William Barry
Docucorp
The monthly billing cycle is one of the most common occurrences in American life. An estimated 18 billion recurring bills are sent to American consumers, who then send back 23 billion checks in payment. Killen & Associates estimates that of the total number of bills, more than 25 percent are mailed by utilities. Thus, any change by utilities in the way they present and accept payment for bills is certain to have an effect on all large billers.
With the advent of the Internet and related technologies, electronic bill presentment and payment (EBPP) has emerged as a way for utilities to cope with the enormity of the billing process. As part of an overall revision in billing strategy, EBPP can facilitate revenue collection, improve customer service and cut costs. It can also enable new cross-marketing opportunities.
Still, EBPP has been somewhat of a "chicken or egg" puzzle to date. Consumers have been slow to adopt electronic payments because not enough billers have offered these services and billers have been slow to offer these services because the number of online bill payers hasn't been sufficient to justify large-scale investments in the technology. It is a quandary that is just now being solved as the technologies and business models mature.
Adoption is growing, but slowly
At the height of dot.com mania, one might have assumed that by now nearly every customer would be viewing and paying their utility bills online. The reality is that only about five to six percent of online U.S. adults view their utility bills electronically, versus 32 percent who view their credit card bills and accounts online. While a large percentage of consumers understand the potential convenience and timesavings of EBPP, few have actually embraced the technology.
Credit card bills vary widely month-to-month and offer great opportunity for analysis, whereas utility bills are fairly predictable and do not change much. Therefore, simply producing electronic representations of utility bills is an exercise in futility. To be truly effective and increase their take-up, electronic utility bills must be bundled with more compelling features and services. (Some of these features are outlined at the end of this article.)
There are two primary EBPP models: biller-direct and consolidator. In the consolidator model, consumers visit bank websites, view all their bills and pay at once. However, this model has largely failed because consumers prefer visiting biller Web sites directly, and because consolidators have generally not been able to offer more than a few of consumers' many bills. Registration difficulties, high costs and payment lag times have also limited the success of the consolidator model.
The biller-direct model operates just as it sounds: consumers establish a direct link with their utility, view their bills, and then transfer payment. In the biller-direct model there is no third party intermediary such as a bank or financial services provider.
Gartner Group research backs up the shift toward the biller-direct model. While more than 48 percent of consumers prefer direct access to billers' websites, only 24 percent prefer the consolidated model. This consumer preference for direct billing has definite implications—utilities must develop their own systems to satisfy consumers, rather than rely on partnerships with banks and financial service providers.
Investment focus is on improvement
Utility executives rank EBPP as their top technology-related spending priority, but the reasons behind this ranking have evolved, especially as the economy has swooned.
Responding to customer demand and reducing the cost of bill production and delivery are generally citedsited as the two key reasons for EBPP investments. However, since the adoption rate has been slower than expected, customer demand may actually be less of a catalyst than believed, leaving cost reduction as the key factor.
There is little doubt that electronic billing can significantly reduce costs for utilities. Estimates of the fully loaded unit cost of billing activities range from about $.80 to $2.00 per paper bill. For e-bills, the cost is approximately $.40. When these per-bill savings are combined with the number of bills sent by utilities, potential cost savings for the industry could range from hundreds of millions to billions of dollars each year. Likewise, the potential to reduce the costs for customer service interactions (an average of $4 per telephone call versus $1 per Web self-service), are also driving the move toward electronic billing and service mechanisms.
As deregulation brought competition, utilities sought new revenue sources through such offerings as intrusion detection, satellite and Internet services. Marketing these services on monthly bills was seen as vital to future success, thus the ability to cross-sell additional services is increasingly an important consideration for utility executives as they consider EBPP technology.
Given the current rate of adoption, utility executives just now investigating EBPP must ensure that they tie any investment in the technology into a broader billing and customer service strategy. However, several features will help make EBPP more compelling for consumers and increase their uptake. These include:
- Service pricing reductions for online bill payment or accepting only electronic bills in lieu of paper bills;
- Service use analysis;
- Intelligent applications that enable "what if" analysis for accepting offers on different services;
- Automatic payment mechanisms that process bills unless an amount is beyond preset limits;
- Attractively designed bills that improve customer communication and explanation of services.
If these critical features are kept in mind, and a technology vendor with the requisite industry experience, professional services capability and robust software is selected, your EBPP project will be much further down the road to success.
 William Barry, Docucorp |
William D. Barry is senior vice president of sales and marketing for Dallas-based Docucorp International. For more information, email him at bbarry@docucorp.com, visit www.docucorp.com or call 1-800-735-6620.
Docucorp (Nasdaq: DOCC) provides dynamic solutions for acquiring, managing, personalizing and presenting enterprise information. Servicing the entire enterprise information lifecycle, Docucorp's information application software, application service provider (ASP) hosting and professional consulting services enable companies to implement solutions in-house or fully outsource to Docucorp. The company has an installed base of more than 1,200 customers, including many of the largest insurance, utility and financial services organizations.
