EBPP Begins to Take Hold
February 23, 2005

Summary: Kenny Hargis examines the evolution of electronic bill presentment and payment and considers what the future holds for this increasingly popular technology.

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The Internet continues to become more pervasive, seeping into the many facets of life. In the financial sector, this fact is perhaps most evident in the rise of electronic bill presentment and payment (EBPP) capabilities. Three quarters of all bills are still being paid via the paper format, but the increased use of EBPP in recent years is dramatic. Adoption rates of the technology continue to increase, and, as the younger generations become active participants in all things financial, those rates could skyrocket before long.

But first, to understand where EBPP is going and why it is important for all financial institutions to at least begin considering this technology, an examination of the technology’s evolution would be helpful.

EBPP: A brief history
The story of EBPP begins a few years ago during the late 1990s, a time when many in the technology industry were heady with success. In a number of markets, new technologies were being developed and introduced at a maddening pace. It was no different for the financial services print and mail industry.

Document service providers were flush with success and ready to make the technological adjustments that would propel them into the 21st century. With analysts predicting that paper-based billing would disappear within a few years, document service providers diligently went about the process of developing electronic billing systems. Some companies jumped in head first, spending millions of dollars to roll out such systems. Many believed the reason they were spending those millions of dollars was to prepare them for ‘the future’.

As it turned out, ‘the future’ wasn’t all it was cracked up to be. Because so many of the early EBPP systems didn’t work properly or offered only part of what they promised, it was easy for customers to decide against using them.

When faced with the reality of viewing and paying their bills online, most customers balked, opting instead to stick with what they’d always known. “Paper billing might not be perfect,” they thought, “but at least I’ll have something to hold in my hand. Plus, I won’t have to learn how to use some complicated Internet site.”

It’s hard to blame the customers for coming to such a decision. Those early EBPP systems really did lack the functionality and flexibility of those available today.

Ultimately, because the customers weren’t interested enough in EBPP in the late 90s, the technology went into a kind of hibernation. Companies that had banked their future on EBPP would have to wait (if they had enough capital to stay open – or if they had another line of business). Many of them didn’t make it, and the ones that did were forced to take a hard look at EBPP and figure out a way to make lemonade out of lemons.
 
EBPP’s first re-emergence
Early on, a few companies with strong EBPP infrastructure realized that they didn’t have to wait around on the public to be comfortable with the technology. In fact, these companies knew that if they played their cards right, they could start the process of helping people become used to the technology. They began with customer service representatives (CSRs).

This early re-emergence of the technology featured only the presentment, and not payment, but it was effective then and continues to be so now. The application enables CSRs to review electronic representations of bills or other information mailed to customers. The technology that had been built for presentment and payment made it possible for document service providers to create digital versions of bills and information that were the same as the paper-based versions.

This was important because it meant that the CSR and the customer who called in with a question were actually looking at two separate, but identical documents – one paper, the other digital. If a customer had a problem with information located in the upper left portion of the bill, he easily could point the CSR in the right direction. The CSR, in return, could see what the customer was talking about and provide an answer or remedy in a timely fashion.

In the past, the information on the CSR’s screen had been presented in a format that looked nothing like what the customer was seeing. Under that system, the information might be the same, but it was more difficult for the CSR and the customer to address issues.

That system was, at times, confusing and frustrating for both parties. It cost the customers time and eroded their confidence in their financial institution. It cost the financial institution time and money, and it was detrimental to customer relations.

There are always going to be a few customers that have questions about information on their bills. Helping CSRs serve those customers better with technology that has electronic bill presentment underpinnings is a shrewd move on the part of financial organizations.

The technology evolves again
Once financial institutions realized the benefit of creating electronic representations of bills for CSRs, they also could see additional possibilities for using the technology. They understood that customers often did not have access to the paper copy of a bill or might want to know what the bill looked like before it actually arrived in the mail. By placing the electronic version on a secure Website, the financial institution could address these issues. Customers would be able to log on to the Website to view past and present bills.

This same technology also made it possible for customers to view copies of cancelled checks. The financial institution would scan the cancelled checks and post them online at the Website. By logging onto the secure Website, customers could view digitized versions of their checks.

While these features were used primarily as customer service tools, allowing customers to have access to more and better information about their accounts, the move also served as a primer for full EBPP. The initial two formats of the technology involved only the presentment of bills, first to CSRs, then to actual customers. Once comfortable with the ability to view online copies of their bills and checks, customers seemed to finally be ready for presentment and payment.

A generational shift
Also speeding the acceptance of EBPP technology was the coming of age of Generation X. Gen X is more comfortable with technology – particularly computers – than any of the generations before it. As EBPP was re-emerging, Gen Xers were reaching the age at which they would make major purchases of homes and automobiles. Having grown accustomed to using the Internet for entertainment, communicating, gathering information and making purchases, members of Gen X welcomed the opportunity to use the Internet to view and pay their bills.

Because of Gen X’s purchasing power, financial institutions began to sit up and take notice of this new demand. The technology they had been using to present bills and cancelled checks to customers could be modified to enable those customers to pay bills online.

Coupled with the demands of Gen X (and, to some extent Gen Y) was the proliferation of the Internet. Internet penetration rates were growing, making it even more convenient for more groups of people to go online. In addition, security for Internet-based financial transactions was increasing. These elements all combined to usher in the present stage of the technology.

Payment
Paper-based billing isn’t going away any time soon, but EBPP technology finally is coming into its own. Because many consumers have seen the benefits of viewing and paying bills online, adoption rates for the payment feature are on the rise. It is faster than paying bills in a traditional manner, there is no chance that a bill or payment will get lost or delayed in the mail, and it can help cut down on postage costs.

Companies are seeing the benefits of EBPP, as well. In addition to improved customer service, they are able to monitor billing habits of customers. In some cases, companies are able to stop sending paper billing to customers that have requested to receive and pay bills only online. This reduces the print and mail costs for those documents.

Other benefits include the ability to attach marketing, advertising and other information to the online bill. Companies are able to develop online profiles of their customers, and the marketing information and advertisements can be targeted at specific customers. Web links included in the electronic bill offer customers the ability to get additional information about their accounts or be directed to offers that might appeal to them.

Future applications of the technology could provide financial institutions with the ability to sell ad space on the electronic bill to external parties. While similar to the advertising in some of today’s bill mailers, the online advertising would be more targeted because of the user profiles.

EBPP’s current successes and future
Brokerage firms were some of the earliest adopters of the presentment technology. Because brokerage firms tend to send out multi-page documents, the electronic presentment of documents has helped them reduce their usage of paper. Their customers also like the convenience and speed of being able to receive and view such documents online. Credit card companies have also recognized the benefits of EBPP technology, and mortgage companies are beginning to use the technology as well. Indeed, it has grown so popular within the last two years that most companies that send out large volumes of bills or other documents are at least looking at EBPP as an option – if they don’t already have a system in place and operational.

Because EBPP is still a relatively new technology, there is more growth that must occur. There are continuing arguments over using a single source (or consolidator model) for bill payment – e.g. a bank offering to serve as the location from which all of a patron’s bills can be paid online, or multiple bill payment sites (the direct model). In addition, consolidation between companies that provide billing services is likely to result in some changes. Many EBPP providers are using technology that is proprietary. As companies consolidate, those systems will need to be able to talk to each other. Eventually, a set of standards must be created to address the issue.

Many of those changes, however, are probably still a few years down the road. In the meantime, adoption rates for EBPP are expected to continue to rise among consumers. The security of online financial transactions will continue to improve and the quality of EBPP services is expected to increase – which is good for everyone.

	Kenny Hargis
	Kenny Hargis is president and CEO of Venture Encoding, which provides a variety of services for the financial services sector, including electronic printing, technologically advanced print/mail applications, online customer care tools and electronic bill presentment and payment.
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