An almost sacred trust bonds Americans and the financial institutions that hold and manage their money. So why do portals think they can wedge their way into this relationship?

Already the industry has seen portal juggernaut Yahoo eagerly grab a piece of the electronic bill payment and presentment pie through an alliance with Atlanta-based CheckFree Corp. Now action will become even more frenetic in the EBPP world on the heels of America Online Inc.'s November announcement that early this year it will offer its customers e-bill services through a partnership with electronic finance giant Intuit Inc. What new dimension will AOL add to the picture as banks flounder to stake a claim in this nascent market?

For the Dulles, VA-based Internet service kingpin there couldn't be a better time to exploit the possibilities of online bill pay. Jupiter Communications, New York, projects the number of households paying bills online to skyrocket to 18 million in 2003 from the current 1.8 million.

"We've seen huge interest in EBPP," says AOL spokesman David Theis. "People are doing more online."

Logic speaks loudly

Under the five-year agreement, Intuit becomes the exclusive provider of online bill-pay services to AOL users. This could spell big bucks for the creators of the popular Quicken.com finance hub, opening a new distribution channel for Intuit. "Our strategy is to provide as many bills electronically as possible," says Jeff Larsen, a spokesman for the Mountain View, CA-based company. "Teaming up with America Online was a logical move."

Logical indeed. AOL has topped the 20 million mark in membership, catapulting it far ahead of the competition. And that doesn't include the 2 million people using CompuServe, an AOL company, or the scores of visitors to its Web sites that include AOL.com and the local news and entertainment site Digital Cities.

AOL has had a long-standing relationship with Intuit. The online service's Personal Finance Channel (PFC) on the Web is powered by Quicken, so it is not surprising that the company decided to use Intuit's e-bill solution as well.

Further integral components of the e-bill pay operation come from Intuit's partner CheckFree, which will provide the bill processing muscle, and CyberBills Inc., Santa Clara, CA, which will contribute paper scanning technology. With this latter feature, AOL will become one of the growing num ber of e-bill services that provide a scanning capability for paper bills, an alluring feature that has the potential to give online bill pay a more universal reach.

This feature was perhaps the clincher for AOL. "We like Intuit's system because it's not dependent on billers having electronic bill pay technology," Theis says. "Anyone can use our system because Intuit has this scanning technology."

Because of the bill-imaging functionality, billers are not required to sign up to participate in AOL's EBPP service, he explains, so the company will direct this service more toward consumers than billers. People will set up their accounts and make arrangements to have paper bills addressed to Intuit's scanning facility rather than their individual homes.

"This is the first time where you'll have bill-pay capability, pay-everyone capability, and bill-scanning capability integrated into one site under a brand like America Online," Intuit's Larsen claims.

No cannibals here

Stickiness is the key when it comes to the capricious online universe. E-billing could be the ideal value-added product for AOL's legions of users. "The ultimate convenience is having all your bills in one place," Theis says. "This is a hugely attractive service to our members."

The EBPP service will premiere early this year. AOL users can access it via the Personal Finance Channel. When they click on the bill-pay icon, they will be linked to a co-branded AOL/Quicken site.

But what about Quicken.com-is Intuit feeding the competition by providing such technology to AOL? As far as Intuit is concerned, it has nothing to worry about. "This won't present competition to Quicken.com," Larsen contends. "We see no cannibalization with this deal."

Brook Newcomb, senior analyst with Cambridge, MA-based Forrester Research Inc., agrees, adding that it's a matter of personal preference on the part of consumers that will drive traffic flow to either site. "Different people will go to AOL's bill-pay site than those who will go to Quicken.com. This is the concept of an affiliated service, and that means Intuit wants its service available in as many sites as possible."

Intuit has implemented the same technology used for Quicken.com in all its co-branded ventures, such as the arrangements the company has with Excite, Concentric, and MindSpring. "We have 1 million Quicken.com customers," Larsen says. "The technology we're providing AOL will be more robust than Quicken.com's, but that will only be temporary" once Quicken's technology is updated to match that in AOL's billing program.

A territorial battle?

For AOL, the issue is not that it's trying to metamorphose into a bank. Rather, according to Theis, it's the convenience factor. He sees AOL as an enabler between banks and consumers rather than as a rival for financial institutions' customers. "AOL's bill pay feature will strengthen consumers' relationships with their financial institutions," Theis explains. "We're not trying to replace banks. If someone has a relationship with a bank, [AOL's service] is just another convenient way to deal with his bank account."

Analysts concur that AOL is not encroaching into banking territory. It is merely taking advantage of a service that has the potential for generating a lot of business. "Financial services is an attractive function for portals to offer because it will keep people coming back," Newcomb explains. "AOL isn't interested in being a bank. It wants the best of a deal without buying into the whole thing."

But banks really need to get moving on e-billing, Newcomb cautions, because they might wake up one day and find AOL and other portals transformed into banks by default because they are simply more aggressive in embracing new technology.

Theis points out that AOL refers users of its PFC to various banks. A quick visit to the Finance Channel's Web page shows numerous links to financial institutions of varying sizes. In addition, Theis says financial institutions will not have to purchase special software if their customers use AOL's e-bill service because everything is designed to run on the Quicken system.

Lots of interest

Most will agree that consumers are not exactly flocking to electronic bill pay at present. That's due to a number of factors, not the least of which is the relatively passive stance banks have taken with regard to electronic bill presentment and payment. Someone has to pick up the reins, and that is exactly what portals are doing.

"We're seeing a lot of interest in electronic bill pay from a lot of parties. The only ones missing are the consumers!" Forrester's Newcomb says. "Banks have not been aggressive in this area. But portals like EBPP. It's a sticky feature."

And with a team like AOL and Quicken jumping on the bandwagon, in addition to the Yahoo/CheckFree alliance, e-billing might get a much-needed surge in consumer awareness. "Billers know about electronic bill pay, but not many consumers," Intuit's Larsen says. "When a company like AOL starts telling people about it, the EBPP industry is sure to get a boost."

Every biller?

Another aspect that may spur adoption of e-billing by the masses is the scanning feature. "I think it's an interesting, innovative way to get around a hurdle to adopting this technology," Larsen says. "If a biller doesn't have an e-bill capability, then we can scan the bills for them. So in that respect, every biller is eligible for AOL's service."

Although he likes the scanning function that will be featured with AOL's e-bill pay service, Newcomb is not certain how billers will react to it. He thinks billers will feel like they're losing contact with their customers because the paper bills are routed to Intuit's scanning site. "Billers would like consumers to go to their sites to pay bills. They won't be happy with [a service like AOL's] because it's putting one more party between them and their customers," Newcomb remarks.

For many billers, especially utility companies, the monthly statement is their only means of contact with customers, he adds. Although it will be possible to scan all the envelope stuffers along with the bill itself, it's just not the same to billers.

George Barto, a senior analyst with Stamford, CT-based GartnerGroup Dataquest, thinks the idea of imaging envelope stuffers is a way for AOL to make billers feel more comfortable with its e-bill service. "A customer will be able to see exactly what he would see if he were holding the physical bill in his hand," Barto explains. "Besides, AOL is a behemoth. It can swing a lot of power to go to the presenters and tell them that AOL is going to do the presentment along with Intuit and CheckFree. Those are three names with a lot of punch."

Another consideration is how comfortable consumers will be sending their bills to a strange address. "This is private information," Newcomb says. "Will people feel safe sending their bills to CyberBills? Chances are, people don't know this company." But they do know AOL and Quicken, he adds. So perhaps the attitude will be along the lines of what's good enough for AOL and Quicken is good enough for consumers.

"For AOL this is another feature to offer its end users-bill pay made easy," Barto says. "AOL will market this service for its convenience and it will probably be priced competitively."

In the long term, portals may not be the best choice for people for EBPP. "But AOL's service is probably the best early solution available," Newcomb says.

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