State of the EBPP Market

Although the online billing market has received plenty of attention, it hasn’t taken off as fast as many analysts had predicted. In the B2C market, it’s a classic chicken-and-egg situation: billers are reluctant to get into online billing until a critical mass of consumers shows a willingness to pay online, and consumers are reluctant to pay online until more of their bills are available that way.

Of course, there are other hurdles impeding widespread adoption, such as finding an acceptable cost to consumers. In addition, privacy and security concerns continue to make customers hesitant.

But, momentum for online billing is finally starting to build. Forrester Research predicts that 70 percent of all U.S. households will be paying bills online by 2008. For billers, EBPP is not just a cost-cutting or timesaving application, but a way to get closer to their customers. In addition, many large businesses are now looking at EBPP for B2B transactions with their supply-chain partners (see sidebar, “Bill and Invoice Presentment and Settlement (BIPS) Access and Distribution Models”).

Whether in B2C or B2B, most biller-customers now consider EBPP a strategic application that is a key part of their larger e-commerce and customer-relationship management strategies. It’s a value-added service for customers that access the biller’s Web site for purchases, customer service, support, and so on. At the same time, savvy billers in the B2C space realize they have to provide options by syndicating their content to multiple payment sites or consolidators. Many consumers would rather have all their bills in one place, so billers need to offer this alternative.

Bill and Invoice Presentment and Settlement (BIPS) Access and Distribution Models

There are two basic models for BIPS: the biller-direct model (whether hosted internally or outsourced) and the consolidator model. In the biller-direct approach, the customer goes directly to the biller’s site to access and pay bills. In the consolidator model, a third party aggregates billing data from many billers, providing customers with one site to visit to pay multiple bills. Both the biller-direct approach and the consolidator approach have advantages and disadvantages, but both models will continue to coexist.

Biller-Direct Model

In the biller-direct model, the biller makes the billing data available to customers over the Web or through e-mail. Customers can go directly to the biller’s site to access and pay their bills, with no other parties involved. The biller-direct model provides a one-to-one direct link between the biller and the customer.

Billers may host their own biller-direct sites, or enlist the services of a biller service provider (BSP). BSPs can include application service providers (ASPs) or service bureaus (such as Bell & Howell, EDS, Pitney Bowes, or DST Output), or any other entity that can handle any or all aspects of BIPS. Billers can also use such BSPs to syndicate billing data to consolidators or to consumer service providers (CSPs) such as Web portals, thus handling the technical intricacies for the biller, while extending the biller’s reach to multiple customer distribution points.

Distribution or Syndication Model

As an alternative to having customers visit a dedicated biller-direct site (whether hosted by a biller or outside service provider), billers can choose to work with third-party intermediaries that provide alternative end-points from which customers can access, view, and pay their bills. The most established distribution model available today is the consolidator model, in which a third party acts as the aggregator for multiple billers. The consolidator provides a single site that allows customers to access multiple bills from their different billers. The leading consolidator in the market today is CheckFree; newer players gaining traction include BillingZone.

Under a consolidator model, customers log on to the consolidator’s site and can view and pay all of their bills in one place. The consolidator provides an important convenience to customers, and provides a vehicle to attract more users to pay their bills online. Greater customer exposure leads to increased customer adoption, which can reduce the total cost of billing. For this service, consolidators typically collect a transaction fee or “click charge” from billers for every transaction conducted.

One limitation of the consolidator model has been the inability of consolidators to attract enough billers to give customers a single site from which they can access all of their bills. Thus, many billers are turning to other distribution points in an effort to give their customers the flexibility to access their bills through the distribution point of their choice.

Thus, many billers are now turning to consumer service providers (CSPs) in their strategies to syndicate their billing data to multiple end points and increase customer adoption. Portals such as AOL and Yahoo! act as consumers’ gateway to the Web, attract large volumes of user traffic, and are ideally positioned to connect users and their bills. Banks and financial institutions can also act as CSPs for their customers.

Another emerging approach for bill distribution is to work with intermediaries that serve as distribution pipes or “switches” for online billing. For example, services from organizations such as MasterCard RPPS and the Spectrum alliance (a joint venture of Wells Fargo, First Union, and JP Morgan Chase), provide billers with a trusted intermediary that handles the intricacies of bill distribution to various customer end points, and also handles the return payment processing.

Such services act as “behind the scenes” intermediaries that provide billers with a way to greatly extend their reach without having to manage processes or relationships with multiple distribution points^[1].

Dozens of companies are providing software and services for online billing. In addition, there has been considerable activity in mergers and acquisitions. The most notable moves have been made by payment-processing market leader CheckFree, which acquired chief rival TransPoint, purchased software vendor BlueGill Technologies, and formed a strategic alliance with Bank of America in which the bank acquired 16 percent of CheckFree’s stock.

^[1]“Bill and Invoice Presentment and Settlement: The Doculabs Report,” 2003 Doculabs. All rights reserved. Doculabs Headquarters, 120 S. LaSalle St, Suite 2300, Chicago, IL 60603.