Flint's Blog

Payments 360

One of the favorite parts of my job is working with our development and product marketing teams to come up with new product ideas that we think our customers will like. 

Today we launched a new product called Payments 360  (Press Release Here).

100% online bill payment is a lie.  If you pay your bills online at your bank web site or pay your bills via Quicken, you've always been able to pay all of your bills this way.  So most consumers assume that the payments are being sent to the billers electronically because they didn't have to write out a check.

The reality is that the majority of billers are not setup to receive electronic payments.  Most billers do not have the technical infrastructure or the budget to enable receipt of electronic payments.  So what winds up happening, is that a paper check is mailed to the biller.  These are called "Third Party Checks" and they are are the worst kind of paper check.  They don't include the tear-off remittance stub, they might not have the correct name, they may even be missing the account number.  These are payment exceptions and billers and lockboxes hate them.  They're slow and very expensive to handle.

That's where Payments 360 comes in.  We've built an extremely low cost solution that allows billers to convert these expensive Third Party Checks into streamlined electronic payments.  They're cheaper to handle, they settle over night, and they can be automatically posted to our customer's accounts receivable system.

The feedback from our initial Payments 360 customers has been extremely positive so far.  Funny thing though - not one customer ever asked for this kind of product.  They knew that third party checks were a big hassle but didn't know to ask if there was way to make them go away.

Products that nobody asks for are the toughest ones to fund the devlopment of. It's either one of two things - customer aren't asking because it's not a product that would be useful, or they're not asking because they don't know they have the need.  We like to take the occasional gamble and build something in advance of demand.  It's risky, but when it pays off, it's a whole lot of fun.

The Electronic Billing Landscape

One of the challenges that has hampered electronic billing growth in the U.S. is what I call the "forced philosophy" problem.  Forcing your philosophy is trying to convince customers that they should do things in a certain way because it's easier, faster, cheaper for them.  The problem with forcing your philosophy is that it almost always doesn't work.  People don't want to be forced into doing anything. Electronic billing is a perfect example of this.

In the early days of electronic billing, billers made a big push for auto-debit - automatically deducting the amount billed each month from the customer's credit card or checking account. This was far easier for the consumer: they never would forget to pay their bill, never have to write out a check, they could save a stamp, etc.  Sounds great, right?  Well not so fast.  For the most part, consumers hated giving up the control, allowing their biller to take money from their account whenever they wanted.  Auto-debit has been a modest success at best, mostly appealing to people who prioritize convenience over control.

When the web came along, billers hopped on the bandwagon and decided this was going to be the answer to their billing issues.  Let's convince all of our customers to sign up to receive and pay their bill at our website.  We save a fortune on printing/mailing of bills and the processing of inbound paper checks.  The benefit to the consumer is that they don't have to deal with either their paper bill or writing a paper check AND they have more control than auto-debit. This type of electronic billing is called "biller-direct" and has had better success than auto-debit, but again not the success that billers had hoped for. The problem with biller-direct is that consumers have 12-15 bills per month and don't want to go to 12-15 different web sites with different user ids and passwords; and deal with all the complexity.

The next generation of electronic billing was going to solve everything.  What was needed was a way for consumers to receive and pay ALL of their bills online - often called electronic bill presentment and payment (EBPP), consolidator billing, or aggregator billing.  The basic idea is that consumers could go to one web site, review and pay all of their bills online.  You get the convenience of auto-debit, the control of biller-direct, and remove the hassle of remembering a bunch of user ids and passwords.  The problem with EBPP is that it never really completely worked.  You could only get some of your bills online - only big billers that could communicate with one of the billing networks.  The objection to EBPP is that consumers didn't want to receive some of their bills online and some at home, they'd rather just stick with what's working.

There have been a number of other attempts to "solve" electronic billing - email billing, fax billing, mobile banking, Paytrust, Quicken, Yodlee.  Each have their advantages and disadvantages and haven't seen widespread adoption.

So what's a biller to do?  They can't force any of these philosophies because that won't work.

The answer is simple, the solution is hard. 

If a biller wants to maximize their electronic billing percentage, they need to do everything.  You can't force any of these philosophies, because different consumers want different things.

If you can get 10% on auto-debt, 20% on biller-direct, 25% on EBPP, 15% on email billing, 5% on fax billing - that's 75% and that would be great adoption.

Why is this solution hard?  Because the vast majority of billers don't have the budget, the bandwidth, the IT infrastructure, or the desire to pull these disparate systems together.

That's where companies like Billtrust (shameless plug) come in.  Billtrust offers all of these solutions to billers of all sizes so that they don't have to build it themselves.  In a tough economy, CFO's are focused more than ever on cutting costs and building electronic billing solutions is not the core competency of most billers, nor should it be. 

One of the big reasons Billtrust has been successful is because we don't force a philosophy. In fact, we're proponents of the fact that you simply can't do this, or you will fail.  Offer your customers everything and provide the right incentives to drive the behavior you prefer.  If 50% of your customers want fax billing, then be happy - it's way cheaper than postage.