Of all the ways that E-commerce was supposed to change how consumers and businesses manage their affairs, electronic billing and payment was considered among the most bankable.
After all, who’d miss the paper cuts, the check writing, the envelope licking? Or, at corporate finance departments, the drudgery, delays, and expense of manual processing? Yet electronic bill presentment and payment, usually dubbed EBPP (for consumers) or EIPP (“I” for invoice; for businesses), has fallen significantly short of very high expectations. Despite the potential cost savings and efficiencies of online billing and payment, old habits apparently die hard. Last year, American consumers paid just 1 percent of their bills online, according to consulting firm Gartner. And of the 9 billion business-to-business payments remitted last year, 82 percent were made the old-fashioned way, by paper check, reports IT consulting firm Celent Communications.
Why are so many checks still in the mail? On the consumer side, individuals are clearly reluctant to send private financial information into cyberspace, and analysts expect it could be years before they feel differently. Furthermore, while some companies have had success with Web-based billing, most have yet to provide a compelling reason for people to manage their bills online.
Lack of enthusiasm on the business side is harder to fathom. Most companies are already familiar with the value of electronic payment systems like automated clearinghouse (ACH) and wire transfers. And treasurers understand the potentially huge benefits of automating receivable and payable processes on an Internet platform. In a case study, Gartner analyst Avivah Litan found that a company could save $7.15 per invoice by presenting it over the Internet rather than in paper format. With the average large company issuing 792,000 invoices per year, the savings could exceed $5 million annually. And with an average investment of less than $500,000 needed to get an EIPP system up and running, a typical company could break even if it issued just 2.3 percent of its customer invoices electronically.
That’s a compelling case, but it runs up against at least one compelling issue: With the economy weak and corporate profits in the doldrums, finance chiefs are looking at E-commerce projects far more skeptically these days, and EIPP applications are no exception. “Two years ago, companies were in a ‘let’s try’ mode, and it was easy to get commitments,” says Brian Hinton, a vice president at Bottomline Technologies, one of the leading vendors of EIPP software. “Now they have a ‘show me’ attitude.”
Like all EIPP software vendors, Hinton has been developing metrics that parallel the Gartner findings, hoping to persuade CFOs that money spent on EIPP will reap a quick and sizable return.
The immediate cost savings are only part of the picture. Blistex Inc. CFO Phil Hoolehan, who is currently implementing an EIPP system, hopes that the bigger payoffs will be improved working-capital management, better cash-forecasting ability, and higher employee productivity.
O Banker, Where Art Thou?
If economic conditions are working against electronic billing and payment, so too is inertia in the banking world, particularly in the United States. In Canada, where five major institutions dominate the industry, the banks have agreed on one standard for the presentment and payment of electronic bills. That has helped EBPP grow at a faster rate there than in the United States. U.S. banks have for the most part pursued individual strategies, offering up a host of proprietary approaches. Most have viewed consumer-oriented electronic billing as a potential threat to their customer relationships, and have therefore been reluctant to build a common technological platform with competitors. Spectrum EBP, an alliance that includes 6 of the top 10 U.S. banks, was formed to establish technological standards nearly a decade ago, but has made little progress to date.