SAN FRANCISCO - Bankers have long viewed electronic bill payment and presentment as a technology that could help them save money on check processing and generate fee income, but on Thursday Wachovia Corp.'s head of e-commerce called that a pipe dream.
EBPP will never be a profitable service, but banks must offer it anyway because the most desirable customers demand it, said Lawrence Baxter, Wachovia's chief e-commerce officer.
Mr. Baxter's somewhat gloomy message was surprising given the forum - a keynote speech at Thomson Financial's fourth annual EBPP conference here - and that Wachovia is one of the three founders of Spectrum LLC, the consortium designed to put banks at the center of electronic bill payment and presentment. The other founders were J.P. Morgan Chase & Co. and Wells Fargo & Co.
Mr. Baxter said EBBP has little value as a stand-alone service and that it should be included as a feature, but not the centerpiece, of a wider offering to draw high-net-worth customers to online banking.
"It's not really about bill payment anymore," he said. "We think you've got to do it in a broader perspective. Bill payment is just one little piece of it."
Seeing EBPP as a stand-alone profit generator is "a seriously misleading way of framing the question," he said. The issue should be "how do we use bill-pay as part of the array of tools to engage these customers?"
Though Wachovia does not consider EBPP central to its effort to get its most desirable customers into online banking, Mr. Baxter said, it is as essential as electricity.
"What's the ROI on the light system? You can't do business without it," he said.
For that reason, Mr. Baxter said, Wachovia, of Charlotte, N.C., spends more to provide electronic bill payment and presentment services than it gets in fees. But the expense is worth it because of the caliber of clients the service draws.
"They just happen to be the very best, cream of the crop of our customers," he said. "They just happen to be the customers that everybody wants."
In devising a return-on-investment justification, "you have to sell the overall strategic story" to senior management and investors, he said. "It's like building out branches in more affluent suburbs."
Technological advances are enabling customer relationships that were impossible in the past. At Wachovia, such relationships are a component of a package that Mr. Baxter called household treasury services. "This is where we're heading now," he said.
The strategy does not represent a single initiative or product to sell to customers, he said. Some of the services are available now, while others - such as a "payment warehouse" of billing information that would be accessible online - remain under construction. Instead, he called the approach "a vehicle for very intense engagement with our most valuable customers."
Mr. Baxter also tried to put to rest the lingering fear that utilities, telecoms, and other billers will try to use EBPP to encroach on banks' turf.
"Most billers are not trying to become banks," he said. Despite the challenge of disintermediation if customers deal directly with these companies, he said, Wachovia feels "much more confident about the centrality of banks" in such transactions.
Peter Kight, the chairman and chief executive of Atlanta-based CheckFree Corp., made a similar point in his presentation, saying that "the billers want you as much as you want them."
