At the beginning of 2000, onlookers hardly considered Chile a darling for electronic bill payment and presentment (EBPP) largely because until June of last year no firms offered the service. Then Miscuentas.com stepped forward to offer EBPP and promptly hit a brick wall in the form of a complaint that by doing so the company was engaging in a monopolistic activity. The Santiago-based firm was suddenly tied up in the courts, for months barred from fulfilling client requests to pay bills online.

Jump forward to the beginning of 2001 and you see something quite different: a Chile rife with EBPP activity. By the beginning of this year a slew of companies offered solutions for bill payment and/or bill presentment with about half of Chile's 30 or so banks involved in the payment chain. Miscuentas.com, freed from its anti-monopoly lawsuit, has continued to scoop up billers and users.

How did EBPP in Chile right itself so quickly and what is its long- term prognosis?

A rocky start

Following the company's founding in January 2000, Miscuentas.com, a subsidiary of Santiago-based Grupo CB, was optimistic about leading the EBPP drive in Chile, given the country's reputation as a Latin American leader in telecommunications and privatization. Backing Miscuentas.com's plan to offer EBPP in Chile was its exclusive deal with Atlanta-based CheckFree Corp., a company providing such services to more than 350 financial institutions.

However, Miscuentas.com encountered stiff resistance after trying to work with several financial institutions to gain access to the clients of the 13 bank members of Automated Compensation System (CCA), Chile's equivalent of the United State's Automated Clearing House. Because it is not a bank, Miscuentas.com cannot work directly with the CCA, instead having to forge relationships with the bank members in order to access their customers. Miscuentas.com broke the logjam by finally signing a deal in March 2000 with CCA member Banco Santander that gave it the right to offer EBPP services to the CCA's eight operational banks (the other five banks are not operational), regardless of whether the banks endorse the venture.

Miscuentas.com's fortune again seemed bright. But the company was again halted by the objection of CCA's bank members. That hurdle was overcome in September, when Chile's Fiscalia Nacional Economical, or Antimonopoly Commission, voted unanimously to allow Miscuentas.com to continue operating. The vote forced the banks to accept Miscuentas.com's site as a payment alternative.

While the commission's vote was a victory, some damage to Miscuentas.com had already been done. The company's EBPP operations, stalled three to four months after its opening foray, recommenced operations after the beginning of Chile's summer, a time when business traditionally slows to a crawl.

Making up for lost time, by April the company was operating with 13 companies ranged from Codigas and Chilectra, gas and electricity providers, to Entel, a telecommunications service, and Metr polis Intercom, a cable television provider. Nine additional companies were in EBPP pilot programs.

After this slow start, before long the EBPP industry in Chile became a free-for-all. Servipag, a Santiago-based firm owned by the Banco de Chile and Bci, two Chilean banks which are also the principal shareholders in CCA, has historically allowed the payment of a variety of bills in its brick-and-mortar branches. Servipag in November began offering online payment solutions and snaring customers at a 1,000-per- month clip, reaching 5,700 by March.

EBPP-related initiatives were also advanced by others, including todocuenta.com, PagoF cil, and Tecnopago.

Tecnopago S.A., formed in October 1999 by the Chilean firm, EFT Banca S.A., launched a new portal for electronic payments in November and by April was executing 2,000 online payments monthly. "From here until the end of the year we expect significant growth due to the entrance of more banks and the inclusion of more billers," says Gerardo Irarr zabal, the company's CEO. Tecnopago has three bank customers in pilot-Banco Santander, Citibank and BankBoston (as it is still known in Latin America)-and one, Banco Edwards, operating.

Irarr zabal expects major growth in EBPP due to the convenience of the service and the boom of the Internet in Chile. His belief is that before year's end the majority of banks will embrace EBPP and that 40% of customers accessing bank Web sites through Tecnopago's services will be paying bills online.

In spite of, or perhaps because of its rocky start, Miscuentas.com believes it has served as the leader into the market. "We encouraged EBPP because we were the pioneers-we were the first to do EBPP in Chile," says H ctor Villaneuva, the firm's CEO. "We opened the doors for many companies to do the same type of business as us... Whatever company that has an Internet presence, their own technology, and a stable relationship with a bank can get involved in this business."

Being first has its pride and also its problems. This year Villanueva expects another tide of new competitors.

Luring banks, billers and clients

The key for EBPP's success, after the technology barrage, is to be embraced by banks, billers and clients.

Consumers in Chile, a country of 15 million, pay a monthly average of eight-to-12 bills, with an average cost of 4,000 pesos (US$7), according to EFT Banca. So hopes for EBPP's growth rests squarely with the attitudes of billers.

Miscuentas.com expects to see its figures increase from 13 billers with 3,000 users in March to at least 50 billers with 30,000 users before year's end. To use Miscuentas.com's system, clients register online and submit a written signature allowing for the automatic debit of current accounts.

In April, Servipag had 25 billers working with its online payment solution, from AT&T Chile and VTR Cable to Gas Valpo. Its year-end goal is 100 billers.

Miscuentas.com and Servipag are both in advanced talks with several more banks.

Additionally, EBPP players are making the service more attractive for consumers by providing top-level security and free service. Both Miscuentas.com and Servipag use SSL (Secure Socket Layer) protocol and 128-bit encryption, and are required to meet the stringent regulations of Chile's Superintendency of Banks and Financial Institutions. Tecnopago, Servipag and Miscuentas.com all provide some form of complimentary service. Servipag offers a free, unlimited trial allowing clients to pay a fixed amount of bills. Miscuentas.com offers free services, but plans ultimately to charge $1 per month for EBPP services, regardless of the number of bills paid. The $1 is far below the $5 fee for a specified number of bills that is typical with EBPP in the U.S., says Villanueva.

The Chilean government may also give banks, billers and EBPP providers a boost by legalizing digital signatures for applications, including EBPP. That legislation is currently under congressional evaluation and passage could stoke EBPP growth. "The digital signature would resolve much today regarding authentification and security," says Oscar Alvarez, CEO of Servipag. "It's a theme that's very technically attractive. It would assure that whoever is making the transaction is who they say they are."

Miscuentas.com's Villanueva predicts passage of the legislation in August or September.

A fledgling industry

EBPP is, however, still in the early adopter phase and it is difficult to predict which company or model will be the eventual winner. "Our focus is 25 to 35 year olds who naturally don't fear the Internet," says Villanueva. "People of other profiles like to see the stamp and the part that says 'Paid.' "

Servipag is also patient. "We are an industry in evolution," says Alvarez. "All companies that have sites such as ours are not profitable. This is a gamble for the future."

To offer sufficient functionality and ease-of-use to clients, Servipag plans to re-launch its portal in May.

Miscuentas.com, the Chilean market's pioneer, uses CheckFree's acclaimed technology, and has low operating costs. While remaining a leader in Chile, Miscuentas.com is now eyeing the rest of Latin America and seeking a strategic partnership with a large financial institution to help it expand.

It also wants to carry its partnership with CheckFree to other Latin American nations. Miscuentas.com touts itself as the only company doing "pure" EBPP in Chile, because firms like Servipag do not yet present "faithful copies" of bills online, though Servipag plans to begin doing this by October.

Servipag also plans to gain market share by leveraging its experience, its brick-and-mortar presence, and the local knowledge of Adexus, its Chilean technology provider. Established more than a decade ago, Servipag allows hundreds of different types of bills to be paid at 47 brick-and-mortar branches and another 112 non-traditional offices throughout the country.

"In the physical world we have more than 400 billers and our intention is to bring them all to our portal," says Alvarez. "Billers already know us and there's a confidence that we've developed over time. It's just a matter of migrating them from one channel to another." Unlike Miscuentas.com, Alvarez says Servipag has real-time online debiting, allowing bill disputes to be immediately resolved.

Chilean banks are also poised to offer independent EBPP solutions, Alvarez says, and some now allow for the use of more than one EBPP solution. For example, Banco Santander's clients may pay bills using either Miscuentas.com or Tecnopago. Santander began working with Tecnopago in October at a time when it was the only application service provider (ASP) in EBPP-related work, says Laureano Cuesta, Santander's channels manager.

Cuesta refers to the battle between CCA and Miscuentas.com as "a misunderstanding" and says it is too early to assess the bank's EBPP initiative because its pilot project was not completed until April, when it began marketing the service. But Cuesta says Santander is ambitious with a goal of "greater quality of service to our clients, enabling them to pay all their basic services via the Internet: bills for water, electricity, phone, cellular service and the Internet."

Despite the various EBPP initiatives, few expect breakneck growth among Chilean EBPP players, in part because Internet penetration in the country is 9%, according to Cuesta.

Meanwhile, the number of people eligible for EBPP remains scant. Cuesta explains that only 30% of Chileans have a checking account. Most other Chileans are either unbanked or have only a savings account. Those low numbers mean that even if all banks allow online bill payment, which they do not, fewer than a third of Chileans have the account status necessary to do it.

Another school of thought, to which Cuesta does not subscribe, is that the prevalence of automatic debit could curb the growth of EBPP. Chileans have the option now of paying at the branch, of having funds automatically debited from their accounts, or of EBPP. Up to now, as in Spain and Europe, in general automatic debit has trumped EBPP as a payment method, Cuesta says. Many Chileans will continue to use this system-which has existed in Chile for years-particularly to pay bills without variable costs.

In contrast, consumers will adopt EBPP for bills where payments vary, in part because they want to see the bill amount prior to making payment. "Automatic debit and Internet payment are distinct and complementary," says Cuesta.

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