Electronic Bill Presentment and Payment-Is It Just a Click Away?

Abstract

Introduction and summary This article concerns electronic bill presentment and payment (EBPP) in the business-to-consumer (B2C) marketplace and, more specifically, remote bill payments (as opposed to payments made at the point of sale). B2C EBPP applications are plausibly among the most promising innovations to shift U.S. consumer payments from checks to electronic alternatives. By EBPP, we mean the electronic bill presentment to the consumer and the electronic initiation of payment by the consumer. Some analysts have suggested that electronic delivery of bills will increase the use of electronic payments. Our research attempts to answer the following two questions: Why aren't electronically presented bills always paid electronically? And, if EBPP does aid in the migration to fully electronic end-to-end payment, what are the barriers to its adoption? While the U.S. continues to lead the world in technological advancements such as the development and widespread use of the computer and Internet technologies, Americans still rely on checks to make most payments. The U.S. has higher check usage per capita than any other industrialized country. Humphrey, Pulley, and Vesala (2000) state that U.S. consumers and businesses write around 20 checks per month. This is more than 2.8 times the number of checks written per person in Canada, France, or the UK and at least 20 times more per person than in Germany, Japan, Italy, Belgium, the Netherlands, Sweden, or Switzerland. In 1999, U.S. businesses and consumers issued a total of 68 billion checks (BIS, 2001). The proportion of check usage is highest for remote payments. Of the 15 billion to 17 billion consumer bills issued every year, over 80 percent are paid by check (Kerr and Litan, 2000). If EBPP were to capture the whole consumer market and convert all check payments into electronic ones, the number of checks written by consumers would be reduced by over 40 percent. Today, most consumers still receive their bills via mail. With today's technology, bills may be presented via the Internet, mobile phone, or personal digital assistant anywhere in the world, allowing for greater convenience to consumers. However, how much, if anything, most consumers are willing to pay for such a service remains unclear. Greater convenience, along with value-added services such as better customer service, account aggregation, and other incentives may be required to achieve the number of consumers necessary for billers to provide EBPP services. In the next section, we explore how most traditional bills are presented and paid. Then, we discuss the various EBPP models and what enhancements to existing payment choices may be necessary for Internet-and e-mail-initiated transactions. Next, we consider the various payment options available for EBPP; and finally, we outline barriers to market adoption of EBPP services. Traditional bill presentment and payment Below, we discuss the costs and benefits of the traditional bill presentment and payment process. Industry participants estimate that billers issued between 15 billion and 17 billion consumer bills in 2000. Over 80 percent of these bills were originated by one of four industry groups: finance, insurance, telecommunications, and utilities. Billers and consumers pay $80 billion annually for bill presentment and payment. (1) Internal operations for bill and payment processing cost billers $45 billion yearly, with almost two-thirds ($30 billion) of that going to technology vendors for hardware and software implementation and support. The remaining $35 billion comprises $10.7 billion for postage; $8 billion for account fees at financial institutions; $7.5 billion for insufficient fund fees; $5.7 billion for outsource bill/payment processing; $2.2 billion for check clearing fees; and $0.9 billion for ACH (automated clearing house)/credit card processing and settlement fees (Whaling, 2000a). Bill presentment Traditional consumer bill presentment and payment is a paper-based process that involves presenting the consumer with a paper bill for goods or services previously rendered, which the consumer pays by check. …

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