CyberCash

Richard K. Crone, VP/GM PayNow
480 Roland Way
Oakland, CA 94621
(510) 563-4305
rcrone@cybercash.com
www.cybercash.com

Status Report:

•  Its InstaBuy service facilitates biller-controlled enrollments to enable one-click bill payment.
•  Its Merchant Connection Kit provides secure processing of electronic ACH checks and credit/debit cards.
•  A long-time proponent of biller-direct bill presentment (see OBR 10/97).
•  Major biller clients include NUI Corporation and AirTouch.

Digital dollars from CyberCash, DigiCash and First Virtual have found few takers, but next-generation systems are on the horizon.

When digital cash first appeared, it was supposed to revolutionize online commerce by helping people make micropayments for inexpensive electronic goods and services that were priced too low to justify credit-card transactions. But consumers have spurned e-cash technology from pioneers such as CyberCash (Redwood City, CA), DigiCash (Palo Alto, CA), and First Virtual Holdings (San Diego, CA) as cumbersome and time-consuming. Because consumer interest is minimal, online merchants haven’t bothered to learn about selling digital goods by the bit.

Two years ago, David Herschman, President of Virtual Vegas (San Francisco, CA) tested CyberCash’s CyberCoin micropayments system in the company’s online gaming service. He gave it up because consumers just ignored it. “As a publisher, we can’t wait until micropayments become a reality,” Herschman says.

Micropayments players are working to turn things around.

•  CyberCash is testing a refurbished CyberCoin service in England and Japan and is preparing to launch revamped micropayments technology this summer – minus the software wallet.
•  In the past year, Dutch-owned DigiCash has hired new management and moved its U.S. base from New York to Silicon Valley to be closer to e-commerce customers. By late summer, DigiCash expects to unveil modifications of its ECash system, which is being retooled to accept every currency.
•  Latecomer Digital is testing its Millicent micropayments service throughout the summer, giving consumers $10 in sample electronic tokens that they can spend with two dozen online merchants.

A hybrid alternative could give credit-card users the flexibility to make micropayments. Seattle start-up Qpass, previously known as Proscenium, is developing a payment technology publishers and other content companies can build into their Web sites to sell information bit by bit and charge it to a credit card. By using the Qpass system, content companies could sell individual articles or online games for small amounts that would accrue until they totaled a sum large enough to charge to the customer’s credit card, says Cornelius Willis, Qpass Marketing VP and former director of platform marketing at Microsoft. Qpass is testing the technology at partner Andersen Consulting’s Web site and expects to have beta tests running by fall. Qpass officials claim media, publishing and entertainment companies are interested in using the service, but decline to name names.

Some observers are skeptical about Qpass. As other revenue models, such as advertising, subscriptions and sponsorships kick in there’s no need for pay-as-you-go payment systems, says Cliff Condon, Money and Technology Analyst at Forrester Research. “Plus, micropayments are a difficult concept for consumers to get around. It’s not easy to grasp,” Condon adds.

CyberCash continues to lose money, posting a $5.7 million deficit on revenue of $1.1 million in the first quarter. But the Reston, VA, company is in a stronger position than some of its rivals, with a growing revenue base from its online credit-card processing and electronic check divisions and a recent infusion of $15 million in investor funds.

Last month, CyberCash completed a $16.5 million acquisition of VeriFone rival ICVerify, a deal company execs hope will expand the number of merchants who use its online payment services – including, eventually, micropayments.

CyberCash is advertising on HotBot (7/14/98) with two banner ad sequences targeted to online merchants and billers. The top banner was shown during a search for “bill payment” and the bottom shown on search for “bill presentment.”

In December, CyberCash and a joint-venture partner in Japan began issuing CyberCoin digital cash in amounts of up to US$150, which shoppers can use at a variety of online merchants. CyberCash is running similar experiments in Germany and England.

Until now, CyberCash has focused on micropayments trials in countries where credit cards aren’t as widely used as in the United States, allowing alternatives like debit cards to catch on more quickly. But as soon as late June, CyberCash will unveil an updated micropayments platform that will let U.S. shoppers make impulse purchases at multiple CyberCoin-enabled merchants without needing to set up a wallet, says Maureen Loftus, CyberCash Merchant Services SVP.

Whatever happens, it’s too late for First Virtual. The San Diego company, which burned through at least $35 million in investor funding, quit the digital payments business earlier this year and is now promoting itself as a vendor of interactive messaging tools. Last month, Softbank Holdings, the U.S. arm of Japan’s Softbank, said it would buy a controlling stake in First Virtual for $7.5 million in cash and debt and loan the ailing company another $1.5 million. After the announcement, First Virtual said it would cut 20 of 70 employees and take a second-quarter charge as a result.

--Michele Rafter

Contacts: Maureen Loftus is SVP Merchant Services at CyberCash, (650) 413-0146; Michael Nash is CEO at DigiCash, Palo Alto, CA, (650) 321-0300; Keith Kendrick is President at First Virtual, (619) 350-3452, kendrick@fv.com ; David Herschman is Pres. at Virtual Vegas, (415) 351-1374; Gary Craft is Analyst at BancAmerica Robertson Stephens, (415) 248-4202, gary_craft@rsco.com ; Cliff Condon is Money & Technology Group Analyst at Forrester Research,
(617) 497-7090, ccondon@forrester.com ; Cornelius Willis is VP Marketing at Qpass, (206) 405 3103, Cornelius@able-inc.com ; Russ Jones is Dir. Millicent Marketing at Digital Equipment, (650) 853-2145, rjones@pa.dec.com .

The numbers are astounding. According to Robertson, Stephens & Company, U.S. billers will flood the mail this year with more than 27 billion bills; 15 billion to consumers and 12 billion to other businesses at a total cost of more than $100 billion. Using the Internet to link directly to customers and to automate remittance processing might cut billers’ costs in half and save the industry $50 billion or more. In other words, say good-bye to laborious paper check handling, OCR stub scanning, and all the rest of the paper chase.

But as appealing as this sounds, it’s only part of the story. The billing and payment process represents a biller’s prime marketing opportunity, and the Internet is an unequaled marketing tool. The cascade of statements produced monthly by the nation’s billers is compelling content. It’s highly individualized, dynamic and perishable. It’s interpreted and analyzed differently by each viewer. It shows up at regular intervals. And it must be acted upon quickly.

But too many billers are gravitating towards third party concentrators to handle their electronic billing and remittance processing. And by outsourcing, rather than accepting payment at their own branded Web site, they will undercut several of the financial benefits inherent in online payments, and almost all the precious marketing and customer bonding benefits.

Banks don’t have to look any further than the advent of electronic draft capture for credit card payments to see what happens when third party concentrators enter the payment equation. Compared to when banks received the physical bankcard draft, electronic draft capture made it much more difficult for banks to maintain their customer relationships. Instead, merchants could shop nationally for processing and no longer had to interact with their local bank when depositing bankcard drafts. And when banks gave up the customer contact and allowed their merchants to deposit electronically to non-bank third party concentrators, they gave up the depository relationship by default. As a result, 75 percent of all bankcard transactions are now processed by non-banks.

Using a concentrator for interactive billing and payment, the peril is even more profound. We are not talking about ancillary credit services anymore. We are talking about the life blood of the bank: demand deposit accounts. Standing by while third party concentrators inject themselves into this picture will lead not only to a strategic retreat, but also to a total rout that jeopardizes a bank’s profitable DDA customer relationships while leaving the lucrative Internet field to the non-bank victors, perhaps for good.

Innovations

Suffolk County National Bank to Launch Bill Presentment in Q1 1998

Suffolk County National Bank may be the first bank
in the world to offer bill presentment services
to small and mid-sized businesses.

On the Internet, you can never tell where the innovators will crop up next. In the case of electronic bill presentment, it looks like the first program in production will be at a Long Island community bank, Suffolk County National Bank (Riverhead, NY; $843 million).

SVP Alex Duroski confirmed that the bank is about to begin alpha testing s Web-based bill presentment program with a major regional biller. Electronic Funds & Data Corp.  www.billsite.com is handling the presentment and payment logistics, and serving as a general contractor for other billing services the biller is considering outsourcing.

The bank, which currently services the test biller’s DDA, stands to gain fee income from the arrangement, and will have a unique program to offer other billers in the area. Users of the service will go to a bank-branded version of EF&D’s BillSite,  www.billsite.com . Users needn’t be customers of SCNB, which is one of the attractive features of the program for the bank. Its logo will be in front of every user paying at the SCNB BillSite, and the bank can’t help but benefit from the exposure. At this time, the bank is not planning additional fees for non-customers (e.g., surcharges) but would not rule them out.
Contact: Alex Duroski is SVP at SCNB, 516.727.2855; Gary Glanz is President of EF&D, 516.537.6300, gglanz@efd.com .

Billing without Paper…or without Banks?

Ironically, no organization is better prepared to address this issue with billers than banks. Bankers need only translate their own experiences with being intermediated by payment processors in the electronic draft capture market, and more recently by software companies in the online banking arena, to be able to project the impact that payment concentrators are already having on billers and their relationship with banks. Banks have fought back by purchasing their own software companies, banded together as consortiums, and have turned to the Internet to avoid being intermediated by others in the battle to retain, brand and control customer contact. Now banks hold the key to empowering billers with direct interactive billing and payment services, while extending their own stewardship over the payment process.

Just as concentrators installed electronic draft capture terminals in every merchant site in order to garner bankcard transaction fees, banks need to be placing bill payment capture devices, in the form of electronic cash register software, at their billers’ Internet sites. Only by supporting such a direct payment and deposit capability will banks be able to maintain and foster the primary banking relationship with their billers and electronic consumers. At the same time, banks will be empowering their billers to manage their own customer touchpoints and leverage the cross-sell opportunities and one-to-one interaction power of the Internet without third party intervention.

Cybercash is promoting interactive billing
on the first page of its Web.

A service such as CyberCash’s Internet payment service, likened to an armored car on the Internet, is necessary to securely move the electronic payments from the payer’s browser to the bank. Rather than delivering cash and check deposits to a physical bank branch, the CyberCash service uses the biller’s electronic cash register software and advanced encryption to securely deliver EFT requests directly to a bank’s systems for processing. At the same time it provides the electronic payment information needed to update the biller’s accounts receivable system and post the payment.

By collaborating with their billers on this direct payment scenario, and by supporting electronic cash register software, banks can accept electronic check deposits with the same bank-controlled and branded process that they follow today for paper check deposits made to a local branch. The biller gains all the cost-saving and customer service benefits, while the bank fortifies its standing with the biller and retains control of the payment flow.

Banks should look at participating in interactive billing and payments as more than just a defensive measure. In fact, direct online payments can be used to extend a bank’s reach far beyond its current DDA base. By empowering a biller to accept payments directly at its own Web site, a bank is in effect establishing quasi DDA relationships with every consumer registered for online payment with the biller. It doesn’t matter if the consumers are retail customers of the bank or not. And it doesn’t matter where they live.

This is a very exciting proposition. For the first time, a wholesale bank can actually have an advantage in the retail banking arena. Suddenly the wholesale bank has relationships with consumers across the nation. Think of the possibilities. Could the bank use the accounts registered with its billers to begin expanding its services? Could it issue a digital debit card against registered accounts held by other banks and start garnering new fees? Clearly, taking an aggressive stance with interactive billing can open new doors for a bank, even as it protects and deepens a bank’s existing DDA relationships with its most prized depositors: billers and electronic consumers.

Unfortunately, this same opportunity exists for the shrewd non-bank concentrator who has seized control of the customer interface and DDA registration process by providing this service to banks and billers. It is this customer interface and registration component that adds a whole new risk element to the outsourcing decision.

Mock-up of a browser being used to aggregate bills. The frame on the left side contains links to each users’ bills housed on the biller’s Web sites.

Why Consumers Will Benefit from Direct Biller Payment

Consumers don’t owe the money to the concentrator, software supplier or the bank for that matter, they owe it to the original service provider, the phone company, electric utility, insurer and the like. It is the original service provider, for example the electronic utility, that must be paid or the lights don’t stay lit.

So the key is to enable consumers to meet their financial obligations in the most expeditious, direct and user friendly way possible without radically deviating from the logical way they make payments today. Our research shows that you can accomplish this by empowering consumers to concentrate billing obligations on their own computer or Webtop.

Fortunately, thanks to continually evolving Internet push, pull, and user interface technologies, the biller-controlled model can boast similar if not stronger conveniences than registering with a concentrator. For example, leading browser software, including Microsoft’s and Netscape’s, now include bookmark features that allow consumers to handily group their obligations in one payment folder on their own Webtop, as opposed to relying on an third party service. Using
the bookmark feature, consumers can store the location of each billing obligation. When it is time to pay the bills you simply go to the folder, select “open all” and individual frames open on your computer screen for each of your bills.

The key here is you don’t need to employ the old service bureau concentrating model to simplify navigation for the customer. That is the beauty of the Internet, you are only a click away from a direct connection to the site of your choice.

Even newer browser technology allows Web users to “subscribe” to specific Web sites. Once subscribed, specified information can be downloaded to the user’s PC at predetermined intervals, providing an “off-line” way of viewing bills.

So how does it work? It’s fairly simple. You bring up a page you want to receive in the IE 4.0 Web browser and choose to add it to your “favorites.” You then have the option of just adding the link as a bookmark or you can “subscribe” to the page. Subscriptions offer two options — one is a simple notification via a red flag on your bookmarks list when the page has changed, the other is

notification PLUS downloading the page. If you choose to download, you also have the option of receiving
e-mail notification when your subscribed pages change. You can even customize e-mail delivery schedule. It only takes a few seconds and voila, your credit card and cellular phone bills appear via e-mail every Friday morning before you have to complete your expense report. Your mortgage bill arrives on the 15th of the month and so on.

As utilities become more deregulated, as we have seen here in California with the landmark legislation to deregulate electric power, billers need new ways to distinguish themselves from the competition. Their statement data and how they weave it into the overall information exchange they have with their customers can be used as a distinctive competitive advantage for the biller. By farming out bill presentment, billers risk being disconnected from their customers.

Customer disconnect is an issue that banks must be sensitive to when proposing to host or concentrate remittance obligations with concentrators on their site. Can a biller really risk giving up their most prized customer data and content and touchpoint to a third party? Should billers be paying a concentrator to take their content? Or should it be the other way around, with the concentrator bidding for the rights to the biller’s content in order to draw traffic to the concentrator’s branded Web site?

Banks need to remember that the biller can provide the incentives to get customers to come to their site since they are the “original service provider” and the money is ultimately owed to them, not the concentrator. Billers can allow the consumer to participate in electronic bill payment one biller and one payment at a time, without the monumental commitment of devoting several weekends to learning how to operate a personal financial manager or committing to the ongoing cost of a pay-anyone bill payment program.

Concentration of billing obligations is naturally controlled by the consumer. You don’t receive one envelope with all your bills from all your service providers today, nor do you expect to since you are doing business with separate and distinct entities. Our market research shows that consumers don’t want their bank to know what they owe others and vice versa. Presenting a consumer’ bills on a bank’ Web site gives the customer the impression that the bank is the “Big Brother” of one’s financial matters and they consider it obtrusive.

AT&T Universal Card was one of the first card issuers to present statements online. The company recently added a payment function called AutoPay, which according to its Web is “so convenient (your) bill practically pays itself.”

As banks look at the advantages of providing direct interactive payment capabilities to their billers, they should also be looking to their own houses. After all, financial institutions constitute the third largest billing community in the United States, with banks generating monthly bills for mortgage loans, consumer loans, credit cards, brokerage services and more.

All this compelling content can help drive customers to a bank’s own Web site where a host of value-added services and one-to-one marketing opportunities can reside. A bank could offer, for example, personalized investment services or tax-planning services tied in to a customer’s accounts. Additional revenues could also be generated by displaying paid advertising or providing links to other companies’ Web sites.

In a time when banks are endeavoring to maximize the value of a customer’s lifetime relationship, interactive billing and payment represents a potent relationship-building tool, with a direct feed into a bank’s customer information files.

Richard K. Crone is Vice President and General Manager for CyberCash, Inc. He is responsible for the company’s PayNow Secure Electronic Check Service. Mr. Crone can be reached at 650.413.0165 or at rcrone@cybercash.com

Don’t hold your breath, but the Secured Electronic Transfer (SET) standard for Internet credit card purchases is almost here. MasterCard, Visa and their partners expect to issue the first SET mark — think of it as the SET seal of approval — by Aug. 31, according to industry execs speaking at a recent Internet payments conference in Berkeley, CA.

SET specs were published in June and in late July, MasterCard and Visa formed a body called SetCo to test, certify and police SET-compliant applications. “But it’s not (happening) nearly as fast as vendors would have you believe, and it’ll be up to you to make sure the pieces work together,” Nick DiGiacomo warned bankers attending a meeting sponsored by the National Automated Clearing House Association (NACHA) and Citation Internet Consulting Group.

DiGiacomo is CEO of Tenth Mountain Systems Inc., which will handle testing with SetCo. Companies that pass will sign a trademark licensing agreement to display the SET logo on their Web site.

Meanwhile, SET pilots continue. Beginning this month, Mellon Bank and MasterCard will issue SET credit cards to Mellon and federal employees to purchase U.S. Savings Bonds and federal surplus merchandise online. Bank of America is slated to conduct a live trial by September.

DiGiacomo urged retail banks to get in on the action by issuing SET-compliant wallets to customers — but don't be surprised when they call with questions, he said. “We recommend setting up informational Web sites to take the offensive,” he said. DiGiacomo’s 10-step SET plan for banks:

1. Learn about it. Give responsibility for setting up a SET program to a staffer, not consultant. “You have to have an internal advocate.”

2. Create plans for marketing, security, roll out, and customer service, and establish criteria for choosing platforms and vendors.

3. Choose a certification authority and get SET software certified through SetCo.

4. Choose a SET server that connects to the Internet, existing banking systems, payment networks.

5. Integrate SET with merchant account balances, statements, payment networks.

6. Select customer electronic-commerce software.

7. Have your SET service tested, preferably by an outside party “so you don’t run into blind spots.”

8. Establish support services such as operations, maintenance and customer service, and make sure systems are in place to meet regulatory, compliance and audit requirements.

9. Participate in a pilot with explicitly stated entrance and exit criteria. Pick “friendly” partners, not Net-heads, as testers. Use results to measure acceptance or resistance to e-commerce in and outside your organization.

10. Keep your SET service updated.

SET was among several Internet payments issues discussed at the first of a series of seminars to be held around the country through October by NACHA and Citation, a Texas-based consulting group.

Other Conference Highlights

Online Bill Pay: Do consumers want to pay their phone bill at the phone company Web site, their gas bill at the gas company site, and so on, or visit one place to pay everything? Checkfree, MECA, Microsoft and BillSite are betting on the latter and building mega-Web sites they’re marketing to telephone companies, utilities and others. But CyberCash VP Richard Crone believes consumers will want to hop from site to site, and utilities will want to stick bills on their own sites so they can sell ad banners. Meanwhile, Internet bill trials continue, and a few pioneers such as National Utility Investors  www.nui.com and Brooklyn Union Gas www.bug.com are already online. Predicted for the future: PointCast type systems that broadcast bills to consumer’s e-mail boxes.

Other Net-Based Debit Transactions: EFunds Corp., a Tustin, CA, online payments company, has outfitted 150 to 200 merchant clients to accept debit payments via the net. Of 100,000 to 150,000 payments processed so far, only 10 haven’t cleared, “so small it’s probably bank error,” said Neil Godfrey, EFunds CEO. According to Godfrey is EFunds is unique in providing merchants with a turnkey system — hardware, software and gateways to banks.

By the Numbers

• 90% of top 50 U.S. banks will offer full-service Internet banking by 1999.
• By 2000, 1,100 banks will offer full-service Internet banking.
• By 2000, 85% of Internet-capable banks will offer DDA accounts.
• Consumers made $1 billion in purchases on the Web in 1996.
• Women now constitute 42% of the Internet population.
• By 2000, consumer and biz-to-biz e-commerce transactions will hit $150 billion.
• Commercial “.com” Web sites jumped to 623,002 in May 1997 from 123,372 the previous year.
• 69% of all billers with five million or more customers will begin building BPM by the end of 1997.

Source: Various speakers at CICG/NACHA Internet Payments Conf.

Micropayments: Digital Equipment Corp.’s Millicent micropayment system should be available to consumers by year’s end, offering script in increments of a tenth of a cent to $5. Companies offering content during a trial phase: Reuters, Music411, Songline Studios and Investors Daily. Digital expects Millicent micropayments to grow to $4 billion in revenue by 2000. That’s counting on 25% of the net population spending 50 cents a day, said Stan Hayami, Digital’s Micro-Commerce Business Mgr.

Net-Based EDI: Lawrence Livermore National Laboratory, a $1 billion government research lab in Livermore, CA, spent 10 months and $60,000 moving its electronic data interchange (EDI) operations to the Internet, working with banking partner Bank of America. Two years later, the lab uses the system to make $15 million in monthly payments to vendors, and 96.3% of payables go out on time. So far, Lawrence Livermore is Bank of America’s only EDI customer using the Net, but the bank’s working to line up new customers, according to BofA EDI Specialist Rett Summerville.

Electronic Postal Service: Add the U.S. Postal Service to the list of players wanting into the e-commerce arena. The USPS is looking for partners for test of a time and date-stamped electronic postmark to begin this fall, with commercial availability in summer 1998. Proposed price: 22 cents per message of 50K or less. Law firms and financial services companies are two top prospects for the services, said Leo Campbell, USPS e-commerce manager. The USPS is also looking into offering electronic P.O. boxes, and hasn’t decided whether it will become a certification authority for digital certificates.

More on Digital Certificates: Market leader VeriSign will issue Class I, II and III digital certificates, to be used in SET transactions. Free Class I certificates verify an e-mail address; Class II cost $19.95 and include name, address, e-mail address authenticated against Equifax or other consumer credit database and verified via snail mail (see also QSpace p. 5). Class III aren’t being issued yet, but will involve some type of in-person identity check, said Bob Pratt, VeriSign Product Line Manager. VeriSign plans to roll out a digital certificate corporate outsourcing service this fall.

NACHA: To help speed up development of Internet payments, NACHA’s Internet Council is participating in a project with Mellon Bank, Bank of America, ABN AMRO, and others to test issuing and honoring digital certificates. A NACHA Internet Council working group is analyzing whether consumers could use the Internet to make direct ACH payments, with or without a signature. “If a consumer could transact with a bank to pay a merchant, it could be more practical and useful than making a payment directly to a merchant they don’t know,” said Leilani W. Doyle, a NACHA Internet Council member and Division Manager, Citation Internet Consulting Group.

Coming Attractions

NACHA and Citation Internet Consulting Group will hold Internet payments conferences in Denver, Chicago, Atlanta and Boston between August and October. Find more information on the NACHA Web site www.nacha.org  or call 703.742.9190.

Contacts: Rett Summerville is EDI Specialist at BofA, 415.436.5488. Leilani W. Doyle is Division Manager at Citation Internet Consulting Group, 713.461.1592, ldoyle@cicg.com . Richard Crone is VP at CyberCash, 415.413.0165 or rcrone@cybercash.com . Stan Hayami is Micro-Commerce Business Manager at Digital, millicent@digital.com . Neil Godfrey is CEO at Efunds, 714.259.5266, info@e-funds.com . Nick DiGiacomo is CEO at Tenth Mountain Systems, 619.458.2655, nick@yourservice.net . At the U.S. Postal Service, Leo Campbell is E-Commerce Manager; Kim Parks is New Business Sales Manager 703.526.2655. Bob Pratt is Product Line Manager at VeriSign, 415.429.3427.

Michelle V. Rafter

Michelle V. Rafter covers the Internet for Reuters, WebWeek, the Los Angeles Times and others. Reach her at mvrafter@deltanet.com .

First Union’s (Charlotte, NC; $134 billion; 2.6 million ATM cards) previously announced (OBR 11/96, p.18) CyberCoin Wallets from CyberCash are now available on its Web <www.firstunion.com>. National Bank of Canada, <www.nbc.ca/securnat/> is the only other financial institution currently offering the wallets. First Union also added a so-called CyberCoin MiniMall to its existing Community Commerce center <www.firstunion.com/2community/cybercoin/minimall.html>. The CyberCoin Wallet is designed for smaller purchases, $0.25 to $10. It works on a stored-value model. Users can transfer value into the wallet from any (even non-First Union) checking account or credit card for use at any of 15 CyberCoin-enabled merchants on the Web. At First Union, Edgar Brown is SVP Mgr. Remote Access Products, Parker Foley is VP Electronic Commerce, 704.590.2471, pfoley@clt.mindspring.com.

After months of anticipation, CyberCash (Reston, VA) rolled out its PayNow electronic bill-pay service in late January, and expects four partners to complete beta tests by early spring before marketing it in the second half of 1997.

PayNow is the final installment of three online payment systems introduced by CyberCash, which is looking for big hits in the bill-pay and microtransaction markets to make up for an expected onslaught of SET-related competition in the secure credit-card transaction business that has been its mainstay..

Using PayNow, consumers—and eventually businesses —will be able to view a graphical representation of your bill at a bank, merchant or third-party Web site and pay it from a CyberCash PayNow-enabled virtual wallet tied to the individual’s bank account. As with other existing third-party bill payment schemes, the bank need not be directly involved for PayNow to work.

Consumers will pay little or nothing for the service. CyberCash will get its revenues from merchants who will pay a small fixed transaction fee per check. The company isn’t saying what that will be.

Nice publicity…Cybercash lists PayNow partners on the first page and links to two bank distributors of its wallet, First Union and National Bank of Canada.

PayNow joins CyberCash’s two-year-old secure credit-card transaction service (OBR 7/96 p.4-6), and CyberCoin, a microtransaction payment system the company announced last September (OBR 11/96 p.9). To date, consumers have downloaded more than 1 million CyberCash wallets, but only about 70,000 to 80,000 have used the wallets for credit card purchases, and approximately 5,000 for cash transactions, according to CyberCoin Product Manager Larry Gilbert (lgilbert@cybercash.com).

Exactly how PayNow is implemented will depend in large part on CyberCash’s present and future partners, who are developing their own iterations of the service to market to banks, utilities, retail merchants and eventually corporations.

The first set of Cybercash partners is conspicuous in its absence of traditional financial service providers. The initial group includes an accounts receivable outsourcer (IBS), a start-up payments company (EF&D), a midwest multimedia company (Cephas), and the only name familiar to online bankers, Princeton Telecom, an established bill payment consolidator.

Princeton Telecom/PSE&G
Princeton TeleCom Corp (Princeton, NJ) is testing PayNow with an undisclosed number of staff and customers of PSE&G, the largest electric and gas company in New Jersey. After a two-month pilot is complete, PSE&G is expected to offer PayNow to customers in April. If all goes well, Princeton will market the Web-based bill-pay service to other of the 530 national billers it serves, starting with 14 companies currently using the company’s 1-800-PAYBILL telephone remittance program, according to Princeton President Don Licciardello (609.924.8980).

International Billing Services
International Billing Services (El Dorado Hills, CA), a 1,500-employee subsidiary of USCS International, is one of the largest billing outsourcers in the country, producing 65 million statements per month, 4% of the entire U.S. first-class mail volume. IBS handles 54% of all U.S. cable-TV bills, 36% of cell phone bills, and 10% of regular telephone bills. AT&T is a client. IBS is testing PayNow billing statement presentment (no payment option yet) with an unnamed major telecommunications company during Q1 before deciding to expand the pool of testers or add an electronic bill payment option to the online statements. IBS and its mystery partner hope to go public with a PayNow product by mid-year, said Jorge Martin, IBS Electronic Billing Product Manager (916.939.5817, jorge_martin@billing.com).

Other customers “are definitely interested in this” and IBS won’t wait until the initial pilot is complete before recruiting them, Martin said. IBS currently offers lockbox, ACH, and telephone-based remittance processing services in partnership with Mellon Global Cash Management .

Electronic Funds & Data (EF&D)/Suffolk County Water District
Electronic Funds & Data (Bridgehampton, NY) is the start-up developer of BillSite <www.billsite.com>, a Web-based bill-pay service (OBR 10/96 p.6). EF&D is testing PayNow on several hundred employees of the Suffolk County (NY) Water District through February before offering it in March to the utility’s 350,000 customers. Residential customers will learn of the offer via SCWD statement stuffers and other promotions, said EF&D Chairman Stanley Blumenstein (516.537.2418).

Cephas Multimedia/Kansas City Power
Kansas City Power and Light, a Kansas City, MO utility with 500,000 customers, is conducting its own internal pilot with the aid of Cephas Multimedia Inc., an 11-person Kansas City Web shop that was approached by KCPL to undertake the project. An undisclosed number of utility employees will use PayNow through two billing cycles before the company decides whether to offer it to customers. “We’ll see what sorts of bugs are in the software, document features people use most, see what customers want,” said Cephas President Jay Wilner (jay@cephas.com).

Beyond the pilots
The number of PayNow partners could grow quickly, based on the high level of interest utilities and other retail merchants have expressed in the product, according to CyberCash PayNow Product Manager Richard Crone (415.413.0165, rcrone@cybercash.com). “I’ve been deluged with calls from billers,” Crone said. Once PayNow is established in retail remittance channels, CyberCash will direct its efforts at business-to-business transactions, Crone said. “One of the most costly functions (in business) is wholesale remittances,” Crone said in an earlier interview. “When you receive an invoice and have to pay against it, the paperwork involved is expensive. If a business allowed that invoice to be presented on a Web page and let you pay it with an electronic check, you could drop costs dramatically.”

Where are the banks?
What does PayNow offer banks? Apart from passing out free virtual wallets to retail bank customers and handling PayNow ACH debits, it’s a mixed bag. At least one PayNow partner, International Billing Services, expects to market a standard PayNow Web site bill-pay platform to banks and bank consortiums, but has yet to begin shopping the idea.

“Some people are comfortable paying bills through Checkfree or Money, but others want to deal solely with their bank,” IBS’s Martin said. “We want to provide an open platform and talk to bank groups like Integrion and individual banks” about using it.

Besides pitching BillSite to major utilities and other national billers, Electronic Funds & Data is developing a sister program called BillTools the company plans to market to regional banks, which in turn could offer it to local billers. EF&D is negotiating with Suffolk County National Bank (Riverhead, NY; $800 million; 21 branches) to resell BillTools to the bank’s corporate customers. However, EF&D officials aren’t certain whether BillTools will include PayNow or an electronic bill-pay service from EF&D’s SafePay subsidiary.

Analysis: bill payment battle shaping up
Cybercash’s entry into the bill payment business begins to fill the void left by Checkfree’s acquisition of Servantis in early 1996 and Intuit Services Corp. last month. But Cybercash is putting a different spin on its payment solutions, concentrating on Internet-based programs that complement Web-based bill presentment schemes being evaluated by major billers.

But don’t expect Checkfree to ignore this market. Tests continue on its E-Bill bill presentment program (OBR 10/96 p.5). Also expect competition from major credit card processors such as First Data and National City Corp., which has already launched a bill presentment/ payment program at Mobil’s Web (OBR 12/96 p.13). Bill presentment/payment is also a natural extension of personal financial management software functionality so expect some new ideas to come out of the brain-trusts at Intuit, Microsoft, and MECA. Finally, the numerous banking industry consortiums, NACHA, Visa, MasterCard, Integrion, and the ATM networks, will play a role in the adoption of digital bill payment in the coming decade.

Contributing editor Michelle Rafter covers the Internet for Reuters, the Chicago Tribune, c|net and WebWeek. Reach her at mvrafter@deltanet.com.