MIS 3090 IT for Financial Services Electronic Bill Presentment and Payment Please use this space for making ANNOTATIONS or for adding comments to individual slides. April 22, 2017

Business Landscape Billers today are As a result Billers are demanding Facing pressure to acquire, retain & reach customers Under stakeholder pressure to drive down costs As a result Billers are demanding Technologies that enable cost savings Technologies that enable customer relationship management (CRM)

Consumer Landscape Consumers today are Busier More demanding Striving to reduce costs where possible As a result Consumers are demanding Convenience (time is money) Greater control of their finances Better, faster, smarter way of doing things 35 million U.S. consumers are paying bills online; this is expected to increase to 65 million by 2007 (Gartner 2004)

Presentment (two aspects) Electronic Bill Presentment and Payment The business-to-consumer process (B2C) by which bills are presented and paid through the Internet Relatively simple process Increasingly being adopted by utilities Electronic Invoice Presentment and Payment The process by which companies present invoices and make payments to one another (B2B) through the internet Relatively complex process Not yet widely adopted

The Business Case Business to Consumer Business to Business Europe US Average individual European consumer receives 4 bills/month European companies produce 20 billion consumer bills p.a. Bill presentment and payment costs for billers and consumers = €95 billion An SME with turnover of €2.5 million sends on average 7,500 invoices/year European business to business e-trade amounts to $777 billion A Belgian subsidiary of a large consumer electronics firm sends 400,000 invoices p.a. to other members of the group Europe Average online American household receives 11 bills/month US companies produce 15-17 billion consumer bills p.a. Bill presentment and payment costs for billers and consumers = $80 billion US business to business e-trade amounts to $870 billion 80% of invoices are generated by four industries: finance, insurance, telecoms & utilities US Source: PwC analysis – various sources

Limits Customer Interaction Long Payment Cycles & Float Current Process Slow Delivery U.S. Mail Expensive Printer 18-32 DAYS $1.30+ Per Bill Paper Payment Cycle Biller Customer The paper bill process is expensive and time consuming for everyone. It limits your interaction with your customer and takes much longer than necessary to get to the final processing of customer payments. It can take as long as a month, from the time the original bill is printed, to receive payment for an invoice. And it’s costing you an average of $1.50 for4 every bill you print and mail out. Now it just so happens that NISC is in the utility, but the business logic is the same for any process in which you are taking care of your customers whether you are in business or government Limits Customer Interaction Bank Long Payment Cycles & Float U.S. Mail Payment Processor

Future IT-enabled Process Efficient Instant Delivery Hours vs. Days Pennies vs. Dollars Bill Bill Bill INTERNET Biller $ $ End User $ The billing cycle is completed without one stamp, killing no trees, completely paperless, at a fraction of the cost. Now I don’t have anything against the USPS or FedEx or UPS, but my challenge to you is, every time you are mailing something to a citizen of Montana, I challenge you to ask the question, it there a e-commerce solution to the snail mail alternative. During these difficult economic times we have a responsibility to be as efficient as possible. And make your services available in your case the citizens of Montana in a manner what is as convent at possible. $ Reduced Float One-to-One Marketing Payment Processor

Value Creation Strategies Business to Consumer Business to Business Value Decrease customer transaction costs Example: allow customers to verify bill details on line (especially valid for recurring bills with varying amounts) Example: allow integration with ERP systems for faster processing, approval and payment (especially valid for complex invoices) Price This is more difficult Customers seem unwilling to pay for the convenience of electronic invoicing and/or payment Idem – on the other hand some companies are starting to charge a fee to corporate clients for paper invoices Cost Invoice production and delivery Cost of paper invoice: $1.30 Cost of electronic: $0.60 Prevent/automate dispute handling 4% of bills are disputed Cost of paper invoice: $6.00 Cost of electronic: $2.60 13% of invoices are disputed Improved cash management Get paid quicker Source: PwC analysis

Types of EBPP Systems Source: Pearson Education

Bill displayed on biller website for view and pay Bill Direct Model Biller website  Biller website Biller website  Biller website  Biller website Bill displayed on biller website for view and pay

Bill displayed on aggregator website for view and pay Aggregator Model Biller website Biller website  Aggregator website Biller website  Biller website  Biller website Bill displayed on aggregator website for view and pay

Consumers’ Habits How Consumers View and Pay Their Bills Electronically Source: Gartner Research (January 2004)

What Consumers Want… Source: Gartner Research (January 2004)

Categories of bills… Million Source: Gartner Research (January 2004)

Checkfree Market leader in online billing and payment Faces a number of challenges: Industry changing fast and leadership precarious Although market is growing, consumers have traditionally resisted online bill payment Conflict strategic goals of stakeholders (merchants, banks, credit companies, billing firms and consumers) Technology changes: XML-based vs. proprietary Competitors: PayPal, Metavante Source: Pearson Education

USPS eBillPay USPS announced in April 2000 that it was entering EBPP market. Partnered with Checkfree and a smaller provider (YourAccounts.com). GAO: Movement from paper to electronic billing could reduce revenue by more than $16 billion per year for USPS, assuming that every bill now mailed is instead billed and paid on-line. Billing statements currently represent 25 percent of USPS revenue.

For Next Class… Read Capital One case Write out your answers to the case questions and be prepared to discuss We will also discuss the “Check 21” topic