Study: Using E-Payments, Billers Can Save Billions

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While a new study by market researcher Killen Associates, Palo Alto, CA, found that banks, utilities, water and cable companies could save $1.2 billion each year by effectively using electronic billing and payment systems, companies have yet to see any savings.


According to the study, the cost for manual first-class bill presentment -- the term used when the customer receives a bill -- through the U.S. Postal Service ranges from 70 cents to $1.50 per bill, but e-bill presentment can reduce it to 50 cents each. In addition, when e-payment is added, the cost reduction can be even greater.


"No utility can afford to overlook this potential in savings," said Bob Goodwin, senior vice president at Killen. "Online bill presentment can save billers on labor and postage costs. Getting paid electronically can reduce the costs in receivables and improve cash flow. We see this as a revenue generator for big utilities who can take on the processing assignments for smaller ones."


Consolidated Edison Co. of New York is launching an e-bill presentment pilot program in the next few weeks through MSFDC, Englewood, CO, a Microsoft Corp. and First Data Corp. e-payment and e-presentation service. If successful, the power company will roll out the initiative to its 3 million customers in New York and Westchester County early next year. ConEd has been offering e-payment options since July 1997. While it has high hopes for the initiatives, they're seen strictly as value-added services right now, not cost-savings initiatives.


"The question of how much savings there is going to be depends on how many toll takers there are along the road," said Dennis Jawor, director of treasury operations at ConEd. "Unless we stop sending paper [bills], there are no cost savings here. From the biller's point of view, we are not looking to have the consumer pay to get this service."


Goodwin, in fact, agreed that e-billing only saves money when the paper bills are discontinued.


"The key word in our study is effective -- and when we say effective, we mean critical mass. It's going to cost a lot of money [for companies] to go into an electronic presentment," he said, "and if you don't get a buy-in from a decent percentage of your customer base, then you may not get those returns."


Nevertheless, ConEd officials are hopeful.


"Our customers, more and more, are taking advantage of the electronic transactions we present to them," Jawor said. "We think there will be a very large acceptance of [the e-presentment] system and it will reduce our costs. We also think there will be an incremental growth in the area of [people] not using paper bills."


Jawor said it could take less than a year for ConEd to break even with its initiatives, even though he estimates it needs 80,000-100,000 customers to adopt this mode on a monthly basis.


Several other e-billing services are being developed, including ones from AT&T, Chase Manhattan Bank and Wells Fargo Bank.


Two companies announced initiatives earlier this summer:


* edocs, Boston, an e-bill presentment and payment solutions company announced a strategic alliance with document composition software company Group 1 Software, Lanham, MD. The alliance will create solutions that simplify e-presentment and e-payment solutions for users of Group 1's DOC1 software and other bill and statement producers. For example, billers will be able to use the same input data file for print and Internet presentment applications, making it possible to quickly deploy integrated print and Web presentment and payment solutions.


* EDS, Plano, TX, announced that its electronic business unit is offering an e-payment service called iBilling, which will let a biller's customers read their bills and also e-mail questions and concerns directly to a customer-service representative.


In addition, Killen Associates predicted that by the end of 2000, almost 8 billion repetitive bills will be presented electronically each year, or 12 percent of all bills.
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