On-line delivery of water bills and customer payments via the Internet could be the wave of the future for utility billing systems, limiting the chance for errors, reducing costs and cutting overhead.
Consumers are actively trying out the Web for online purchases of everything from books to clothes to new and used automobiles. For a number of years consumers have been able to use personal finance management software like Microsoft Money to pay their water bills each month instead of writing out a check by hand and putting it in the mail. This system has been a convenience for consumers, but not much of one for billers since paper checks are still delivered from the consumers’ banks.
New forms of Internet bill delivery and payment could revolutionize billing by offering the entire process online — from presenting bills to consumers to delivering payments to billers. Internet billing has the potential to offer utilities significant cost savings:
- When customers choose to receive and pay their bill on the Web instead of on paper, the utility would save on printing, paper, postage, and payment processing costs.
- Such a system should reduce the chance for human error, since everything is done electronically and information does not have to be rekeyed. That should lead to reduced overhead for handling costly exceptions.
- Customers can go online to check the status of their payments, reducing calls to customer service.
A recent report by industry analysts Robertson Stephens at BancAmerica estimates that 1 million bills will be presented on the Internet in 1998. By the year 2000, this number is expected to reach 500 million, approximately 3 percent of all consumer bills in that year. Today, a number of utilities are piloting Internet bill delivery and payment projects with plans to move consumers away from the paper-based system as quickly as possible.
How it Works
Internet bill delivery and payment presents bills, statements and invoices via the Internet to any PC or Web-enabled TV, and, through the instruction of the recipient, returns payment and remittance information to the biller or designated lockbox. This electronic round-trip simplifies data processing for billers, consumers and their respective financial institutions. The cost for this round-trip transaction for the biller is expected to be less than the cost of a first class stamp.
How it Works
The consumer no longer has to transcribe information from the bill to their check and the remittance receipt, stuff an envelope, find a stamp and get to the post office. Payment decisions are executed online with the click of a mouse. Remittance information is created automatically, allowing virtually no chance for consumer error. Billers and their agents no longer have to process paper checks and re-key the information into their databases.
How it Works
Until recently, a consumer could pay a bill electronically, but on the back end of the transaction a paper check was sent to the biller. While this mode of payment has grown in popularity because of increased convenience for consumers, it has proven both cumbersome and costly for billers. Some bill service providers aggregate electronic payments for billers in batches, providing a single check along with a list of payments by individual account number. This “check-and-list” method of payment with its extra data entry requirements must be handled as a costly exception in most payment processing operations.
Several Options Available
Several methods for Internet billing and payment have been proposed. In order to succeed, the process will have to be convenient and useful for consumers.
Several Options Available
Some large utilities have proposed simply posting their customers’ bills at their own Web sites. While this at first may seem logical from a biller’s perspective, it runs against consumer habits and expectations. Consumers are accustomed to receiving all their bills in one place. They don’t want to go to one site to receive their water bill and another to see their power company bill.
Several Options Available
In addition, most companies don’t have the internal resources to support round-the-clock Internet bill presentment at their own Web site. The operational overhead would have to include consumer authentication, 24-hour by 7-day Internet operations with full-time customer support, real-time links to billing and accounting systems, and the secure data backup requirements of a full-fledged online service.
Several Options Available
Both of these points recommend a secure central service — a consolidator model — that aggregates bills for individual consumers, presenting all the bills together in one place when the consumer is ready to make payment decisions. The service would leverage economies of scale to optimize performance, keeping costs down for all participants.
Several Options Available
How will customers receive their bills from this service? When it comes time to pay their bills, consumers normally reach for their checkbooks. That’s why consumers’ financial institutions are the most logical distribution points for e-bills. Most analysts agree that consumers will willingly go to their bank’s Web site to review their bills, check their accounts and make payment decisions.
Bills and Payments
Here’s how the consolidator system will work from the biller’s perspective. Statements or bills that would have been printed are rendered instead as e-bills (Web pages) and sent electronically to an Internet bill delivery service center.
Bills and Payments
The service center consolidates bills from many billers so the consumer can find all their bills in one place. The service center is in turn linked to the consumer’s bank Web site.
Bills and Payments
Participating banks authenticate the consumers and make the service more attractive and useful by providing the consumer’s individual account balances along with their bill payment status.
Bills and Payments
Customers visit their bank Web site and select the Bills function, which seamlessly lets them view their e-bills from the service center. Customers review their bills, respond to any on-bill communications from the biller (including the biller’s own regulatory notices, advertising, and cross-promotions), and arrange payments.
Bills and Payments
Electronic remittance information — the equivalent of a clean remittance coupon — is returned to the biller. And payments are routed electronically to the biller, the biller’s bank (lockbox) or the biller’s payment processor in the manner that the biller has specified
Conclusion
Internet bill delivery and payment offers many advantages to billers. As testament to these benefits, many of the nation’s largest oil, electricity, telecommunications and credit card companies are in the process of testing the service right now.
Conclusion
As water utilities begin to investigate their options for Internet bill delivery and payment, they should focus on the four key imperatives of this new service: reduce costs, maintain control of the billing and payment process, maximize distribution and customer adoption, and choose capable partners.
