are in the addenda.
Mike Taipale, the manager for electronic payment product development at the Federal Reserve Bank of Cleveland, has been working on Ebids payments for several years. He said tests so far have used the CTX file format, which is typically used for processing corporate payments. If Ebids ever becomes approved for mainstream use, Nacha will probably develop a new payment category, he said.
Billing details have typically fit within four addendum files, which can each hold 80 characters, Mr. Taipale said. The CTX files can deliver up to 9,999 addendum files with each payment file, he said.
Mr. Unger said he is looking for banks and billers to participate in a pilot test, which Nacha’s board has already approved. No banks have signed up yet, but several are interested, he said.
One biller that has signed is the gas and electricity utility Dominion Resources Inc. of Richmond, Va. Gwen Beadles, its director of customer billing and payment services, said it is waiting for Nacha to line up some banks.
In the test, Dominion would deliver all of its Ebids bills to a single bank, which would forward them as ACH files to the recipients’ banks. Ms. Beadles said Ebids would allow her to reach customers no matter what bank they use. One attraction for the consumer, she said, is that they would not need to reveal bank account information to a third party, as many people do when paying through biller Web sites.
Ebids would also enable Dominion to stop producing and mailing paper invoices, Ms. Beadles said. “It’s really the way we foresee the future of billing and payments.”
Mr. Unger said the Ebids system could be a source of revenue for the banks that create the ACH files on behalf of billers. “Banks are not involved in that at all right now.”
Mary Ann Francis, the manager of global trade and treasury solutions at National City Corp. of Cleveland, said banks should be open to alternative uses for their existing systems. “Everybody wants to be more efficient, and everybody wants to get rid of paper,” said Ms. Francis, a senior vice president. “We have these rails — what else can we do with them?”
But Nat City will not participate in the Ebids pilot test, she said — “not for lack of interest, but because we are already working with Nacha on another pilot.” The other one is a way to process online purchases through a bank’s bill-pay engine.
Gwenn Bezard, a research director at Aite Group LLC of Boston, said that if Ebids succeeded it “could definitely represent a threat to CheckFree and Metavante and anyone else that makes money delivering bills to banks’ Web sites.”
A CheckFree spokesman de-clined to discuss the issue, but Ed McLaughlin, a vice president for product and strategy with Metavante’s payments solution group, said he considers Ebids no threat.
Metavante, the technology subsidiary of the Milwaukee banking company Marshall & Ilsley Corp., has designed its e-bill systems to accept invoicing data in a variety of formats in order to promote wider use among billers, Mr. McLaughlin said. If Ebids can generate more electronic billing activity, that would benefit everybody involved, he said. “Anything that increases the flow of e-bills is not necessarily counter to what we are trying to do,” Mr. McLaughlin said.
However, Mr. Bezard said the real question is whether Nacha will even manage to stage a pilot test. “Billers will like this, but I’m not sure banks will see the business case,” he said.
Indeed Nacha, of Herndon, Va., has been discussing Ebids for years. Mr. Taipale, a senior vice president, said he ran a successful proof-of-concept test in 2002 and 2003 and hopes to begin the pilot test this quarter or early in the third quarter.
Beth Robertson, a senior analyst at MasterCard International’s TowerGroup research unit in Needham, Mass., is a member of Nacha’s Council for Electronic Billing and Payment. She said that some major banks are willing to participate but would not name them.
“It has taken a lot longer than one would think” to get the Ebids pilot running, she conceded that.
Mr. Unger said it is not uncommon for ACH initiatives to take several years to move from concept to reality, and Ms. Francis said that that “when an idea has been around for a while and people keep talking about it, it must be because there is something to the idea.”
But Mr. Bezard said it has taken so long to start a pilot test for Ebids because banks simply will not be interested in the concept. “I wouldn’t say it has no chance,” he said, but getting banks to use the system “will be very tough.”
