E-billing catches up

E-billing, long regarded as the next killer application for the Internet after e-mail and online banking, is finally starting to take off in SA. Vendors have spoken about the potential of e-billing for more than five years, but South African consumers and companies have been slow to embrace the concept.

Sluggish adoption of e-billing is not restricted to SA - a recent study conducted by Mail Moment and sponsored by the US Postal Service found that 72% of people who live in technology-intensive countries still prefer a paper bill to the electronic equivalent.

Still, there are some signs that e-billing is on the cusp of major growth in SA.

Michael Wright, CEO of Striata, says the local e-billing market has shown strong growth since Standard Bank started distributing electronic statements to its customers via e-mail in 2001. Since then, the market has gained momentum with large billers, which include major retail chains, financial services companies, utilities and telecoms operators, following suit. End-user adoption is also starting to accelerate.

"As the success of online banking shows, there is a viable online market in SA. Organisations are willing to invest in e-billing and online self-service solutions to reach that market," says Kevin Meltzer, business development manager at Consology, a Siebel partner that focuses on the e-billing and self-service market. Mobile operators and service providers such as MTN and Vodacom have begun to evolve beyond e-billing, providing online customer self-service to their subscribers, he adds.

There are as many approaches to the e-billing market as there are vendors playing in the space. Companies such as Striata and E-mail Connection that offer e-mail-based solutions have taken a high profile in the South African market, although Web-based solutions from the likes of Siebel and Actuate have made in-roads into industries such as telecoms.

People tend to be lazy, so pushing e-mails to them and asking them, ensures better adoption than expecting them to sign up for a service on the Web.

Michael Wright, CEO, Striata

Whether e-mail or the Web should be the preferred channel is the source of heated debate among vendors and integrators in the e-billing market. Both sides agree that the Web and e-mail both have a part to play in the e-billing world, but disagree about the exact roles of each channel.

In reality, the needs of the organisation rolling out the system will determine which solution is most appropriate: an interactive online portal backed by e-mail and SMS notifications, or an e-mail solution backed up by a portal for storage of historical documents and basic self-service functions like changing personal details.

On the one hand, advocates of e-mail-based solutions argue that e-mail is a simple medium that offers low barriers to entry for billers and builds on existing user behaviour. Companies can simply use the services of a messaging service provider to distribute their bills via e-mail rather than implementing expensive portal and self-service software.

On the other hand, proponents of Web-based e-billing say Web solutions allow billers to offer richer functionality, more interactivity and more detailed information to their customers than static e-mails do. They also claim that e-mail has inherent trust issues: corporate firewalls often shred e-mailed bills before they reach the customer, particularly when they take the form of attachments.

Says Wright: "E-billing began on the Web in the US, but in SA it started with e-mail. Because of the costs of dial-up Internet connectivity, South Africans tend to dial-up to retrieve their e-mail to read offline rather than spending time surfing around."

E-mail as an e-billing channel has matured considerably in the past couple of years, and now even allows for secure payment of bills via a push-debit mechanism, adds Wright.

E-mailed bills are becoming more interactive and can be designed to allow customers to easily sort information into views (such as high to low values).

Security concerns such as phishing, worms and viruses have done little to dampen enthusiasm for e-mail as a billing channel in SA, says Wright. Strong encryption (128-bit) ensures the integrity and confidentiality of Striata`s e-mails, he adds.

"People tend to be lazy, so pushing e-mails to them and asking them to opt-out if they don`t want to receive their bills in their in-boxes usually ensures better adoption than expecting them to sign up for a service on the Web," says Wright.

E-mail solutions can also give small and medium enterprises an affordable entry into the e-billing space since they require no capital outlay or in-house technical skills and are based on a pay-as-you-go subscription mode, says Gary Hart, marketing and product manager at MWeb Business.

MWeb`s e-billing allow customers to be notified via SMS when their bill is e-mailed and will include links for credit card payment in the future. "Small businesses are all about cash flow, so they welcome any solution that helps them to get their invoices to their customers faster and reduce their debtors days," adds Hart.

"E-mail is a relatively static medium that adds little value beyond the paper bill. For a small company, the generation of an invoice from within an accounting package into a PDF format is a good solution, but for larger companies with lots of customers, the real promise of e-billing is to grow into the world of customer self-service," says Meltzer.

Information-rich bills such as cellular accounts contain a wealth of detail that consumers and financial administrators at large companies can use to make decisions about telephone use, he adds.

The Web model allows customers to perform grouping and charting, manipulate data, dispute a transaction, look up a past statement or apply to migrate from one cellular package to a different contract, for example. In addition, the Web portal can serve as a hub for customer self-service, allowing customers to update their details, activate new services, initiate billing disputes or look for information, says Meltzer.

The original business case for e-billing was largely built around the cost-savings companies can generate by removing paper and postage from the billing process. Although the cost-saving from ending the paper trail still forms part of the ROI calculation, it is no longer seen as e-billing`s most important benefit, says Consology CEO John Ziniades.

Companies can`t simply shut off their paper billing processes when their e-billing offering goes live since they will need to continue supporting customers who don`t have Internet connections, or who simply prefer to receive a hard copy of their bills in the post. That means cost-savings may not be as dramatic as originally envisaged, says Ziniades.

Other elements of the business case for e-billing includes speeding up the collection of payments from customers, easier reconciliation of payments with bill reference numbers, deflecting calls from the contact centre, and intangible benefits such as improved customer loyalty and lower churn.

"The value is not just on the presentment and payments side, but also on the service side. The real benefits come in when you have an offering that allows your customers to answer questions and perform transactions themselves online rather than picking up the phone to call you," adds Ziniades.

In industries such as telecoms, between 60% and 80% of call centre enquiries are related to account issues such a customer disputing a bill or requesting that copies of the past year`s statements are faxed to him.

An online portal can allow a customer to download historical statements or initiate a bill dispute in a process that is cheaper to the service provider than telephonic support and more convenient for the customer. According to Forrester research, servicing customers across the telephone is up to 15 times more expensive than allowing them to help themselves on a Web portal.

E-mail is a relatively static medium that adds little value beyond the paper bill.

Kevin Meltzer, business development manager, Consology

E-billing is also becoming an important component of customer relationship management (CRM), as evidenced by Siebel`s acquisition of self-service and e-billing specialist, edocs, late last year.

For companies such as telecoms operators and utilities, the monthly bill or statement is the only regular, direct contact they have with a customer. An online bill provides them with an ideal platform for personalised marketing and CRM - for example, an operator alerting a subscriber he is eligible for a handset upgrade or a retailer informing a customer of a special offer.

Meltzer says more companies will extend their customer self-service applications beyond the Web to other channels such as mobile phones, self-service kiosks and dealers or service centres in the future. By giving dealers and internal customer representatives access to the same view of the account as the end-user accesses, companies can ensure the customer experience is consistent across channels and the same information is fed to each touch point.

The benefits of e-billing are as compelling for biller and payer in the business-to-business (B2B) market as they are in the business-to-consumer environment. Companies such as Faritec Inter-Company Processes (ICP) have come to the market with electronic invoice presentment and payment (EIPP) solutions that are tailored to the needs of B2B customers.

Faritec ICP is an intermediary that switches B2B transactions between companies, providing an integration layer between companies with disparate systems and processes. Its system provides functionality such as invoice delivery; invoice, purchase order and goods received note matching; claims and request for credit management; dispute management; remittance usage; and reconciliation across these environments.

Says Kevin McKenzie, director at Faritec ICP: "Big payers in the B2B space could interact with between 1 000 and 3 000 suppliers every month, generating tens of thousands of invoices to process. Some need to maintain departments of 300 people just to manage claims and process invoices.

"Most South African companies rely on paper-based inter-company processes in order to administer the interactions between themselves and their trading partners` accounts payable or accounts receivable systems.

"This results in excessive paper trails, work duplication, and errors and delays in processing times. When you consider that payers dispute as many as five or six out of every 10 invoices, the value of a more automated process becomes clear."

One factor that has inhibited adoption of e-billing in SA is that companies regard the systems as expensive and complex to implement and integrate. However, heavy-duty e-billing and self-service solutions are becoming easier to roll-out and integrate with existing enterprise systems.

"There are now out-of-the-box solutions that give organisations most of the functionality they need. Companies used to need to perform a great deal of customisation of the software, but the market is now moving towards easier configuration of packaged software," says Meltzer.

When you consider that payers dispute as many as five or six out of 10 invoices, the value of a more automated process becomes clear.

Kevin McKenzie, director, Faritec ICP

Many South African companies tried to build their own e-billing platforms at great cost rather than buy packaged software, says John Hilton, Actuate product manager at Business Connexion. As a result, they have ended up with systems that are difficult to maintain and enhance, limiting their flexibility to respond to the needs of their customers. Disappointed by end-user adoption of these systems, they have now cut back on their investments in e-billing and rather allowed their portals to stagnate.

Another possible reason that adoption of e-billing among consumers has disappointed, is that online self-service and billing systems have simply not been easy to use, says Hilton. Many have clunky interfaces and thin functionality, which makes them unattractive to the consumers who are supposed to use them, he adds.

However, the biggest obstacle to widespread adoption of e-billing and EBPP is perhaps human nature and resistance to change.

The Mail Moment study in the US found that many customers still prefer a tangible paper invoice to the electronic equivalent. They like to check their mailboxes for new post, want a paper bill to directly write billing information on and cheque numbers, and regard the invoice as a reminder to pay the bill.

To see aggressive adoption of e-billing, billers will need to invest in education and incentives to encourage their customers to make the switch from paper to online.

Will end-users view and pay most of their bills at each of their service providers` Web sites in the future or will they do so through a central hub that consolidates presentment and payment facilities for all the companies they do business with? Whether the former model, called 'biller direct`, or the latter, known as 'biller consolidation`, will win is not yet clear.

The biller-direct model

The biller-direct model still dominates in most parts of the world. Market researcher, TowerGroup, estimates that more than 90% of online bills in the US were delivered at biller-direct sites. However, analysts such as Celent Communications believe the biller-consolidated model will enjoy growth that outstrips the biller-direct approach over the next three years.

The biller-direct model starts to become unwieldy when a user is accessing and paying 10 or 15 bills online each month - logging directly onto each company`s Web site to get a bill and make payments could become a time-consuming chore when a user starts to pay more accounts online.

Neutrality of bill consolidator hubs

One possible reason that bill consolidation has yet to take off is that bill consolidation hubs have failed to win the trust of billers and their customers. A bill consolidator needs to hold a neutral position in the market to entice companies to sign up for its service and has to have a trusted brand to bring end-users on board.

The concept has proven to be most successful in countries where bill consolidation is driven by established companies such as banks and post offices that have proven track records in information security and data privacy.

Bill aggregators are already enjoying some success in countries such as Australia, Norway and Canada. BPAY in Australia, for example, was established with support from the country`s major banks in 1997 and now accounts for 13 million bill payments worth more than AU$8 billion a month.

A consolidation model, driven by the big four banks, could work well in SA because the local financial services industry is dominated by a handful of players and is regulated at a national level.

South African banks are looking to use BankServ, the independent payments infrastructure company jointly owned by a number of financial services companies, as a vehicle for an EBPP initiative.

By working through BankServ, the banks will be able to share the costs of establishing a platform for bill consolidation. BankServ runs a host of electronic payments systems such as the Saswitch ATM network and the Automated Clearing Bureau funds clearing facility.

The South African e-billing market is ripe for a consolidation model because most major billers now have a basic e-billing engine in place, says Ziniades.

Banks are driving the e-billing market in many countries because they want to attract payments to their Internet banking portals and lock them in. Companies are willing to support bank-led consolidation initiatives because they want to distribute their bills as widely as they can and get payments in as quickly as possible, adds Ziniades.

Local banks are the natural players to serve as SA`s bill consolidators because they have a relationship of trust with consumers and billers, says Wright.

Thin vs thick consolidation

The consolidation business model can be sub-divided into two approaches: thin consolidation and thick consolidation. Thick consolidation, where the bill aggregator hosts both summary and detailed customer billing information for billers, is widely considered to be a non-starter. Few companies are willing to surrender detailed customer information to a third party while aggregators don`t have the appetite for taking on the complexity that thick consolidation involves.

In the thin consolidation model, billers provide the consolidator with only the summary level information that their customers need to pay their bills. This information typically includes the bill number, biller, due date and amount owing.

Biller-direct and biller-consolidation services are both likely to have a role to play in the market. Users will probably pay bills at a banking portal, but will use the biller`s Web site to follow up queries on their statement or to initiate customer self-service requests, says Ziniades.

Bill consolidator (or aggregator): A third-party service provider (in most countries banks or post offices) that aggregates bills from a number of companies and then distributes each consumer`s bills through a Web portal or e-mail. The customer simply logs in to view and pay all bills at this single source.

Biller direct: In the biller direct business model, the supplier provides the customer with billing information and payment facilities directly through e-mail facilities or a Web site of its own.

Biller service provider: An agent that provides e-billing services to a company, often as a hosted application that is charged for on a subscription basis.

Customer self-service (CSS): Online CSS is considered by many to be a natural evolution from e-billing. It combines technologies such as electronic bill presentment and payment, order management, knowledge management, and personalisation tools to give customers the ability to perform routine tasks and transactions online. These may include disputing a bill, requesting the activation of a new service by the supplier or initiating a request for support.

Electronic bill presentment and payment (EBPP): A process that involves the delivery of statements/bills to consumers across the Internet and allows them to pay their bills electronically.

Electronic invoice presentment and payment (EIPP): The business-to-business world`s answer to EBPP - a process by which sellers present electronic invoices to buyers, who in turn pay their suppliers electronically.