USPS E-Payment Service Faces Scrutiny

Despite an initial positive response from the direct marketing industry, the U.S. Postal Service's e-payment program, which was launched earlier this month, is facing criticism from competitors and postal pundits.

The service, called USPSeBillPay, offers billers and payers a central site for bill paying transactions without the separate passwords and navigation systems for each biller that consumers currently have to deal with. If a company does not accept electronic payments, USPSeBillPay will issue a paper check and send it through the mail.

CheckFree Corp., Atlanta, which handles about 80 percent of online bill paying in the United States, is operating the program, and, a division of Output Technology Solutions, Spokane, WA, is providing electronic and print services to large commercial customers.

New customers use USPSeBillPay free for the first six months after enrolling. After that, there are two service plans: Pay Everyone costs $6 a month and 40 cents for each additional payment after the first 20, and Pay As You Go costs $2 a month and 40 cents for each payment. Both plans offer the same functionality for receiving and paying bills.

Insiders said the service was launched because the agency feared losing First-Class mail revenue to the Internet in the future. William J. Henderson, USPS postmaster general, fears the USPS could lose as much as $17 billion worth of First-Class mail to e-commerce competition in coming years. That would represent a substantial loss for the Postal Service, which takes in about $65 billion in revenue each year.

While both companies declined to say how much money they expect to make from USPSeBillPay, Henderson said he expects the venture to turn a profit of $400 million for the USPS in 2004.

Direct marketers hope the program will enable the USPS to generate revenue — and essentially become a major e-commerce player — which will allow them “to maintain the infrastructure they need for the rest of the mail,” said Barry Brennan, director, postal affairs, Mail Advertising Service Association, Alexandria, VA. “If they can generate revenue from the transactions that take place electronically via this program, then rates for other classes of mail will not have to go up whenever First-Class mail aversion begins to occur, which is inevitable. Basically, they will be better situated to stay in business,” he said.

But the program is facing scrutiny from other camps.

The U.S. Internet Industry Association, Arlington, VA, a trade association for Internet commerce, content and connectivity with several members involved in e-billing and e-payment, said in a newsletter to its members recently that it opposes the USPS' decision to enter the e-billing and e-payment business.

“With no clear e-commerce strategy and a string of failed initiatives behind it, the [USPS] has again launched a new program in cyberspace,” the newsletter said. “The newest program, under the name USPSeBillPay, is a bill presentment and payment system designed to compete directly with Yahoo!, Intuit and other businesses.”

USIIA said it opposes the program for a number of reasons, including “the use of monopoly revenues to compete illegally in the private sector, the lack of a clear privacy policy for data collected on the site and the failure of the USPS to follow its own procedures for implementation of new postal rates and services.”

It also told its members that “USIIA is expected to file a complaint with the Postal Rate Commission in the next week over the issue.”

Competitors, such as United Parcel Service, Atlanta, also have concerns, including that the Postal Service could initiate this program without PRC oversight.

Tad Segal, a spokesman at UPS' Washington office, said the company questions whether the program is a postal service as defined by the Postal Reorganization Act of 1970, and if it is, “why didn't postal officials have to run it by the PRC and obtain the authorization of the USPS' board of governors before launching it?”

UPS also has concerns about how the service is priced and whether the revenues and anticipated use volumes are being figured into the rate case currently being heard by the PRC.

While UPS has not filed a complaint with the PRC just yet, “We have not ruled out that possibility,” said Segal.

The Postal Service has said this service does not need PRC oversight. A PRC spokesman agreed and said that while any party can file a complaint with the PRC — and the PRC can decide whether to hear that complaint and move forward with a full investigation of the program — the USPS is not obligated to adhere to any PRC suggestions.

Some analysts, however, are taking a positive stance. Current Analysis Inc., a market research firm in Sterling, VA, said the strategic alliances between CheckFree, and the USPS “address the primary IBPP [Internet bill payment and presentment] need to increase biller content and broaden distribution channels.”

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