Flint's Blog

Is Electronic Billing Really a Green Project?

One of the questions I often get asked is "Does electronic billing really save trees if the people print out bills to their local printer?"  The answer is a resounding yes even if every bill that is delivered electronically is printed out.  This is not realistic since lots of people don't bother printing but let's assume worse case they do.  Let me explain...no...let me sum up. (Bonus points if you know who made that quote famous).

First a quick backgrounder on what actually happens prior to the bills appearing in your mailbox.

1. Bills get printed out using one of two types of printers - "cut sheet" or "roll fed".  Cut sheet simply means that the pages are cut to size prior to printing.  Roll fed means a big spool of paper is printed on and then cut after printing.  This is a net neutral on savings since basically the same amount of paper and energy is used.

2. After printing, bills are fed through high speed machines called Feeder/Folders and Inserters which collate, fold, stuff, seal and stamp the bills.  Billtrust use Bell & Howell equipment but there are several other vendors like Pitney Bowes in this business.

There are two bigs savings here.  From a raw materials perspective, the savings are roughly 50% since no envelope is used in electronic billing (assuming a 1 to 2 page bill).  From an energy perspective, it's a big gain since the bill doesn't have to go through the insertion process and if you've seen our electric bills...

3. Bills are then placed in trays, which are put in cardboard sleeves, strapped and barcoded with the destination 3-digit or 5-digit zipcode.  These trays are then delivered to the USPS for mailing.  Some mailers add an extra step and deliver bills to a Presort House which commingles mail from lots of mailers to achieve postage discounts. 

Electronic billing delivers some marginal fuel savings here on the transport of the bills to the local USPS but let's just call this a push.

4. The post office does of one of two things with the trays.  If the tray is barcoded locally, then they open up the tray and put all of the mail on a huge sorting machine that more granularly sorts it for delivery.  If the tray is barcoded for a another location, the tray is either trucked or flown to another postal facility where the bills go through further sorting.

This is a huge savings in fuel obviously since electronic billing has effectively no delivery cost.

5. Once bills are ready for delivery, they then are delivered by the postman.

  More big savings here since this fuel expense is skipped.

So to sum up...the savings may seem minor for each bill, but if you do the math, the savings are quite dramatic.

There are roughly 30,000,000,000 (that's billion) bills delivered each year in the US.  Let's assume each bill is one page.  If 10% of the bills are delivered electronically and assuming only half the people print them out, that saves roughly 500,000 pounds of paper per year.  The fuel expense is tougher to calculate and since I think I've made my point, I won't bother.  However, transporting half a million pounds of paper to your mailbox ain't cheap.

And that's not it!  Electronic bills often result in electronic payments which have equal savings as compared to delivery and handling of paper checks.

Electronic billing is a big Green Project and we're proud to be part of it.

My Tricks to A Reasonably Unconnected Vacation

Fred Wilson has a good post on how to balance life and vacation.  I find it impossible to completely unplug from work during vacation.  I suffer some kind of anxiety attack if I don't check email at least every 24 hours (more like every 2 hours during waking hours).

Step 1: Give up all hope of remaining unconnected.  The earlier you give up, the better you'll feel. 

Step 2: Change your voice mail greeting and tell people to not even bother leaving messages.  Optionally leave your email address on your message so that you can handle things asynchronously.

Step 3: Keep your cell phone off.  I once blew 2 hours negotiating a merger on my cell phone that in hind sight we probably shouldn't have done.  I could have, and should have, skipped the call.  If your team and coworkers can't handle any fires that come up, they'll figure it out.  People actually lived without cell phones once.

Step 4: As Fred said, all family events get priority. 

Step 5: Scan email infrequently and respond to as few things as possible.  You don't want to get into email conversations.

Step 6: Make sure you have an understanding spouse or ignore all of above.

Making the Move to Electronic Billing

One of our big focuses at Billtrust is how to help companies implement an effective EBilling strategy.  An EBilling strategy is not a web site where customers can review and pay their bills.  An EBilling strategy is not emailing or faxing bills to customers.  An EBilling strategy is not an auto-debit product.  These are all pieces to a strategy.

The first part of an EBilling strategy is a comprehensive set of solutions that allow you to distribute bills and accept payments electronically.  Sending out paper bills and accepting paper payments is incredibly expensive (some studies have it pegged at $10 per invoice!).  It's only going to get worse with postage hikes and material cost increases. The second part of an EBilling strategy is having a well thought out plan on how to motivate customers to migrate to EBilling.  We're firm believers that you shouldn't do the first without the second because you're results will be disappointing.

We have some of customers with over 50% adoption of EBilling.  While we think the we have a great EBilling product suite, this isn't enough.  There have been plenty of other vendors who offer good EBilling solutions that have single digit adoption rates.

The key in my mind is part marketing and part economic.

First the economic - EBilling software vendors have an economic incentive to sell you a large ticket product and then move on to the next prospect.  Whether you get 5% or 25% of your customers online doesn't affect their revenue stream.  Legacy print & mail vendors actually have an economic disincentive to have customers move to EBilling because each customer moved is one less paper bill that they can make money on.  Billtrust has crafted our revenue model so we make about the same amount of money on a paper bill and an electronic bill but our margins are far better on the electronic side.  Therefore every time a customer moves to EBilling, our biller partner saves money, we make better margins, and the customer is happy.  A Win Cubed (A Win-Win-WIn situation for you non-geeks).

Second is marketing - EBilling has proven that "if you build it, they will come" is a complete fallacy.  You can't just throw up a EBilling web site and expect people to show up.  You need a plan.  About 18 months ago I sat down with Mitch Rose our VP of Marketing to strategize and we came up with that plan.
We call it e-Adoption and it is a complete marketing strategy that we devise for our customers on how to motivate customers to move to EBilling.  Without sharing all of our secrets, I will tell you that customers have no interest in moving to EBilling to save the biller money.  They want to know "What's in it for them?"

So the key take away for this is:  When you're looking to get into EBilling, make sure your economic incentives align with whomever you partner with and that you've got a strategy to motivate customers to make the move.

The Most Valuable Programming Lesson Ever

I learned the most valuable lesson of my software life back in the early 1990s when I worked at BrownStone Solutions.  BrownStone sold mainframe Data Dictionary / Repository software to Fortune 1000 companies for $250K+ per implementation.  Real esoteric stuff with data modeling, metadata, meta-meta data, and other incredibly uninteresting stuff to 99% of the population. 

We had one competitor that we saw regularly in the market that would routinely kick our butts.  None of us programmer types really knew about the routine beatings because our bosses subscribed to the mushroom management theory of running a company. In 1995/1996, Platinum Technology, headed by Andrew "Flip" Filipowski bought both of the companies.  The competitor company got bought for something like 15 times what Platinum paid for BrownStone. 

After several technical meetings where we were trying to come up with what our combined offering should like, it was apparent that their solution was barely a software product, it was more of a bunch of code that consultants put together in the field.  How could we be losing to these guys?

As much as it pained me at the time, I learned that great software is just not enough to win in a competitive market.  Without great sales, marketing, consulting, and execution, you need to be awfully lucky to be successful.  However, the opposite is often true - bad software will sometimes be enough to sink a company although if you're really good at sales and marketing, then that can overcome a lot of software messiness. 

Our competitor out-executed us in all the areas that I didn't even realize at the time were important.  Seems obvious now but not something they taught at RPI to us Comp Sci types.

Is the Post Office going to exist in 50 years?

I was out for lunch with a bunch of our managers today and we were discussing last night's episode of Lost. For those who don't watch, it's basically a soap opera for both men and women that is completely addicting for those that watch and completely mystifying for those that don't.

So one of our managers who doesn't watch starts to talk about his new favorite show Startup Junkies which is television specifically programmed for HD TV and is an ongoing story about startup called Earth Class Mail.  If I understand it correctly, the idea is that people give up their mail boxes and have everything mailed to this company where they will sort, categorize, store, and retrieve their mail all from a browser.  Interesting concept and seems to be taking Paytrust to the next level for everything other than bills.  I imagine they'll have some of the same challenges as we had with consumer adoption and automation.  I hope it works.

Anyway, what was my point?  Oh yeah, is the Post Office a dying business?  When is the last time you got a personal communication in the mail?  My Mom still mails me birthday cards but I can't think of another instance.  All my bills go to Paytrust, all my personal communications are email/phone, so the only thing that still comes in my mailbox is junk, bank statements, junk, and stupid prospectuses for class action law suits that I imagine somebody makes money on, just not me.

The Post Office just announced their third postal hike in three years.  They spend a fortune on gas, first class mail volume is going down, and they are stuck spreading the decreasing revenue they make over the same number of fixed delivery routes.  Each time postage goes up, we at Billtrust cheer because that means electronic billing is even more attractive and we get more customers.  It also leads to less US Mail volume because billers/advertisers look for alternative ways to reach their customers/prospects.  Which means less volume.  Which means the post office needs to raise rates to cover their fixed routes and employees.  This is a Vicious Circle that I don't see ending without a deep drop in energy prices which seems unlikely.

So where do things end up?

I don't think it happens over night but over the next 50 years my bet is that there comes a point where it is just not cost effective to have mail delivery service for a bunch of catalogs.  Everything is ultimately delivered electronically.  Don't have a computer or web access?  Go to a web cafe.  Think this is crazy.  There is something like 10-15% of the populatation that is unbanked that literally has to walk in to payment centers to pay their bills (probably not reading this post).

Or maybe I'm wrong.

Why Billtrust?

It's spring of 2001, I'm out of a job for the first time since I was a 11, and I decide I'm going to play a lot of golf and finally get good.  Within a week I break my thumb and my golf plan isn't looking too good.  Golf is no fun by yourself when all your friends are working anyway.  I tried to find another hobby but the startup bug is just too tempting and I figured it was time to get back in the game.

Paytrust was all about giving consumers an extremely convenient way to look at and pay all of their bills online.  The way we did this was by redirecting your paper bills to one of our processing centers where we would open them and scan them with all sort of nifty hardware and software.  You would then get an email saying "You've got Bills" ( I'm thinking it should have been a Barry White kind of voice - we did joke about this once at a meeting at AOL's office - not a very funny joke obviously). Even though we automated this like crazy with envelopeners and OCR software, it was still pretty expensive.

We knew all along that to make the business profitable we would need to convince the billers who mailed us paper bills to send them electronically to us.  The pitch was simple.  Your customers want them this way, it will save both of us a ton of money, and you'll get paid faster.  The pitch worked on the big billers that had spent the $100K+ on ebilling software or had an IT department that had built them one.  The small and mid-market billers had no such solution and often barely had more than brochureware for a web site. It was a non-starter for them for technical reasons.

The value was there for the mid-market billers, they just couldn't afford to get in the game because all of the ebill software vendors were chasing the top billers with an expensive software solution.

For those fellow entrepreneurs out there, this was the light bulb moment.  When you think you've come up with a solution to a problem that is so blindingly obvious, that it just can't work.  One of my VCs from Paytrust once told me "Flint, there's no new ideas. Just new takes on old ideas." That's probably correct 99% of the time.  So I looked for business models that had successfully transitioned from a paper world to an electronic world that I could model after.  The obvious answer - Payroll.

Payroll used to be about who could print checks the cheapest.  Nobody shops for Payroll that way any more.  People need compliance with state and federal tax rules, automatic deposit, 401K, workers comp, etc.  What they really need is one throat to choke for all things payroll because in the mid-market, they don't have nor do they want to pay staff to figure it out.

That's how we modeled Billtrust. Almost all vendors in the billing space were focused on who could do the best print and mail solution (i.e. printing good looking bills, stuffing them in envelopes, and getting them to your mailbox).  EBilling to these vendors was somebody else's problem. And for good reason.  Every time a customer went to ebilling, that was one less paper bill for them to get revenue on.

If you believe in EBilling, which after starting two companies in this space probably qualifies me as either a zealot or just completely misguided, then these print only companies wouldn't be able to compete as the market moves to ebilling because mid-market billers will want one throat to check for all things billing.  They don't want a print/mail vendor and a ebill vendor and a epayment vendor. 

So in September 2001 I saddled up the startup pony (I didn't really just type that, did I?) and started  Billtrust. 

Does The World Really Need Another Blog?

Does the world really need another blog?  Probably not. But maybe the first blog by the CEO of a billing company will be of interest to somebody.  We'll see.

First, maybe a little background.  My name is Flint Lane and I'm a former software geek by training.  After spending 10 years in various roles at software companies, I got tired of having the company I worked for get acquired by a company in a distant city.  So I decided that I would start my own company to control my destiny.  I wish it was that easy.

In 1998, I started Paytrust  with a partner with the hopes of revolutionizing the way people paid bills.  It seemed so ridiculous the billers mailed me bills and I would go type them into Quicken to pay them electronically. I wanted everything electronic and assumed that lots of other people would as well.

It was in the middle of the dot-com boom and we successfully created a great service, that received all sorts of awards, and was used by over 100,000 users.  We raised a ton of money from venture capitalists.  We partnered with some great financial institutions.  However, there were problems with the business model.  Acquiring customers was overly expensive and converting paper bills to electronic bills took longer than we had planned.  The business was probably five years ahead of its time and just didn't take off as much as we hoped.  Ultimately I left in 2001 and the company was acquired by Metavante who eventually sold the front end service to Intuit.  I remain a faithful Paytrust user and now pay my $10.95 per month like a good customer.

Next post, Why Billtrust?