US consumer electronic payments (e-payments) surpassed cheque volume for the first time in 20031. An estimated 70% of online households now pay bills via the internet every month2. Fuelled by an array of new internet and mobile options, the amount of e-payments is likely to continue to grow. Clearly, US consumers are comfortable with most electronic transactions, except for electronic bills (e-bills).
According to a study conducted by NACHA’s Council for Electronic Billing and Payment (CEBP), current consumer adoption of e-billing in the US across all biller verticals averages only about 27%. Furthermore, most billers surveyed believe that the ‘tipping point’, where more than 50% of customers are receiving e-bills, is still three to five years away.
E-billing and Payment Challenges
For years, billers have operated e-bill adoption campaigns, using tactics such as sweep stakes, billing credits and environmental messaging with only marginal results. While consumer payment behaviour has changed, billers have yet to crack the code for motivating customers to accept e-bills.
In addition to consumer attitude, there are also a number of structural issues that hamper e-bills growth, particularly in the US market, which has thousands of financial institutions and millions of billers. Basically, e-bills can be provided to consumers through a biller direct model (i.e. consumer accesses biller.com website) and/or a distribution channel, where the e-bill is pushed to the consumer (e.g. emailed, texted or sent to an online banking/aggregator service).
Still, the only method where billers can universally send a bill to any customer is through the traditional mail service, which is, of course, a paper bill. While billers often offer multiple options for a consumer to receive an e-bill, there is no one model that has the same reach as a paper bill delivered through traditional mail. Currently, a biller must integrate with multiple e-bills distributors to maximise their reach to customers, and each distributor will have unique processes, formats and service agreements. The fragmented distribution pipeline creates complexity and additional cost for the billers.
Similarly, banks and others that present consumer bills do not have a ‘receive any e-bills’ option, and must integrate with multiple billers and biller service providers to maximise bill content acquisition to provide a service equal to a traditional mailbox.
The EBIDS Solution
To address these issues and increase the availability of electronic bills for all consumers, in 2011, NACHA and The Clearing House launched the Electronic Billing Information Delivery Service (EBIDS). Combining aspects of the biller direct and distribution channel models, EBIDS enables billers to deliver e-bills to customers’ online banking accounts and receive accurate bill payment information from any bank through the Automated Clearing House (ACH) Network.
All US financial institutions, and by extension most any biller, have connections to the ACH Network, which is governed by the NACHA operating rules. EBIDS uses ACH formats and special rules to enable financial institutions, billers and e-billing providers to standardise e-bill presentment and payment (EBPP) transactions. The goal is to provide smaller market players with the same opportunities as the larger stakeholders and to allow the e-bill networks to interoperate.
How EBIDS Works
EBIDS is basically a set of rules, enforceable by NACHA, for EBPP transactions in the ACH Network, which serves as the pipeline for exchanging transactions. There are four basic processes of the EBIDS model:
- Biller enrolment into the EBIDS Biller Directory.
- Consumer e-bill enrolment with the biller.
- E-bills presentment to the customer.
- Bill payment to the biller.
First, biller banks or biller service providers add billers into the Biller Directory to enable participation in EBIDS. This web-based application serves as a tool to inform consumer banks of the billers enrolled in EBIDS and provide the banks with information on how to conduct EBPP transactions with the billers. Consumer banks download this information from the EBIDS Biller Directory to update their online banking/bill payment systems.
After billers are enrolled, consumers must then sign up to receive e-bills through their financial institutions. Once billers and consumers are enrolled, the billing company can begin sending summary bills through the ACH Network to the consumer’s online banking site. The consumer can log in to view the summary bill and view full bill details at the biller site by clicking a secure URL link included in each bill.
To pay the bill, the consumer can specify the payment amount and date, and the financial institution will send to the biller an ACH credit payment with biller-approved remittance information for accurate processing and posting.
Even billers not distributing bills through EBIDS can receive bill payments. Through the EBIDS PayOnly service, billers can input their ACH payment instructions into the EBIDS Biller Directory. Once added, consumer banks can then use the information to send ACH credit payments, initiated by the consumer, to participating billers through the ACH Network. PayOnly billers can still add the e-bills distribution feature at a later date, if interested.
Benefits of EBIDS
The EBIDS model benefits all parties involved by leveraging standards in the ACH Network, which are enforceable by the NACHA Rules. For financial institutions, EBIDS provides transaction and service revenue as they earn a fee for every e-bill presented to customers.
EBIDS allows billers to extend their reach to potentially any customer at any financial institution and to manage the customer’s online experience with links that direct customers to billers’ sites. Payments received through EBIDS will also improve biller straight-through processing (STP), eliminating a major cause of bill payment exceptions.
Consumers, too, benefit from the ability to view and pay multiple bills at a single location, and retrieve full payment detail. Consumers can save time and maintain control of their billing accounts and timing of payments.
Increasing Use of EBIDS
In its first year, 2011, EBIDS facilitated over 19 million EBPP transactions., but future growth hinges on the ability to achieve ‘network effects’ with more biller and bank participation.
EBIDS is an opt-in programme, which means that the EBIDS rules only impact those billers and financial institutions that choose to participate. Like Facebook, the service becomes more valuable with more participants, which is why increasing the number of participating billers and financial institutions is important.
Evidence shows more consumers are looking to view and pay bills online. According to a 2010 study conducted by Javelin Strategy & Research, nearly half of consumers would be motivated to switch to online billing if there was a single online site that consolidated statements .
EBIDS provides a low-cost way for billers to deliver e-bills to more customers and receive low-risk online bill payments from those customers. It is a win for financial institutions, billers, service providers and consumers alike.
1 http://www.epaynetwork.com/cms/resources/research/financial/001493.pdf .
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