Save Money, Satisfy Customers with Internet Bill Delivery and Payment
By Ralph Young
Keeping customers happy while controlling costs remains a top concern for utilities facing the complex implications of deregulation. With utilities looking into ways to extend new services to their customers, new technologies such as those spurring the growth of the Internet offer real promise.
Today consumers are trying out the Web for online purchases of everything from books to clothes to new and used automobiles. Consumer use of the Internet is growing at a phenomenal rate. How long will it be before utility customers are buying their electricity, water, gas and/or phone service on the Web?
Sooner than you think. Some consumers–even some utility customers–are already paying their water and electric bills over the Internet. For two or three years, customers have been able to use personal finance management software like Microsoft Money to pay their utility bill each month instead of writing out a check by hand and putting it in the mail.
This system has meant great convenience for consumers, but not much for billers since paper checks are still delivered to them from the consumers` banks–until now. Today, the whole process of using the Internet to deliver bills and return payments has taken a giant leap forward.
Internet bill delivery and payment, the latest development in billing technology, revolutionizes billing by offering the entire process online–from presenting bills to consumers to delivering payments to billers. Utilities that have worked hard to squeeze costs out of their billing procedures will discover opportunities for significant cost savings with Internet bill delivery and payment. When customers choose to receive and pay bills on the Web instead of on paper, utilities will save on printing, paper, postage and payment processing costs.
Customers will appreciate the added convenience and simplicity when they can pay with a keystroke or the click of a mouse–no checks to write, no remittance coupon to fill out, no envelope to stuff, no stamp to buy or stick. Altogether there is much less chance for human error. That means utilities can get clean remittance from online customers, reducing overhead for handling costly exceptions. Plus, utility customers can go online to check the status of their payments, reducing calls to customer service representatives. In addition, electronic bills (e-bills) can enhance the customer relationship by allowing more complete, up-to-date and interactive communications.
Sound optimistic? A 1998 report by industry analysts at BancAmerica Robertson Stephens estimated that one million bills would be presented on the Internet in 1998. By the year 2000, the analysts expect this number to reach 500 million, approximately 3 percent of all consumer bills in that year.
Today, a number of forward looking utilities are piloting Internet bill delivery and payment projects with plans to move customers away from the more costly paper-based system as quickly as possible.
With this promising opportunity on the near horizon, utilities need to take a closer look at how they can take advantage of the new technology without taking a wrong turn on the information highway.
What is Internet Bill
Delivery and Payment?
Internet bill delivery and payment presents bills, statements and invoices via the Internet to any PC or Web-enabled TV, and, through the instruction of the recipient, returns payment and remittance information to the biller or designated lock box. This round-trip greatly simplifies data processing for billers, consumers and their respective financial institutions. The cost for this round-trip transaction for the biller is expected to be less than the cost of a first class stamp–a huge savings in paper handling all around.
Customers no longer have to transcribe information from the bill to their check and the remittance receipt, stuff an envelope, find a stamp and get to the post office on time. Payment decisions are executed online with the click of a mouse. Remittance information is created automatically, allowing virtually no chance for error. Billers and their agents no longer have to process paper checks and re-key the information into their databases.
Billers also have the opportunity in this new online era to market additional services and products to customers on a more targeted basis. This opportunity will help develop stronger relationships and customer loyalty through interactive customer service, special offer marketing and overall one-to-one marketing dynamics.
How Will Internet Bill Delivery Work?
Until recently, a customer could pay a bill electronically, but on the back end of the transaction, a paper check, was sent to the biller. While this mode of payment has grown in popularity because of increased convenience for customers, it has proven both cumbersome and costly for billers. Some bill service providers aggregate electronic payments for billers in batches, providing a single check along with a list of payments by individual account number. This “check-and-list” method of payment with its extra data entry requirements must be handled as a costly exception in most payment processing operations. The check and list hassle can be circumvented with a round-trip system of Internet bill delivery and payment.
Several methods of Internet bill delivery and payment have been proposed. In order to succeed, the method must, above all, be convenient and useful for customers.
Some large utilities have proposed simply posting their customers` bills at their own Web sites. While this at first may seem logical from the utility`s perspective, it runs against customer habits and expectations. Today customers are used to receiving all their bills in one place. They don`t want to go to one site to receive their power bill, another to look for their phone bill, a third to check on their credit card statement and a fourth to see what they owe the water company this month. When they are ready to make payment decisions, they want all their bills together in one place.
In addition, most utilities don`t have the internal resources to support an around-the-clock Internet bill presentment at their own Web site. The operational overhead would have to include customer authentication, 24-hour-a-day, seven day-a-week Internet operations with full-time customer support, real-time links to billing and accounting systems, and the secure data backup requirements of a full-fledged online service.
These points recommend a secure central service–a consolidator model–that aggregates bills for individual customers, presenting all the bills together in one place when the customer is ready to make payment decisions. These service types can leverage economies of scale to optimize performance, keeping costs down for all participants.
How will customers receive their bills from this service? Traditionally, when it comes time to pay bills, customers reach for their checkbooks. That`s why customers` financial institutions are the most logical distribution points for e-bills. Most analysts agree that customers will go to their bank`s Web site to review their bills, check their accounts and make payment decisions. Banks are already well established as trusted partners in the customer`s bill paying habits.
How Will Utilities Deliver E-Bills, Receive Payments on the Internet?
From the utilities` perspective, the consolidator system is relatively simple. Statements or bills that would have been printed are rendered instead as e-bills (Web pages) and sent electronically to an Internet bill delivery service center. The service center consolidates bills from many billers so the customer can find all of his/her bills in one place. The service center is in turn linked to the customer`s bank Web site.
Participating banks authenticate the customers and make the service more attractive and useful for them by providing their individual account balances along with their bill payment status. Customers visit their bank Web site and select the “Bills” function, which seamlessly lets them view their e-bills from the service center. Customers then review their bills, respond to any on-bill communications from the biller (including the biller`s own regulatory notices, advertising, and cross-promotions), and arrange payments.
Electronic remittance information–the equivalent of a clean remittance coupon–is returned to the biller. Payments are routed electronically to each biller, the biller`s bank (lock box) or the biller`s payment processor in the manner that the biller has specified.
How to Get Started
Internet bill delivery and payment offers many advantages to companies. As testament to these benefits, many of the nation`s largest oil, electricity, telecommunications and credit card companies are in the process of testing the service right now. Southern California Edison, Consolidated Edison of New York, and Philadelphia Electric Co. (PECO) are among the utilities currently testing Internet bill delivery and payment with TransPoint.
The benefits of participating in Internet bill delivery and payment are clear. The sooner customers can choose to receive and pay their electric bills on the Internet, the sooner utilities will start to reduce the costs associated with paper billing and payment processing.
As utilities begin to investigate their options for Internet bill delivery and payment, it is important for them to focus on four key goals: reducing costs, maintaining control of the billing and payment process, maximizing distribution and customer adoption, and choosing capable partners. n
Ralph Young is the Executive Vice President of Sales and Marketing for TransPoint, formerly MSFDC, a joint venture between Microsoft and First Data Corp. with Citibank as a minority equity investor. TransPoint is developing a fully integrated system for Internet bill delivery and payment. For further information about TransPoint e-bills, visit http://www.transpoint.com.
Editors Note: This article is the first of a two-part series on consolidated electronic billing. Part two, which will appear in the April issue, will detail Philadelphia Electric Co.`s pilot billing project and the utility`s transition from traditional billing methods to Web-based billing.
E-bills can be delivered via the Internet to any PC or Web-enabled TV.
E-bill recipients can receive detailed information about any or all of the bills that are presented on a consolidated bill.