Posted: 01/2001

Billing/OSS

EBPP Usage Has One Way to Go: Up
By Chris Garifo

Consumer adoption of electronic bill presentment and payment (EBPP) has been
less then thrilling. While many industry experts shrug it off as a temporary
state of affairs, at least one analyst says the viability of EBPP from consumers
is flawed.

"It’s the business segment that’s really going to drive [EBPP],"
says David Hawley, an associate analyst in the telecom e-business planning group
at the Yankee Group (www.yankeegroup.com).

Hawley says it is a mistake for the telecommunications industry to focus on
the consumer segment, explaining that residential consumers will look to online
payment portals, to pay all their bills at once–not just their telecom bills.

Chart: Electronic Bill Payment and Presentment Households

But Hawley’s views do not agree with those of Jupiter Research (www.jup.com)
senior analyst James Van Dyke, who predicts that Internet payments will become
the norm.

"What ‘killer apps’ such as person-to-person payments and Internet
billing will do is attract hordes of consumers and businesses to electronic
payments, by creating gains in convenience and even security," Van Dyke
testified last September before the House Committee on Banking and Financial
Services. "It makes one wonder how long it will be before coins, paper
currency, and even mailboxes are cute and antique vestiges of a bygone
era."

The committee examined what changes might be necessary in the law,
marketplace or in consumer confidence to make new electronic payment
technologies available more rapidly.

While Jupiter Research predicts that more than 40 million households could be
using EBPP in 2005, consumer confidence is blamed for the low usage levels
service providers currently report.

Getting a Tepid Response

One specific example of these low levels comes from Matrix Telecom (www.matritele.com),
a Fort Worth, Texas-based CLEC. According to president of DCA Services Inc. (www.dcaservices.com)
Rick Nagel, the Matrix customers using EBPP services only reach between 2 and 3
percent.

Nagel says some of the reasons for those low numbers are the different
components to EBPP-type and other customer self-care applications, customers who
are not accustomed to using the web for making payments, and the portal’s
self-service capabilities.

What this means is that customers’ simply feel uneasy in using the Internet
as a vehicle for commerce and to troubleshoot service issues and problems.

"Until more and more people begin trusting the feedback mechanisms of
the Internet–its confirmation that what they want to have take place actually
takes place–they’re going to continue relying on the human element to give them
that sense of security that things are actually being looked at and taken care
of," Nagel says.

He adds the industry still remains cognizant that nearly every U.S. home has
telephone service; the number with Internet service is much lower.

Crowded Space

While EBPP usage is below what the industry may wish it were, that is not
because the providers are not out there.

"The EBPP space is crowded," says Derrick Van Grol, vice president
of sales and marketing for Info Directions Inc. (www.infodirections.com),
a provider of web-enabled billing solutions, including OnlineBill.

Despite the crowded field, potential customers don’t seem willing to pay the
bucks because, with industry margins growing tighter, they don’t want to be
saddled with the financial burden of the back-office billing solution, but
because they want to market themselves as a "next-generation" service
provider, with the EBPP capability, that signals to customers their next-gen
status.

Van Grol says that of Info Directions’ 90 installations, four customers use
its online billing product.

Those four are driving online behavior, "which means you’re going out
and you’re profiling and targeting the type of user who is Internet savvy and
prefers a paperless bill [but] isn’t afraid of the security issue," Van
Grol says.

What makes that effort problematic is that regulatory agencies aren’t ready
to allow service providers to discontinue issuing paper bills to their
customers.

Van Grol says service providers who want to increase EBPP usage won’t be able
to give customers the same choice grocery stores do: paper or plastic.

"As you sign [customers] up for service, they just click a box that
tells them that they’re going to be rendered an electronic bill," Van Grol
says. "They input their credit card number and off it goes. But if you’re
not driving that online behavior, they’re going to go with the paper bill
[because] people are used to it."

Michelle Nowak, Info Directions vice president of product management, adds
that the generation gap complicates the EBPP effort.

"You have to remember the large amount of customers who are receiving
telephony bills today are not as Internet savvy," Nowak says. "It’s
the generations below them that have the Internet wherewithal and want to use
it, but they’re not necessarily the bill payers at this time. … It’s not the
kids in college right now, it’s [their] mom and dad who won’t go online and pay
a bill."

Jack Roney, vice president of investor relations for billserv.com (www.billserv.com),
an EBPP service bureau, says it is not surprising that usage rates are low.

He points to factors such as customers’ comfort zone, security, privacy and
the industry’s hesitancy to embrace the technology until consumers and
businesses signal they’re ready to accept it. He says his own 2-year-old company
didn’t anticipate profitability at this stage.

"But it’s just like ATM machines when they first came out," Roney
says. "I was even a commercial banker at the time and I walked right by
them to go stand in the teller line. The way people adopt new change and new
technology, it’s just somewhat slow. But now you can’t live without ATM
machines."

Start Spreading the News

Roney suggests that the industry needs to raise awareness of the EBPP
technology. If that happens, he predicts the adoption rates will "pick up
markedly" during the next two or three years, pointing to Jupiter
Research’s forecast that EBPP adoption will climb from 100,000 U.S. households
in 1999 to 2.8 million in 2001 and 6.8 million in 2002.

The Yankee Group’s Hawley adds that while it is inevitable for consumers to
begin using EBPP in greater numbers, it’s the business side that will find the
greatest appeal.

Part of EBPP’s allure will be that it provides businesses with the ability to
sort through online data rather than wade through reams of paper to glean a
variety of important data, such as which employees called who, how much the
calls cost and whether the calls were authorized.

"To be able to flip back through that in an electronic format is really
going to appeal to [businesses]," Hawley says.

Hawley admits that security could be a concern. He adds that those worries
are addressed by safeguards such as 128-bit encryption and other security
setups.

"They’re very secure," Hawley says. "That’s really just
another issue of business consumer education and letting them know how secure
the transactions really are."

Hawley says that businesses also must view EBPP as an element of an entire
customer self-care system that will require an appropriate back-office operation
to support it.

After that, the three keys to drive businesses to EBPP adoption are:
education, education, education.

"It’s that simple," Hawley says. "You could write a 20-page
paper on [EBPP’s benefits] easily."

Service providers have to reach the right people in a corporation, show them
the benefits of an electronic-based system, and make sure they’ve got the
back-end systems to support that, Hawley says.

A Success Story?

BTI Telecom Corp. (www.btitele.com), a
facilities-based ICP headquartered in Raleigh, N.C., is one success story with
its EBPP portal, called Online Invoice.

The system was deployed in May, and the company’s director of information
services, Pam Schaard, says BTI launched a marketing and sales strategy that
focuses on driving customers to using Online Invoice.

The strategy includes incentive giveaways and an effort to constantly remind
customers about its Online Invoice option and encourage them to use it, even
talking them through the process of using it while on the phone with them.

Another key is BTI’s Customer Ownership Program (COP), which assigns at least
three customer accounts to each BTI supervisor or management member.

"You own those accounts," Schaard says. "You are to nurture
them (and) take care of them." The result is that COP has been successful
in steering customers into Online Invoice usage.

Schaard says BTI saw an 18 percent increase in customer usage in October
compared to September, and she said she expects that success to continue into
2001.

The portal (www.btitele.net), which
includes a Reuters news feed, averages about 650,000 hits a month, though not
all of those hits are from BTI customers, she says. However, about 20 percent of
BTI’s customers do use the site to pay their monthly bills. Most of those
customers are businesses.

A surprise in usage of Online Invoice has been the number of businesses that
have been paying online with credit cards or automatic bank drafts (referred to
as ACH for automatic clearinghouse), Schaard says. With ACH, a customer signs up
for automatic payment of the bill and BTI automatically processes the
transaction to the customer’s bank, eliminating the need for the customer to
write and send in a check.

"That saves our customers money," Schaard says.

"You wouldn’t think a big business would pay with a credit card,"
Schaard says. "Maybe they’re getting frequent flier points."