Bank of America preps "all-in-one" billing

The pilot, launched in March and soon to involve more than 1,000 BofA employees, is a major move as banks, billers, and technology companies jockey to use the Internet to present bills to consumers online, then allow online payments.

BofA, the largest U.S. bank, has built its own software for its service, unlike Citibank, which in September joined Microsoft joint venture TransPoint, an outsourcing service for banks to present bills to consumers.

"Banks have a very significant role in presenting bills--they want to maintain control over the transactions," said Erica Rugullies, an e-commerce analyst with Giga Information Group. "Also, the bank's Web site is a primary place consumers will want to go to view and pay bills."

"This allows Bank of America to leverage the large national reach we have, across consumers, billers, and small businesses," said Jane Wallace, Bank of America senior vice president. As a result of last year's merger of Nationsbank and Bank of America, the institution claims 30 million household accounts in 22 states and 2 million business customers.

Bank of America has carved out a strategy that skirts efforts by TransPoint and CheckFree to control access to companies that bill consumers monthly, such as utilities, cable TV firms, credit card companies, and mortgage lenders. Those two "consolidators," or middlemen, are signing up billers, then taking their clients to banks that want to offer electronic bill presentment and payment (EBPP) services.

Instead, BofA will go direct to billers among its 2 million business customers, including 80 percent of the Fortune 1000.

Furthermore, Bank of America will host the billing data itself, let billers host their own bills and send only summaries to the bank, or let billers pick their own hosting service--even if it's another bank.

But BofA's real strength is its 30 million households, all with bills to pay. Of those more than 1 million are already banking online. (For competitive reasons, the bank won't disclose how many customers in California, where the service will debut, do banking online.)

But analyst Rugullies thinks consumer adoption will be slow.

"Today's online billing market [can be seen] as a bowl of spaghetti, with billers, software companies, service providers, consumers, corporate bill payers, and standards bodies," she said. "Everybody has their own opinion, business drivers, and conflicting interests. It's really slowing things down."

Y2K worries likewise will hinder adoption until the second half of next year, she predicts. Online bill presentment is designed to get rid of paper, but the biggest piece of advice for preparing for Y2K is to get paper copies of all documents, she notes.

Bank of America will use its own bill-payment engine, which now handles more than 1 million online payments a month, in the new service.

"One of the most important components left out of bill presentment is what happens to payments. We wanted to ride existing rails--when a biller receives a payment, we are sending those payments their existing accounts receivable postings," Wallace said.

That means the new category of payments can be dropped into their existing cash management systems without adapting the technology. The bank says that when online consumers make bill payments today, 66 percent of the billers get paid electronically, as opposed to cutting a paper check. That compares with an industry average of 41% of billers paid electronically.

To achieve that level of flexibility, BofA is basing its system on the Online Financial Exchange (OFX) protocol, a standard that's being merged with a rival protocol used by Integrion, a consortium of big banks that use IBM as its technology provider.

Still, while online billing standards remain in flux, BofA's big bet on OFX will strengthen its hand in standards politics.

"We felt that standards are important to overall massive adoption, and we felt we needed to stay true to OFX bill presentment, both on biller and the consumer side," said Wallace. "So if a biller purchases an OFX server to present bills, we could certify those messages; that means handling those bills with no additional technical difficulties."