MIS 3090MIS 3090IT for Financial ServicesIT for Financial Services

Electronic Bill Presentment and Payment

April 21, 2023

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Billers today are– Facing pressure to acquire, retain & reach customers– Under stakeholder pressure to drive down costs

As a result Billers are demanding– Technologies that enable cost savings– Technologies that enable customer relationship management

(CRM)

Business LandscapeBusiness Landscape

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Consumers today are– Busier– More demanding– Striving to reduce costs where possible

As a result Consumers are demanding– Convenience (time is money)– Greater control of their finances– Better, faster, smarter way of doing things

35 million U.S. consumers are paying bills online; this is expected to increase to 65 million by 2007 (Gartner 2004)

Consumer LandscapeConsumer Landscape

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Presentment Presentment (two aspects)(two aspects)

Electronic Bill Presentment and Payment– The business-to-consumer process (B2C) by which bills are

presented and paid through the Internet– Relatively simple process– Increasingly being adopted by utilities

Electronic Invoice Presentment and Payment– The process by which companies present invoices and make

payments to one another (B2B) through the internet– Relatively complex process– Not yet widely adopted

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The Business Case The Business Case Business to Consumer Business to Business

Average online American household receives 11 bills/month

US companies produce 15-17 billion consumer bills p.a.

Bill presentment and payment costs for billers and consumers = $80 billion

US

Eur

ope

Average individual European consumer receives 4 bills/month

European companies produce 20 billion consumer bills p.a.

Bill presentment and payment costs for billers and consumers = €95 billion

An SME with turnover of €2.5 million sends on average 7,500 invoices/year

European business to business e-trade amounts to $777 billion

A Belgian subsidiary of a large consumer electronics firm sends 400,000 invoices p.a. to other members of the group

US business to business e-trade amounts to $870 billion

80% of invoices are generated by four industries: finance, insurance, telecoms & utilities

Source: PwC analysis – various sources

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PaperPayment

Cycle

18-32 DAYS

$1.30+ Per Bill

18-32 DAYS

$1.30+ Per Bill

Expensive

Slow Delivery

Long Payment Cycles &

Float

Limits Customer

Interaction

Biller

Printer

Bank

PaymentProcessor

U.S.Mail

U.S.Mail

Customer

Current ProcessCurrent Process

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End User

Payment Processor

INTERNET

Biller

Bill Bill Bill

$

$$

$

Hours vs. Days

Hours vs. Days

Pennies vs. Dollars

Pennies vs. Dollars

EfficientEfficientInstant DeliveryInstant Delivery

One-to-One Marketing

One-to-One Marketing

Reduced Float

Reduced Float

Future IT-enabled ProcessFuture IT-enabled Process

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Value Creation StrategiesValue Creation StrategiesBusiness to Consumer Business to Business

Value Decrease customer transaction costs

Example: allow customers to verify bill details on line (especially valid for recurring bills with varying amounts)

Decrease customer transaction costs

Example: allow integration with ERP systems for faster processing, approval and payment (especially valid for complex invoices)

Price This is more difficult

Customers seem unwilling to pay for the convenience of electronic invoicing and/or payment

Idem – on the other hand some companies are starting to charge a fee to corporate clients for paper invoices

Cost Invoice production and delivery Cost of paper invoice: $1.30 Cost of electronic: $0.60

Prevent/automate dispute handling 4% of bills are disputed

Invoice production and delivery Cost of paper invoice: $6.00 Cost of electronic: $2.60

Prevent/automate dispute handling 13% of invoices are disputed

Improved cash management Get paid quicker Source: PwC analysis

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Types of EBPP SystemsTypes of EBPP Systems

Source: Pearson Education

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Biller

website

Billerwebsite

Billerwebsite

Billerwebsite

Billerwebsite

Bill displayed on biller website for view and pay

Bill Direct ModelBill Direct Model

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Billerwebsite

Billerwebsite

Billerwebsite

Billerwebsite

Billerwebsite

Bill displayed on aggregator website for view and pay

Aggregator

website

Aggregator ModelAggregator Model

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Consumers’ HabitsConsumers’ HabitsHow Consumers View and Pay Their Bills Electronically

Source: Gartner Research (January 2004)

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What Consumers Want…What Consumers Want…

Source: Gartner Research (January 2004)

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Source: Gartner Research (January 2004)

Categories of bills… Categories of bills…

Million

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CheckfreeCheckfree Market leader in online billing and payment Faces a number of challenges:

– Industry changing fast and leadership precarious– Although market is growing, consumers have

traditionally resisted online bill payment – Conflict strategic goals of stakeholders (merchants,

banks, credit companies, billing firms and consumers)– Technology changes: XML-based vs. proprietary – Competitors: PayPal, Metavante

Source: Pearson Education

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USPS eBillPayUSPS eBillPay USPS announced in April 2000 that it was entering

EBPP market. – Partnered with Checkfree and a smaller provider

(YourAccounts.com).

GAO: Movement from paper to electronic billing could reduce revenue by more than $16 billion per year for USPS, assuming that every bill now mailed is instead billed and paid on-line.

Billing statements currently represent 25 percent of USPS revenue.

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For Next Class…For Next Class… Read

– Capital One case– Write out your answers to the case questions and be prepared to

discuss– We will also discuss the “Check 21” topic