E-Billing Participants

*banks, thrifts, credit unions, mortgage brokers, credit card companies, stock brokerages, insurance companies, and mutual funds

Last month we discussed the importance of e-billing to three deep-pocketed industry segments (see chart above). The reasons for billers and Internet portals to be interested in this business are readily apparent. Billers want to save money, primarily in the vast customer service infrastructure needed to support billing. Portals are interested in capturing a chunk of the 4 to 5 billion transactions projected for 2002 (see OBR 1/99).

The motives for financial institutions are less clear-cut. Most have found electronic bill payment to be a money pit and customer service challenge. And with the slim likelihood of ever being able to charge a fee that covers costs, let alone delivers a profit, retail banking execs have been forced to justify the program with intangibles: customer retention, competitive positioning and so on. While those arguments do hold water, it’s much harder to justify the necessary investments when you can’t show a direct profit.

Long-term, you must find a way to correlate bill pay activity with revenues. The three most likely profit-making strategies:

•  Incremental Loan Outstandings from consumer and small business credit lines tied to bill pay accounts
•  Prepaid/Guaranteed Transactions from consumer-to-consumer, consumer-to-business,

Wells Fargo offers three fee-based prepaid products within its Net banking program: cashier’s checks, traveler’s checks, and foreign currency delivered to your door.

and business-to-business money orders, foreign exchange, and so on (see screenshot above).

•  Fee-Based Billing and Payment Services for small businesses, self-employed individuals, and certain highly compensated individuals (OBR 9/98).

In this issue we suggest a series of metrics that can be used to evaluate the impact of e-billing on your company’s bottom line.