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EDS services offer two ways to pay

Electronic Data Systems rolls out a services package for financial firms that want to move to support both paper and electronic billing yet are stymied by aging computer systems.

Electronic Data Systems today rolled out a services package for financial firms that want to move to support both paper and electronic billing yet are stymied by aging computer systems.

Plano, Texas-based EDS's initiative, called Integrated Payment Services (IPS), is part of the firm's overall strategy to ink contracts with firms with enormous billing needs, put their content online, host their Web site, and deliver billing data to their partners and customers.

Through Integrated Payment Services, EDS will host services--from bill presentation to automated pay-by-phone to statement printing services--at EDS data centers. Pricing includes an initial set-up and installation fee, depending on the size of the project, and additional per-transaction charges.

With its services, EDS, which partners with electronic payment software firm Checkfree, is predominantly targeting the fastest growing market for electronic business: the financial industry, including banks, mortgage companies, credit card firms, and insurance companies.

But telephone companies, utilities, large retailers, and health care organizations are good candidates for online presentment and payment services as well, EDS executives said. Among the EDS customers now testing electronic billing services are PNC Bank and EDS outsourcing partner MCI WorldCom.

Online bill presentment saves billers on labor and postage costs, and getting paid electronically can reduce the costs in receivables and improve cash flow.

But the market is new and analysts say firms still have a long way to go to change how customers receive and pay bills. Last year, of the 61 billion repetitive bills issued worldwide in 1998, just 1.8 billion were presented electronically and only 7 billion were paid electronically, according to market research firm Killen & Associates in Palo Alto, California. The firm, which defines a repetitive bill as a monthly payment such as gas, phone, and electric, estimates IT spending for upgrades on corporate customer care systems for billing will reach $10 billion by the year 2005.

For that reason, the market for electronic payment services and software is becoming increasingly competitive among major technology providers, billers, and banks. Market players include the TransPoint joint venture of Microsoft, credit card processor First Data Corporation, and Citibank; CheckFree's alliance with AT&T, and IBM's Integrion joint venture with Visa and others. American Management Systems (AMS) is also partnering with Internet billing technology company Just In Time Solutions.

Karl Duffy, a vice president at Killen & Associates, said he expects there will be more than one big winner in this payment services market, though EDS now offers customers a comprehensive package to ease billing woes.

"They're willing to work with EDI (Electronic Data Interchange), business payment systems, and legacy systems," he said. "They can build on top of that and make things run."

"The nice thing about it is they take what the customer wants to do and work with that, rather than saying [all transactions] will be over the Internet. It's basically open-ended and the customer is king."

But it will be the end users who ultimately decide whether they want to receive their bills over the Internet, said Kip Martin, analyst with Meta Group in Stamford, Connecticut.

"You have to find some way to convince [users] that this is faster, easier, and cheaper than getting bills through the mail," he said. "To date, no one has come up with a convincing reason for using this other than it's interesting and cool."