Introduction

In an industry promising revolutionary advances nearly every day, one application
has gone well beyond vision-speak: Internet bill presentment and payment(IBPP).
By implementing an IBPP system, businesses can allow customers to view, store,
and pay recurring bills using a Web browser, email, or personal financial management
software. IBPP customers may also access and authorize payment via cellular
or PDA wireless devices. Sophisticated IBPP systems will soon enable customers,
particularly business customers, to analyze, dispute, and recalculate their
bills prior to payment.

The most obvious benefit to businesses is cost savings. “The most measurable
savings will likely come through enhanced cash flow,” according to BancAmerica
Robertson Stephens & Company, because the billing-cycle float is reduced. That
involves not only mailing time, but also processing time and funds availability.
Considering the additional savings in paper, handling, and postage (anywhere
from $.50 to $1.50 per bill), and the overall improved efficiencies are reasons
enough for any large business to implement IBPP. However, there are benefits
that are even greater than cost-savings when businesses choose the most appropriate
IBPP solution for their customers.

More than half of the approximately 18 billion bills sent annually will be available
online by 2002, according to some market research. Some analysts have even gone
so far as to predict the outright failure of businesses that don’t implement
IBPP. That’s why many corporations are currently evaluating or implementing
IBPP solutions, including hundreds of firms in the financial services, telecommunications,
and utility sectors — where bills can number from hundreds of thousands
to multiple millions each month. Solution models are still evolving, but any
successful model must be completely flexible to accommodate the rapidly evolving
needs of customers.

IBPP Benefit Overview

The traditional approach to billing a customer involved very little interaction
with the customer. Viewed as a non-strategic cost center, the billing department
was often isolated from the customer service area of the company and devoted
only to payment collection.
However, in today’s Web–driven business environment — where delivering
the highest levels of customer care is essential to long-term success —
this approach has proven inadequate. By actively engaging the customer in the
billing process, IBPP can facilitate world-class customer care and transform
billing into a competitive edge for the billing company. The benefits are vital
for companies taking their business to the Web:

Customer Care and Relationship Management

IBPP brings greater efficiency to the billing process and generates stronger
customer loyalty by providing better service. Today’s most robust IBPP solutions
not only provide a new vehicle for viewing and paying bills, but also a better
way to submit bill disputes and commonly asked questions. This helps free the
customer service staff from time-consuming and costly telephone-based support.
Customers can receive email responses to their questions, while the customer
care staff uses its time more efficiently by handling more urgent and complex
issues.

IBPP can strengthen the relationships that a large biller has with its small
and medium-sized business customers by streamlining business processes and building
customer loyalty. This can be achieved without requiring the installation and
maintenance of expensive Electronic Data Interchange systems. Large companies
have traditionally employed proprietary EDI invoicing and payment systems to
manage online purchasing and invoicing with large business customers. These
EDI solutions have required expensive customized software and additional hardware
to be installed, maintained, and upgraded at each user’s site. The expense of
these EDI systems has been too great for most smaller customers, leaving them
to grapple with more cumbersome processes. With Web access to IBPP, the high
level of service that large customers have enjoyed from EDI solutions can be
extended to smaller business customers at a lower cost. Even large customers
can take advantage of additional services offered through IBPP without modification
to their current EDI systems.

Highly Targeted Marketing

While serving customers more efficiently, IBPP also offers a biller the opportunity
to gather market intelligence about customers in real-time. Based on customer
profiles, companies can deliver graphically rich “enclosures” and other dynamically
generated promotional content for their customers. Marketing programs can be
tailored to an individual’s preference. Innovative companies are initiating
or extending their e-commerce offerings by using IBPP to enable customers to
establish new services and order products online.
A tremendous advantage of IBPP is the demographic type of customer that it attracts.
In the consumer market, early IBPP adopters are likely to be well-educated and
have high disposable incomes. These ideal prospects also have a high probability
of becoming early adopters of other new products and services the biller might
offer, whether directly or in conjunction with a business partner.

Enhanced Revenue Generation

In addition to new marketing opportunities, IBPP offers new opportunities for
revenue generation. For example, large billers eager to attract customers to
their sites are hosting other companies’ bills in order to offer customers convenient,
one-stop bill payment. They see value in increased usage and receive a larger
audience for their own services. Banks that maintain their own online banking
services are in a particularly strong position to offer IBPP services to other
companies. Telecommunications companies are also in various stages of evaluating
this opportunity. Business models for consolidation based on presentment and
transaction fees promise a significant source of new revenue. As IBPP becomes
established, there will be opportunities for well-branded bill payment sites
to sell advertising space as well.

Implementation Options

Simply put, IBPP means using the Internet to deliver recurring bills —
and options for paying them — through a Web browser interface. But there
are other methods of implementing IBPP, and different types of partners that
can help businesses integrate IBPP by taking on critical functions in an outsourcing
capacity.

Direct Model

In the direct model, a biller uses its corporate Web site to present bills
to customers and/or send bill summary notices via email. Payers must visit the
Web site to review bill summaries and details. They may then pay the bill, often
through a third-party payment provider. Unlike a retail bank or originating
depository financial institution, the TPPP simply processes bill payment and
collects a transaction fee. Figure 1 illustrates the interaction between the
biller, customer, and TPPP. After the customer enrolls for electronic billing
(Step 1), the biller emails a notification to the customer (Step 2), which might
contain bill summary information. The customer can then view bill details at
the biller’s Web site (Step 3), as well as authorize payments (Step 4). Once
authorized, a payment is processed by the TPPP, who debits the customer’s account
and sends a remittance to the biller (Step 5).

Figure 1 – In the direct IBPP model, the biller establishes a one-on-one relationship
with the customer.

The direct model enables a biller to maintain full control of the display of
bills, additional services, and marketing content. It also allows the biller
to preserve in-house control of important customer profiles and billing data.
Strategically, the direct model of IBPP can also serve as a test case for advanced
customer relationship management solutions. As businesses recognize the strategic
importance of CRM services such as customer self-care, they’re looking for extensible,
customer-centered applications that attract and retain customers. With IBPP
as a foundation, businesses can implement scalable billing systems to provide
the best in 21st Century customer care.

Many consumers have already experienced some form of direct billing, usually
from credit card companies or telecommunications providers. While the eventual
dominance of consolidated models (discussed below) seems assured, the strength
of such models will rest on a direct-billing infrastructure. For example, many
customers will continue to want to contact a biller directly to obtain customer
care or to take advantage of targeted marketing initiatives. And business customers
— who typically require bill analysis and invoice negotiation — will
appreciate a direct relationship with their major suppliers. Only a flexible
IBPP system will allow the simultaneous implementation of the direct model with
other models for a full range of customer benefits.

Consolidation Model

True market momentum lies with the consolidation model of IBPP. In this model,
the biller sends billing data to a third party, known as a bill consolidator.
The consolidator aggregates data from multiple billers and prepares bills for
presentment through its third-party arrangements with financial institutions
or Internet portals. Customers can then access their bills from the bill consolidation
site and enjoy the convenience of one-stop bill presentment. Within the framework
of this model, two distinct types of bill consolidators are emerging: “thick”
and “thin” consolidators.

Thick consolidation — In the thick consolidator model, the biller sends
all of its billing data, including transaction details, to the third-party bill
consolidator. All customer interaction is managed by the consolidator, which
acts as a single point of contact for the customer to manage multiple bills.
Figure 2 illustrates the interaction between the biller, consolidator, customer,
and TPPP in the thick consolidator model.

Figure 2 – Thick consolidators offer customers a one-stop shopping experience
for reviewing and authorizing bills from multiple billers.

When the customer enrolls with the bill consolidator (Step 1), the bill consolidator
registers that customer with each biller for whom the customer has requested
electronic billing (Step 2). The biller then forwards billing data to the consolidator
at regular intervals (Step 3) where it is consolidated into a single billing
database. Customers are notified by the bill consolidator whenever they have
bills to review from any biller (Step 4). The customer can view bill details
and authorize payments (Steps 5 and 6) at the bill consolidator’s Web site.
Payment processing transactions between the bill consolidator and the TPPP (Step
7) result in a remittance to the biller (Step 8).
Thick consolidators offer customers a one-stop shopping experience for reviewing
and authorizing bills from multiple billers. However, because traditional thick
consolidators do not provide direct interaction with the customer, the biller
has limited control over customer relationship management and targeted marketing.

Thin consolidation — Thin consolidators combine the strengths of the direct
billing model and thick consolidation model by collecting and preparing only
bill summary information. Customers that request billing details are linked
from the consolidation site directly to the specific biller’s Web site, enabling
the biller to directly provide extended customer care and targeted marketing.
This hybrid approach allows billers to achieve the broad reach of consolidation
while retaining direct interaction with the customer for control over strategic
marketing initiatives and customer relationship management. Figure 3 illustrates
the interaction between the various parties in a thin consolidator model.

Figure 3 – Thin consolidators combine the strengths of both direct billing
and thick consolidators.

Here, enrollment (Steps 1 and 2) is handled by the thin consolidator, who transparently
enrolls the customer with each biller they’ve selected. Unlike the thick consolidator
model, where the biller sends full billing details to the consolidator (and
also defers the opportunity for a one-to-one electronic connection with its
customer), here the biller sends only bill summary information to the consolidator
(Step 3). Email notification alerts the customer (Step 4) that bill summary
information is available for viewing on the consolidator’s Web site (Step 5).
If the customer would like to view full billing details, they are routed securely
to the biller’s Web site without having to log on again. At the biller’s site,
the customer can view bill details (Step 6) and see any other information the
biller chooses to make available, such as targeted marketing and customer care
information. The customer returns to the bill consolidator’s site to authorize
payment (Step 7). Payment processing and remittance to the biller (Steps 8 and
9) are then handled by a TPPP or through the biller’s financial institution
relationship.

Like the thick consolidator model, this approach has the requirement of a highly
reliable and scalable solution that can handle large transaction volumes at
the consolidator. However, this model also requires that the biller’s Web site
support the detailed transactions of IBPP as well as all of the components of
customer care and marketing.

Biller and Consumer Service Providers

Businesses that implement IBPP solutions may look to other vendors to outsource
critical functions of the overall solution. To help with specific IBPP requirements,
two key players have emerged: Biller Service Providers and Consumer Service
Providers. BSPs offer outsourcing of IBPP services to billers such as local
telephone companies and utilities. They manage the information technology systems,
the billing data, and the electronic payment transactions on a service basis.
BSPs may implement the direct billing model or be part of a consolidation solution.
In either case, they serve multiple billers, thus generating economies of scale.

CSPs focus on the consumer, presenting bill summary information from multiple
billers to the customer. Since customers often have relationships with geographically
dispersed billers, the convenience of the CSP’s one-stop Web site, where they
can authorize multiple bill payments, is compelling. The CSP model is particularly
compelling for retail banks and enterprises in certain vertical industries.

Conclusion

The combination of leading-edge IBPP with state-of-the-art online customer
care is recasting customer relationships and increasing customer loyalty. IBPP
transforms billing into a strategic marketing vehicle, tailored to a customer’s
unique profile and allowing the cross-selling of a company’s services and products.
Industries experiencing intense competition with their products and services,
such as financial institutions, telecommunications companies, and utilities,
can differentiate themselves with IBPP services and are aggressively pursuing
IBPP solutions. Banks in particular are in a unique position to become direct
billers and bill presenters for other companies, as well as key electronic payment
players.

Ultimately, IBPP will transform the bill presentment and payment process even
further. Features such as bill reporting, search and analysis capability and
bill history all promise to simplify the billing process. As IBPP evolves, today’s
batch-mode process will be replaced with real-time billing that is truly customer-driven.
For example, user-defined direct debit — the authorization of automatic
payments based on predetermined criteria — could eliminate the need for
customers to track and individually pay bills that fit their specifications.
Customers will be able to see their account status at any time and control how
and when they receive and pay their bills.

For More Information

iPlanet E-Commerce Solutions delivers a comprehensive IBPP solution tailored
to the needs of billers. Built on the scalable foundation of the iPlanet™ Application
Server, iPlanet BillerXpert and iPlanet BillerXpert, Consolidator Edition applications
support large-scale, transaction-intensive Web sites. Whether a company presents
bills directly or via consolidators or Internet portals, the iPlanet commitment
to open standards helps ensure that its IBPP solution will link to all the key
constituencies in the presentment and payment infrastructure, and reach customers
via every Internet-ready device.

To learn more about the iPlanet IBPP solution, please visit the Billerxpert
product pages at www.iplanet.com.
Sales contact information can be obtained by contacting iPlanet headquarters
in Santa Clara, California at 888.786.8111.
Related reading materials can also be found at: www.sun.com/sp/suntone and www.sun.com/sp/sunconnect