Pick up the tab

01 April 2007

As banks push their customers towards banking online, whether through a static or mobile device, the possibility for conducting all business transactions online, like bill payment, is becoming a desired service. So what’s holding things back?

Robert Unger, senior director, Electronic Commerce Services, NACHA’s Council for Electronic Billing and Payment, calls it the “poultry problem” — the age old chicken and egg dilemma. Until a number of large billers and banks get together to offer an electronic bill presentation and payment, customers won’t experience the real benefits of paying their bills online and therefore won’t be motivated to change their behaviour. But until the customers change their behaviour and the demand increases, the billers and banks don’t see the need to offer the service.

Lloyds TSB is taking a crack at this problem and in November was the first UK bank to launch a bill manager service where customers can pay, view and store paperless bills online. Working with OneVu, a joint venture between Voca and CheckFree, Lloyds gives the customers the ability to field their household bills in one place and access them through their internet banking service.

The Lloyds service launched with 13 billers — sufficient, says Anita Hockin, head of internet at Lloyds, to be attractive to customers. “We have had some that have recently gone live like TV Licensing, which is a big biller for us because a majority of households will have to pay TV licenses. And we also have some coming soon like Bristol Water, Wessex Water and Telewest. We are working with OneVu to bring more billers on board and, as we get more billers on board, customer usage will increase,” she says.

OneVu expects to have up to 30 billers signed up to the service by the end of the year, plus up to five banks live. As of now, the service includes: Anglian Water, Bournemouth and West Hampshire Water, Bournemouth and West Hampshire Water, Bristol Water, Colchester Borough Council, EDF Gas, EDF Electricity, Essex and Suffolk Water, Nectar, Northumbrian Water, Southern Water, Sutton and East Surrey Water, Telewest, TV Licensing, and Wessex Water, with South East Water coming on board as Banking Technology goes to press.

Central and Eastern European banking group Erste Bank, who started an EBPP service in cooperation with Raiffeisen and the Bank Austria Creditanstalt banking groups in the summer of 2003, has 40 billers signed up to the service but thinks this is not enough. Walter Jung, product manager for electronic banking at Erste Bank, says: “At the moment we have about 20,000 customers using this service; we have about 10,000 bills transferred per month. That is not a high number. The problem has been to get billers — we expected more but in Austria we have a very good service for direct debiting and the larger companies with regular bills have a high percentage of customers which use direct debit, so the need for bill presentment from the side of the companies is not there. So we have a small number of billers and therefore not many customers using this service because of a low number of billers.”

Erste Bank is successful with an alternative type of bill presentation and payment: a service for online payments in webshops. “When you buy something in a webshop, you can pay online with internet banking. This service is very successful because the webshop, the merchant side, needs this,” says Jung. The customer chooses their articles in webshop and they select the EPS online transfer as a payment method; the customer is then transferred from the webshop directly to his internet banking. They log on, get a form with all the data already filled in, a credit transfer form, and the customer is not able to change the data, only can confirm the credit transfer to the merchant or cancel. The customer confirms and the merchant immediately gets a confirmation online so the whole payment cycle is integrated in the ecommerce workflow, and after the payment the customer is transferred back to the webshop.

The bank has over 400 merchants using this service, including some government authorities which offer egovernment services to the public that also have payment needs. Jung says that it is popular for two types of people: people who don’t own a credit card can use this service; and also people that are afraid for security reasons and don’t want to use credit cards on the internet.

Lloyds decided to take the plunge now with the more traditional bill presentation and payment based on the technology available and customer response. Hockin explains: “EBPP is in a mature state now — it has been tested in the UK market, it is technically good, and it is at the point that every customer can use it because of the ease of use, it’s not just for early adopters. The other thing is the rate of customers using the biller’s website, which is around 50% according to a recent survey we did with TNS. But if the bank offered the bill management, then more like 70% would actually use it. So we were waiting for customers to say that this was the functionality they wanted and something they really wanted to use to manage their money.” She added that the increase in online banking and the prevalence of broadband were also contributing factors.

Graham Long, head of payment services, Alliance & Leicester Commercial Bank, agrees that customers are looking to the banks mainly, he thinks, because they feel more secure on a bank’s website. “Generally, if you are looking at the commercial sector, people have mixed feelings about using a commercial entity to make a payment. Whereas if it is the Alliance & Leicester that they are making the payment through, then there is a degree of comfort from it being a bank which counts for a lot.”

Alliance & Leicester Commercial Bank does not do the first P — presentation — because most of its billers, like British Gas, have well-established bill presentment through their own systems and there are many intermediary companies who aggregate utility bills and provide them to clients as a charged service, it says. Instead the bank offers a payments portal where an individual could go online, register, put in their card details and select from a growing list of potential payees — up to 200 including local government, large utilities, and also HMRC for tax payments.

With these other models around, will EBPP be able to gain traction with the billers, the customers and, most importantly, the banks? Unger thinks so. Last year NACHA, the governing body for the automated clearing house network, started testing an Electronic Billing Information Delivery Service to address two difficulties with EBPP: how to acquire bill content and how to make more standardised electronic payments. Unger says: “The economics are not that compelling for the banks — but EBIDS is going change that because it changes the model to get billers paying a fee to the banks for both enrolment and bill presentment. We think that adding an incentive component to the banks will attract more interest.

“Right now banks view electronic bill presentation and payment as a costly free service that they have to provide. Early on the US banks were going to recover the cost by charging consumers $5 — $6 a month in order to do this service. Bank of America came out and changed all that by saying it was going to do it for free because there are other benefits it can derive from having people come to the website and pay their bills in terms of reducing customer churn, be able to cross-sell other products and services,” he says. EBIDS will use the automated clearing house network that every bank, savings and loan and financial institution has a connection to.

Miles Quitmann, commercial director at OneVu, is also optimistic. “There is a lot of momentum with the biggest billers and there is a requirement for a multi-channel approach to them having their website used but also their ebilling services used. This is one of the big problems and why there is such a drive to have this consolidated service through the bank because many of the big billers are scratching their heads and wondering how do we drive up the uptake of these services and just trying to push their customers to come back to their website is just not convenient enough. They are recognising now that there is a great multi-channel approach to bill presentment and payment.”