ELECTRONIC BILLING/PAYMENTS
Electronic bill presentment and payment will deliver speed and efficiency, yet it remains years away from widespread consumer awareness.
EBPP: A 'Holy Grail' For Servicers
BY JULIUS FABRINI
In "Field of Dreams," Kevin Costner played a character
who heard a mystical voice announce "If you build it - they will
come." In a way, that summarizes the current situation with
electronic bill presentment and payment (EBPP).
Companies that are now providing EBPP services or are
entering this infant-like sector are faced with a daunting challenge of
creating a market for this electronic method of sending and
receiving payment for a bill.
It is estimated that less than 1% of the 20 billion bills produced
annually are presented and paid electronically, according to
industry sources.
What does this mean for servicers? Well, for one thing, servicers
are well-positioned to be one of the key business sectors that will
play an important role in growing EBPP, which is sometimes
referred to as digital billing.
As more servicers learn about the convenience, rapidity,
efficiency and customer potential capabilities of EBPP, this tool will
grow by leaps and bounds, EBPP vendors emphasize.
There appears to be confidence in the industry that EBPP will
one day be a dominant method of making mortgage payments,
contends Debbie Newell, product manager for Youraccounts.com,
the e-commerce division of Output Technology Solutions in El
Dorado Hills, Calif. With more than 30 companies under contract,
Youraccounts.com focuses exclusively on electronic presentment,
processing and payment of bills, statements and other related
customer communications.
Newell notes that the use of EBPP will expand as consumers -
in this case borrowers making mortgage and other payments - learn
to feel comfortable with making their payments on the Internet. In
addition, she points out that servicers will need to take part in
actively marketing consumer education campaigns as part of the
process of showing borrowers the ease and convenience in using
EBPP.
Obstacles
Kenny Hargis, president of Venture Encoding Service Inc.
based, in Fort Worth, Texas, says, "A mass consumer adoption of
receiving and paying bills electronically is a major obstacle for billers
to overcome." He explains that his company can facilitate each
phase of the transition to EBPP.
Another obstacle in expanding EBPP implementation in
servicing is the myriad of options faced by both servicers and
borrowers, according to Joseph P. Thomas, senior vice president of
Allison Payment Systems LLC, based in Indianapolis, a supplier of
print and mail services that has been pursuing development of
products and services in the EBPP area for the past two years.
Allison has adopted the use of an EBPP product called
Paysense, and in July 1999, it started delivering electronic bills.
Developed and marketed by Trisense Software Ltd. of
Minneapolis, Paysense is described by the manufacturer as a
turnkey digital billing solution that connects billers and customers
through a digital billing network to receive, view and pay bills
through the Internet.
Tom Kuder, executive vice president of marketing for
Trisense, says EBPP can produce tremendous cost-savings for a
servicing operation. "Round-trip costs for paper-based bill creation,
delivery and payment can range from a low of about $0.65 to as
much as $2.00 or more, tending to the higher end in lower-volume
servicing operations," he explains.
"By contrast, digital billing transactions currently average
$0.35 or less, and can even be less than half this amount in
"wholesale" operations that provide outsourced services to multiple
billers. What's more, electronic costs are much less volume sensitive
than paper-based costs, making dramatic per-item savings possible
even for smaller service operations."
Allison's Thomas indicates that his company has "taken an
ease of integration approach by offering Paysense."
One of the advantages of this system is that "the servicer can
enter the EBPP arena with little or no change to current billing
operations," Thomas notes. "They will continue to send a single
stream of data, but take advantage of both paper-based and EBPP
options. The Paysense product addresses both ease of use and
security issues for the consumer through its 'anonymous bill
delivery' process. No sensitive data is sent via the Internet. This
process has been received very well both by servicers and current
users."
Mindset
A long-time user of EBPP and a firm believer in the technology
is Ed Burger, president of Midwest Loan Services, Inc., based in
Houghton, Mich. A subservicer, Burger says EBPP has been
providing his company with a viable payment alternative for his
customers for about two years.
As for wide-spread consumer acceptance, he says, "The only
barrier to EBPP is mindset. Much of the writing and positioning by
third party providers is the complexity and cost. Virtually any
company servicing with a computer program can offer EBPP very
inexpensively. They simply don' t believe it."
Other crucial benefits of EBPP include its cost-effectiveness
and potential revenue generation for servicers, according to Marc
Mehl, vice president of E Commerce Group, manufacturer of
Speedpay.
Subscription fees for Speedpay, which average less than $1
per transaction, are based on customer usage, and end up paying
for themselves, says Mehl. "If a servicer's customers don't use the
system, there is no charge to the company. And since many
Speedpay clients in the mortgage servicing business charge a fee to
customers who do use it, it has become a cash flow by getting the
funds quicker," he explains. "EBPP can boost the bottom line
through adding incremental revenue."
As an example, Mehl cited one of its servicing clients, Texas-
based Meritech Mortgage Services Inc., which is expected to
generate an estimated $500,000 in extra revenue this year from the
Speedpay service fee.
"The company, which services more than $4 billion in
subprime loans, charges customers $6.95 for the convenience of
making Speedpay payments. Like many other servicers'
customers, Meritech's clients feel that this fee is very reasonable
compared to other fees that may result from late payments or, if
they don't time the mailing of the paper check correctly."
The advantages of using EBPP over paper billing include an
improved method of communicating with customers, according to
Lee Conway, vice president, corporate marketing for NCP
Solutions, which reflects the recent corporate name change as a
result of the combination of National Computer Print of
Birmingham, Ala., CNP Solutions of Jacksonville, Fla., and
Payment Technologies (Paytech) Inc. of Memphis, Tenn.
"Electronic Bill Presentment and Payment is a strategic
direction for servicing operations today," she remarks. "However,
as adoption rates increase the benefits may expand to actual cost
savings to the biller."
Servicers that use EBPP will have increased capability to
market and cross-sell other loan products and immediately keep
borrowers informed about important notices, she explains.
"They will have the ability to track customer acceptance to
offers, learning much more about what interests their customers
and can therefore capitalize on that knowledge and benefit from
targeting the right customer with the right offer at the right time,"
Conway emphasizes.
"Ultimately, the consumers will dictate where they want to
receive their bills," Conway continues. "NCP Solutions has
partnered with billserv.com to offer our customers access to any
distribution point where electronic bills can be delivered, using the
same file they send to us today for their printed bills/statements.
"While many servicing operations initially want to put their
bills/statements on their own Web site, they will eventually want to
expand their offering and enable all of their consumers to choose
where they view and pay their bills. The virtual mailbox will
become the goal of the consumer and billers will have to work
together to provide that. In the end, all parties will benefit from the
experience."
Venture's Hargis is adamant that EBPP is the wave of the
future." However, just as some consumers were leery to use ATM
machines several years ago, today many consumers are hesitant to
receive and pay bills electronically," he points out.
"The challenge for servicing companies is to help increase
EBPP adoption rates by informing customers of the benefits and
giving them convenient electronic payment options. Once the
general public becomes more comfortable with electronic options,
the adoption rate will increase and the full benefit of EBPP will be
recognized and become mainstream."
This article was previously published in the June 2000 Issue of Servicing Management.
