Paperless Billing: What's the Payoff?

Electronic billing offers customers control, convenience and confidence.

Will we ever see an application that eliminates paper, uses electronic processing and results in economic and efficiency gains? With the advent of the Internet and the Web, billing quickly is heading to the utopian state of being paperless, resulting in businesses saving millions on printing and mailing costs and consumers gaining more control of their finances.

Whether it is billing between businesses or direct to consumers, control of the process is critical to both billers and payers. It must be convenient for the consumers, and every one must have confidence in the security and accuracy of the process from start to finish.

Electronic bill presentment and payment (EBPP) via the Internet is one of the fastest-growing are a sin business. With more than 63 billion checks written annually where 80% is some sort of bill payment — either business-to-business or consumer-to business — substantial cash-management benefits and customer-service opportunities exist for those who use interactive billing and payment.

Cost Advantages
The obvious cost savings of EBPP comes from decreasing — and eventually eliminating — printing and mailing expenses. It costs between 75 cents and $2 for each document generated and mailed. Another $1.25 is saved for each paper check eliminated.

There also is the added advantage of substantially cutting both the inbound and out bound float. Electronic fund transfers provide near-next-day availability of funds, and electronic bill generation virtually eliminates statement rendering, printing, folding, stuffing, metering and sorting.

A reduction in just one day of the total billing cycle results in savings of more than $200 million economy wide. Eliminating inbound and outbound float has the potential of yielding $800 million to $1.4 billion in savings annually.

Market Growth
One concern about electronic billing is accessibility of bill information to all payers. With research by PSI Global showing that more than 60% of U.S. households own or use PCs and that approximately 50% are online, it won't be long until virtually all households will have the potential to access billing information. Gartner Group projects that the number of U.S. households using PC banking will more than triple by 2004, growing to more than 24 million. The overnight-delivery market also will experience dramatic changes. Aberdeen Group research shows that by 2001, more than-one third of the overnight-delivery market (21 million documents per business day) will transition to the Internet.

American businesses recognize the potential of these numbers and are implementing e-commerce in record numbers. Globally, the growth is expected to be just as dynamic. Jupiter Communications predicts that the number of bills delivered online will grow from 130 million in 1999 to two billion by 2003, when 18.4 million households will pay bills online. PSI Global predicts that growth in EBPP activity will grow to nearly five billion consumer and business transactions in 2005 from just 21 million this year.

Electronic Billing Methods
Although online billing can be done several different ways, e-mail is preferred by 60% of online PC users, according to a 1999 PSI Global survey. E-mail is the ideal way to deliver information because consumers are comfortable and familiar with it. It offers security, privacy, convenience and ease-of-use. The entire process is online, immediate and accurate.

Although several companies now offer statements on the Web as a convenience to customers, they still must issue a bill to get paid.

Payment via the Internet provides an interesting opportunity for bonding between the biller and payer. It's not just a way to stream line collections; it also offers an opportunity for each biller to brand its direct interaction with customers.

Through the process of e-mail billing, companies can deepen relationships with customers through personalized electronic dialogs and distinguish themselves competitively by providing valuable new information-based services to customers.

The Three C's of EBPP Paperless Billing
Ultimately, e-mail billing boils down to three issues: control, convenience and confidence. Without all three, there'd be no incentive to move to an e-mail system of billing and payment.

• Control — One advantage of EBPP via e-mail is that the biller has complete control over the bill-delivery process, and the payer has control over how and when the bill is paid. A bank, for example, could enlist the help of a third-party consolidator, but with the technology now available, it's no longer necessary to use an external service. EBPP technology is affordable and helps the biller retain control.

  Consumers benefit from freedom and choice in reviewing the bill and selecting a payment option. This is different from accounts that are debited immediately or are debited according to someone else's schedule. Consumers are able to setup an exact date and amount that will be deducted from their accounts. They can change the amount paid on monthly bills and vary the date of payment from month to month.

  The PSI Global study indicates control is the most important feature consumers seek when selecting a payment method other than by check. Control equals security in the eyes of the consumer.

• Convenience — As of September 1999, according to Newsweek, more than 225 million people worldwide were sending and receiving e-mail. E-mail is a familiar, easy-to-use process for beginners as well as seasoned Internet users. And the PSI Global research confirmed that more than 60% of online PC users preferred e-mail.

  The ideal solution is one where there is no need to purchase, download, install or learn any special software or device. E-mail billing offers all of this and doesn't require additional consumer education.

• Confidence — Consumers should be assured that their confidential information remains confidential. A comprehensive e-mail billing and payments system that assures private, secure interactions via the Internet is required. Privacy and security are critical issues driving business and consumer use of and confidence in EBPP.

  For security, the statement/bill would be attached as an HTML file to an e-mail that was then 128-bit encrypted. After receiving the bill, the consumer would send payment instructions directly to the billers who process the payment the same way they do for all other direct debits.

  Accuracy also is important. With e-mail billing/payment, billers are able to instantly validate the customer's information and post payments to the customer's account with 100% accuracy, eliminating the problems associated with earlier versions of electronic banking.

Who Should Offer EBPP?
Eventually, everyone who does any sort of billing will begin using e-mail to issue bills and collect payments. In the meantime, companies already using EBPP should include:

• Companies that want to send customers paper bills, statements, voting proxies, trade confirmations, etc., in an easy, convenient, private and secure way.

• Companies that need to send private documents securely over the Internet to customers, field offices, or corporate partners without specialized software.

EBPP: A Win-Win Situation for All Involved
Although electronic billing has not yet reached the utopian paperless society level, the financial benefits are real and significant for those who previously had to print and "snail mail" bills to consumers. However, EBPP will not succeed without consumer benefits as well.

By paying close attention to the three Cs, consumers are demanding, businesses will be able to deliver a successful e-mail-based EBPP system to consumers.