Electronic Bill Presentment & Payment Models

Electronic Bill Presentment & Payment (EBPP) is a web-based application to reduce the cost of distributing invoices and processing payments to consumers or businesses.

By using bookkeeping programs like Quicken, consumers are changing their old-fashioned bill paying habits and migrating to electronic payments.

There are three common EBPP models being promoted in the market today.

Biller Direct

In the biller direct model, the billing organization makes bills available on its own web site and invites its customers to view and pay their bills directly from this site. Typically, the biller sends an email message to the consumer alerting them to a new bill. The customer then logs onto the biller site via a secure connection, reviews her billing information, and enters payment instructions (usually for a pre-established payment mechanism).

A variation on this model allows the biller to send summary bill data in the email message with an embedded hyperlink back to its web site for bill detail and marketing messages. The consumer can then respond immediately to the bill by clicking on the link, which transfers the session back to the biller site for reviewing bill detail and setting up payment.

Biller Direct Model

The major disadvantage of this model is that the consumer must visit a different web site for payment of each bill. In addition, many bills are cycled at different times during the month so consumers must log-on at different times to pay them or keep track of the e-mail notifications.

Biller Consolidation Model

The biller consolidation model is inherently more complicated, primarily because one or more third parties act as middlemen to route billing and payment data. These middlemen fall into two broad categories: bill consolidators and biller service providers. Bill consolidators receive billing data from numerous billers, aggregate and sort it by consumers enrolled in EBPP programs, then send it to distribution points based upon where individual consumers are enrolled. These distribution sites are commonly banks, but can also be Internet portal such Quicken.com. Biller service providers play a similar role on the billing side, but usually partner with a consolidator for payment processing.

Biller Consolidation Model

After consumers log into their EBPP service sites (banks and portals), review their bills and schedule payments, payment instructions are sent back to the consolidator for processing. In addition to payments for electronically presented bills, these instructions commonly include those to payees that customers have already set up in their EBPP programs. These are typically for recurring household bills, but can be made to any person or business (commonly referred to as a "pay anyone" service, which is offered by most large consolidators and banks). Most payments go through electronic channels (ACH, Credit or debit card networks.) Due to the prevalence of pay anyone options some payments are fulfilled by printing and mailing paper checks.

There are several variations on the consolidator model, based upon product and service offerings of the consolidator and the involvement of biller service providers. The main difference in these model variations has to do with the amount of billing data transmitted to the consolidator for storage and customer access.

The so-called "thick consolidation" model refers to the transmission of full bill detail to the consolidator, while in the "thin consolidation" model only summary-level data is transmitted. In this model, if the consumer wants to access bill detail, she/he hyperlinks back to the biller's site.

Other variations include different payment methods supported, degrees of control over payment offerings and channels, biller administration functions, marketing capabilities, and pricing.

Sample of thick consolidation
Consumer Consolidation Model

The consumer consolidator model is the only one that currently enables consumers to view all their bills via the web, if they so choose. This is accomplished through a 'low-tech' approach of routing all paper bills to a service center for scanning into pdf formats, which can then be viewed online.

There are generally no interactive capabilities with the bills and all additional bill content (statement stuffers, regulatory notices, etc. ) are trashed. The service provider's site has a handy user interface for organizing and viewing bills and entering payment options. Some even offer storage of historical bills online or on a CD. After the consumer views his/her bills and sends payment instructions back to service provider, the service provider then transmits these instructions to a bank or other payment processor for fulfillment.

Consumer Consolidation Model

A Comparison of the Models

Key Model Characteristics

There are many product and service offerings which provide a single-point gateway for high-volume mailers to extract information from legacy systems and send the data to bill consolidators, consumer service providers, or the companies web site.

The attention B2B e-commerce is receiving is just short of phenomenal. The treasury departments involvement in e-commerce is extremely strong, even where it does not directly involve the payment process, such as electronic order entry.

There are fundamental differences in the market drivers between the b2c and b2b markets. While a growing majority of companies plan to increase their use of the Internet to deliver invoice and payment information to other companies, there are significant operational barriers to implementing wholesale changes to the payment process. The most significant challenge for most companies is the integration to a legacy billing and receivables system.

In the B2C market the main driving force is reaching out to consumers and building better relationship which foster a product loyalty which hopefully translates into the consumer increasing their purchases. In the Business to Business market cross selling and up selling are less important. What is important is reducing expenses and accelerating the flow of funds.

There are five B2B catalysts stimulating the adoption of B2B Solutions:

  1. Increasing experience with Web technology
  2. Consolidation of industry standards
  3. Simplification of application technologies
  4. Increasing stickiness in B2B technologies
  5. Cost savings and new revenue opportunities

While e-commerce initiatives are becoming wide spread, Corporate EBPP is likely to follow the slow and steady acceptance pattern the industry experienced with Financial Electronic Data Interchange (FEDI). Using the Automated Clearing House (ACH) as the payment vehicle the Internet is bringing affordable technology to small and mid-sized businesses that allows them to participate in e-commerce just as FEDI provided the means for large corporations to deal with their major trading partners.

The addition of smaller trading partners will accelerate each year but transaction volumes are likely to remain low until industry standards are developed and companies are able to modify or replace their IT infrastructure to take full integrated advantage of web based applications.