Who will pay bills online?
Though various firms are busy announcing pilots for online bill payment, the rate of consumer adoption remains unclear.
Industry watchers and observers are trying to figure out how quickly bill presentment--viewing routine bills online--and bill payment will catch on with consumers.
Bill presentment has been a hot topic in recent weeks, as utilities, banks, Web sites, and technology providers announce pilots, alliances, and business models. But the question remains: When will consumers show up?
For billers, the economics are compelling: Industry estimates put the cost for each bill mailed to a customer at $1 to $2.50 by the time printing, envelopes, postage, and personnel are factored in.
"You can easily save 40 to 50 percent of billing unit cost," said Kevin Duffy, manager of consumer billing strategy at AT&T, the largest U.S. biller, which has several bill presentment initiatives under way. Add to that the opportunity to use online billing to market additional services and to cut down on calls to customer service.
"Big telcos need a relatively low adoption for this to pay for itself," said Nancy Goldberg, vice president of interactive billing and payment services for Internet payments firm CyberCash. "With their millions of consumers, they only need 1 or 2 percent penetration."
Where billers see savings, banks and service providers see a chance to make a buck helping billers get more efficient. The competition, so far more words and pilot tests than real action, is getting intense as banks try to keep others--including the MSFDC joint venture of Microsoft and First Data Corporation--from horning in on a business that financial institutions think is rightfully theirs.
But consumer adoption represents a classic chicken-and-egg conundrum: Consumers won't want to check their bills online until enough billers to make it worth their while to present statements on the Web. Moreover, billers don't want to invest in setting up online systems until enough consumers are using systems to justify their cost.
"We enabled the client in Quicken 98 to get over that chicken-and-egg problem," said William Harris, new chief executive of Intuit, which since December has quietly presented for Florida Power & Light on its Quicken.com Web site. Quicken 98 is Intuit's latest personal finance software.
Intuit thinks Quicken users want to view bills within that application because that's how they pay them, said Nancy Tubbs, Intuit senior product manager.
But that is not the only approach. Banks think their online banking services are logical outlets to present and pay bills; some billers want to present bills from their own Web sites; a crop of "bill consolidators" also is emerging. Consolidators take bills from multiple vendors and put together a one-stop location for most of a consumer's bills.
"The muddle created by multiple models may slow growth in this technology initially," said Scott Smith, Internet commerce analyst at Current Analysis. "Multiple models will be necessary, though, to meet customer demand."
Smith expects consumers will begin using Net-based billing later this year in pilots, but doesn't see widespread adoption--on the scale of today's home banking, for example--until 2000 and beyond. Intuit CEO Harris largely agrees.
"Seamless integration with existing financial services such as [online] banking and brokerage is what will be necessary for bill presentment and payment over the Internet to take off," Smith predicted, adding that billers and service bureaus must execute cleanly or risk slowing consumer adoption.
"Once these models fall into place, consumer demand will be great. The obstacles will be the technology companies and billers themselves," he added.
One such obstacle is the Year 2000 problem, said Warren Dent, senior vice president of business development fir MSFDC. Banks and big billers with critical data on mainframes put top priority on fixing the millennium bug, and some see Net-based customer service as more strategic than online billing. Electric utilities, key candidates for putting bills online, are struggling with the challenges of deregulation.
AT&T has had online bills on its Web site since early March but hasn't promoted that feature aggressively. "We just wanted to make sure it's working properly first," said Duffy, who declined to provide figures on usage. MCI Communications also makes customer bills available on its Web site.
"The consumer experience has to be great, and it has to be better than what they already have [in printed bills]," said Tubbs, adding that Intuit expects to add four more billers to Quicken.com in the next few months.
CyberCash this week announced a pilot with America Online's Digital City in Washington. CyberCash will try to convince regional billers to participate in a CyberCash advertising program that would take consumers to a Web page that lists participating billers. Consumers can click to be transported to a biller's site to see the bill, then pay using CyberCash.
"We want to see how a geographic focus works," CyberCash's Goldberg said, adding that the program, if successful, could be expanded to other regions via Digital Cities.
Most insiders think a critical mass of consumers are already comfortable with using the Net and shopping online, an attitude they believe will make consumers more comfortable with online billing.
"We think it will take off a lot faster than online banking or online bill-paying," said Tubbs, who expects several million people to look at their bills online in the next few years. "I don't think the consumer is the issue here."