The Advantages of Having Bills Paid at Your Own Web Site

There are many advantages to hosting customer bill paying capabilities at your own Web site rather than consigning them to a third-party payment concentrator.

As the Internet continues to consolidate its position as the greatest convenience device since, well, the telephone, the newest wrinkle to emerge is Internet bill presentment and payment. Across a variety of key industries, major billers are beginning to use electronic bill payment as a way to draw customers to their Web sites. Of all the major billers in the world, telephone companies, both wireline and wireless, have perhaps the most to gain from this new customer contact point.

While Internet, or interactive, billing presents cost savings and float-reduction benefits, it's the unparalleled marketing benefits that makes it even more compelling for telcos. More than just a way to streamline receivables, interactive billing lends itself to customer convenience, one-to-one marketing, cross-selling, churn reduction and overall brand reinforcement opportunities. Key among these opportunities is the chance to more fully leverage the massive volumes of up-to-the-minute billing and usage information that telcos have on each customer to add significant value to customer accounts and subsequently build account loyalty.

Biller Direct vs. Payment Concentrators

Given the stakes, telcos moving into interactive billing need to craft their Internet bill presentment and payment strategies to take full advantage of the billing touchpoint as a competitive tool...and not leave any of its inherent marketing opportunities on the table for others to pick up. Already, companies investigating interactive billing are falling into two camps. The first, the biller direct model, involves hosting the interactive billing function at the company's own Web site using it as a lure to build traffic. Once the customer is at the site, any number of features can be presented to further cement the service provider/customer relationship. In this direct model, the biller maintains complete control over the payment process, which includes making and enforcing all consumer privacy decisions.

In contrast, the payment concentrator camp advocates hosting bill presentment and payment at a third-party service bureau, payment concentrator's Web site or a financial institution. Here, a telco's bills are listed with any number of other service providers' payment obligations...gas and electric bills, water bills, perhaps even a competitor's bill. In this scenario, much of the implementation burden is off the biller's shoulders, yet opportunities for strengthening the customer relationship are significantly reduced. The bank's or third party concentrator's logo and corporate image are typically reinforced, not the telco's. And it's the third party that is in charge of consumer privacy concerns.

In weighing the merits of these two camps, it's important to keep the customer's point of view in mind. It stands to reason that strategies that provide the most value to the customer will deliver the most benefits to the telco over the long term. Yes, substituting bits and bytes for checks, stubs and envelopes promises to reduce both inbound and outbound float to next to nothing. Over time companies will see a significant reduction in monthly batch processing for account updates, statement rendering and printing, less folding, stuffing, metering and sorting. Mailing delays and processing bottlenecks due to paper handling and manual exceptions will diminish. Instead, telcos will enjoy greatly reduced production and processing costs coupled with near-next-day availability of funds. But for all this to happen on a scale large enough to make a difference, customers must clearly see the value to themselves or they're not going to play.

Concentrating on the Customer's Desktop

Let's start with where the World Wide Web meets Mr. or Ms. Bill Payer. Much has been made of the ability of third-party payment concentrators to deliver a single, convenient online location for paying all your bills, all at one time. You go to the concentrator's site, and get it all over with. Yet if you're looking for an appropriate point of electronic bill paying concentration, the consumer's own desktop PC or webtop provides the same improvements over paper-based bill payment without many of the drawbacks of the concentrator method. In other words, instead of multiple pieces of paper arriving in multiple envelopes, requiring multiple written checks and multiple mailed replies, the consumer's PC and browser software provide a single and relatively simple interactive interface where all this comes together.

Using the biller direct model, consumers are able to maintain their existing banking relationships, pay their bills at their own pace, and take advantage of the latest browser and Web technologies. These include electronic checks for making secure payments over the Internet, as well as new browser features that now let users conveniently arrange and quickly navigate through their payment obligations. But it's already a fairly simple matter to go directly to any biller's Web site to pay a bill without relying on third-party intervention (which someone eventually has to pay for, one way or the other), and without having to load and learn third-party homebanking software.

By the same token, a telco desiring to receive its money from a payment concentrator service typically has to commit to the service's proprietary closed interface. This commitment generally entails giving up control of the timing and settlement of funds, thus negating many of the cash management benefits of interactive billing. It also limits a biller's flexibility in making changes to its overall billing systems and processes down the road. On convenience and flexibility alone, the biller direct model is superior to the concentrator model. But the direct model also makes room for a wealth of profit-producing value-adds the concentrator model cannot accommodate.

Captive Audiences

When customers arrive at your Web site, you have their full attention...briefly perhaps, but you do have it. It's your logo they see, and your corporate messages. You are not just another cipher on a long list of payment obligations. And it is the bill that brings them there. Once the customer is at a Web site to discharge that duty, the door is open to strengthening customer relationships through highly personalized electronic dialogs. For example, the payment process can be woven into other cross-sell content to increase product penetration rates by promoting complementary services such as adding another phone line. Plus, advertisements for related services can be sold to other companies for an additional revenue stream: personalized statement stuffers. With the concentrator model, the third-party concentrator profits from the ad sales and cross-selling opportunities.

Leveraging Information for Competitive Advantage

But perhaps the biggest payoff for a telco, with its wealth of call detail data, is that the biller direct model allows it to more easily add value and distinguish itself competitively by packing useful information-based services into its customer interactions. For example, Web-based functions can empower individual consumers to analyze their telephone usage in ways that are personally meaningful to them...sorting call detail as they choose for business bill-back and expense account purposes. One role model worth emulating is American Express, whose small business customers can use its interactive billing capability as a cash management tool to create individualized review processes for themselves. Here the billing process has become a potentially daily customer interaction mechanism, building customer loyalty not just before and during a sale, but after it as well.

Providing this type of information-based value-add at a concentrator's site is next to impossible. Much of it would hinge on rapid access to large amounts of account data and analytical functions operating on the telco's own Web server. Only the telco's Web site could accommodate this level of detail and functionality. Customers could always click on a hot link to take them from the payment concentrator's site to the telco's site. But if your strongest customer value-adds and marketing opportunities are on your own Web site, why send them to the concentrator's site first? By doing so, the telco runs the risk of its important messages being relegated to secondary and tertiary frames under the concentrator's control. The concentrator remains the primary onscreen presence and influence, pulling the customer back after a brief visit to your Web site. Your customers are much more likely to linger and take advantage of a telco site's options when it is a clear bill-paying destination. And, conversely, if they are already coming to the telco's site to run the numbers, evaluate new phone services, access call data for expense reports, and so on, it's inconvenient to go elsewhere to pay the bill.

Risky Business and Other Privacy Matters

So far, we have discussed issues revolving around adding value to telco/customer relationships. But subtracting value is a potentially major issue as well. This is the whole issue of Internet privacy, a major concern of consumer rights groups, businesses and government alike. Visibility into one's finances and bills...particularly telephone bills from which so much information can be gleaned...is a major privacy hot button for most people. Witness the recent negative press heaped on one of the country's leading credit bureaus when several of its Internet customers erroneously received other peoples' credit reports. Similarly, telcos need to move carefully in the interactive billing arena to avoid upsetting their customer relationships. There are essentially three ways to ensure consumer privacy on the Internet: self regulation by the companies that hold consumer information, technology that somehow regulates privacy, and government intervention. Most companies would choose one or both of the first two paths. But if there are too many excesses or too many mishaps, then we will all move farther down the path to government regulation. The biller direct model has the advantage of emulating the paper world, but without the paper. Bills are controlled and secured by the telco, making it fairly easy for the telco to regulate itself. The telco decides what information can be made available to whom, and protects it with its own verified security measures and active controls.

In the concentrator model, third-party security and data integrity measures enter the picture, along with third-party intentions. When a third party enters a relationship, the original relationship is distorted. Software cookies can be planted on customers' hard drives, their click-streams can be analyzed and so on by the outside service bureau. Suddenly the telco is less in control, both over honest mistakes such as credit bureau errors, potential excesses and even possible illegalities. Liability becomes a factor, as you are responsible for your agent's actions. All you really have is a contract, and trust and hoping. In short, in this situation the opportunity for self-regulation has been abdicated, along with the chance to deploy the technologies that can control security and assure privacy.

Implementing Successful Interactive Billing and Payment

The payment concentrator model typically offers a packaged approach. As a service bureau, the concentrator takes on the burden of accepting payments, verifying their integrity, and posting the results to the biller's backend accounting systems and the biller's bank. In exchange, the biller loses some flexibility. This might include losing the ability to establish your own posting algorithms for providing credit to customer accounts, along with the ability to accelerate electronic remissions directly to your depository institution (there is an opportunity for a float to be involved that is not present in the biller direct model).

The biller direct model, on the other hand, is made possible by recent advances in secure Internet payment processes and software that place nonproprietary and inexpensive payment capabilities in the hands of consumers. These payment methods now include electronic checks and secure credit card payments over the Internet. As it stands, both billers and consumers are used to recurring payment obligations being fulfilled by checks (the least costly payment mechanism for the recurring biller). Thus, it is the advent of electronic checks that is kicking interactive billing into high gear across the Internet.

Technology Is Here Today

Empowering users to make direct payments at a telco's Web site is simply a matter of deploying electronic cash register software to accept electronic checks and/or credit cards. This software is readily available to run on standard Web server platforms, and uses advanced encryption to securely deliver electronic fund transfer (EFT) requests directly to the biller's bank for processing. At the same time it provides the electronic payment information needed to update the telco's accounts receivable system and post the payments according to the telco's own business rules and PUC guidelines.

Meanwhile, all the bill-paying customer needs is a browser and access to the Internet. Leading browser software, including Netscape and Internet Explorer, now include bookmark features that allow consumers to group their obligations in one payment folder on their own Webtop, as opposed to relying on an third-party concentrating service or financial institution. Even newer technology allows Web users to subscribe to specific sites, such as a telco's. Once a user has subscribed, billing and other specified information can be downloaded to the user's PC at pre- determined intervals, providing an offline medium for viewing billing obligations where the information is constantly updated.

Opportunity on the Line

When you combine these new technologies with the added value that bill payers derive from paying directly at a biller's site...the immediacy and convenience, the information-based services and so on...the consolidation offered by concentrators is a weak selling point. Internet bill payers will go where the value lies, and can easily consolidate their payment obligations on their own Webtop. If regional phone companies, long distance carriers, and cellular carriers alike want to use Internet bill presentment and payment to forge closer and stronger links to their rate base than ever before, they will choose biller direct. Richard K. Crone is vice president and general manager for CyberCash, Inc. He is responsible for the company's PayNowª Secure Electronic Check Service. He can be reached at 650-413-0165 or at rcrone@cybercash.com.