Flint's Blog

What is "Customer Centric Billing?"

For 11 years we've been positioning Billtrust's "outsourced billing service" as a solution to all of a vendor's accounts receivable needs - everything from print/mail to email to world class electronic billing and payment. We've had tremendous success thanks to a great team and a real market need. However, we think that maybe we've been going about it the wrong way. We've been focused on solving Vendor Centric Billing problems which I'm starting to thinking is backwards.

One of the blessings and curses of what we sell is that we save companies a lot of money. That's obviously a great way for clients to justify a purchase - if we partner with Billtrust we can cut our billing expense by 20%-40%. Nothing wrong with that. However, there is something far better than a cost saving project, and that's a revenue adding project. Clients like saving money but they really love growing revenue. How can a back office function like billing grow revenue? We call it Customer Centric Billing and we think it's going to be a game changer for us.

There's been a big shift in the past 5 years with consumers and businesses requesting, and often demanding, that the vendors they deal with be more flexible with their billing and payment options. Consumers increasingly want their bills on bank sites and SmartPhones. Medium and large businesses have been increasingly use Accounts Payable portals like OB10 and Ariba to consolidate their inbound invoices. These are just a few examples of what we're seeing.

Vendors often try and deal with problems like billing in ways that benefit themselves. Symptons of Vendor Centric Billing are:

• Trying to drive customers only to your website to review/pay bills
• Encouraging paperless billing to "help the environment" when everybody knows your doing it to save cost
• Ignoring the generational shift to Mobile devices

A Customer Centric Billing organization embraces change. They listen to what their customers want and provide it because they know over the long term happy customers tend to stick around longer and are more profitable.

Below is a picture of a billboard that I just love. It's a great example of Customer Centric Billing. Cure Auto Insurance is advertising not based on price, not based on great coverage, not based on your driving record. They're advertising that you should use their product because you can Pay By Text. That's it. They've clearly done some research and come to the conclusion that customer demand is high enough for Pay By Text that they don't have to mention anything else. Very cool.

In the B2B billing world, the need to be Customer Centric is even greater. Some businesses are now refusing to do business with vendors if they can't provide billing data in their specific format. Most businesses can't so they're rekeying invoices into their customer's web sites. I was with a client last week who was spending close to 2,000 hours a month rekeying invoices. It was either that, or not get the business.

Vendors that embrace these "Customer Demands" will win in the long run. You can either practice Customer Centric Billing or put your customers at risk.  It's your choice.

eStatements - So what's in it for me?

We spend a lot of time working with our biller customers to help them move from US Mail to Electronic Delivery.  Average saving is 40 cents per bill which includes reduction in postage, material, and labor costs.  On top of that you get improved DSO, more satisfied and sticky customers, more electronic payments and you save some trees.  

Let's say you're a biller with 500,000 customers who receive a bill each month.  If you can move just 10% of your customers to electronic delivery, that's $240,000 in annual savings. That's a lot of cabbage.

So why do billers struggle with getting customers to turn off the delivery of their paper bills.  I call it the "What's in it for me?" problem.  Instead of explaining it, I'll let Citibank make my case.  I'm a CitiMortgage customer.  Generally they do a wonderful job and I have no complaints besides the typical ones about crippling the American economy.  I recently received the below email from them.

So I receive my pretty bill in the mail each month, and I'm trying to figure out why I should stop.  I know it saves Citi a bunch of dough, but What's In It For Me?

I'm sure there are some wonderful people in the marketing department that crafted this email, but I think they failed to give any real compelling reasons.

Here's the case they make in the "Why Go Paperless?" section of the email and my own take.

1. Save yourself a trip to the mailbox and do your part to lower consumer paper waste. 

Actually, my wife or I pretty much make one trip to the mailbox each day and I'm thinking removing one bill will not save us from this Herculean effort.

2. View your statements and make your payments online, anytime - its easy and secure. 

Ummm, I think I can do this today.  How does turning off my paper bill enable this?

3. We'll send you a monthly email letting you know your statement is available.

Really?  Will you only send me an email if I turn off my paper bill?  I doubt it.

That's it, that's the case they make.  How about addressing what really concerns customers?  Like will my bills be available online for 7 years or more?  Or maybe give me some incentive to do this like a free gift certificate on Amazon.  How about you plant a tree for every 10 customers that takes you up on this?

There are really so many other compelling ways to get people to make the switch but unless you solve the "What's In It For Me?" problem, you better set the bar pretty low for target adoption rates.

Driving Electronic Billing Adoption

I recently was invited to write an article for TAWPI's TODAY magazine that discussed some of the best practices that Billtrust employs to drive electronic billing adoption (what we call eAdoption).

One of the common fallacies of driving eAdoption is that it is a technology problem.  While it's true that you need a good ebilling solution, this by itself will guarantee you nothing.  What really is important is having a comprehensive eAdoption strategy. 

Click here (TAWPI Article) for the full article and let me know what you think.

Can someone please invent a better email system?

Email billing has been one of Billtrust's more popular B2B offerings.  However, it is a daily battle to manage the delivery of email.  There's no way to guarantee to delivery, there's no way to know for sure if someone received an email, there's no way to know for sure if someone opened an email, and there doesn't seem to be any solution on the horizon.

Obviously the problem is spammers and the great lengths that everybody goes through to block unsolicited email. ISPs attempt to block spam, corporations attempt to block spam, all email clients worth their salt have spam filtering built in.  The net of all of this spam filtering is that a large percentage of spam is blocked .  However, a small percentage of emails that should get through, invariably don't.

So I know it's not a revolutionary concept but can someone please invent an email system that is fee based?  Any fee, no matter how small, would be a huge deterrent to spammers.  Businesses that send opt-in email want it.  People who receive email want it.  ISPs would embrace it.  The only ones who wouldn't want it are the spammers and the companies that sell spam protection.

The Value of the Network

Most businesses would love to have the Network Effect that have made companies like eBay wildly successful.  Simply put, the more users use something the more value that is created, which leads to more users wanting to use it.

We recently were at SAP's Sapphire user conference in Orlando and heard a lot of discussion about a  network that was going to allow billers and payees to seamlessly deliver bills electronically.  This is not a new concept. 

A number of banks banded together back in the 90's to create a consortium call Integrion.  The banks weren't thrilled that CheckFree and Intuit had a stranglehold on the bill payment market so decided to put a bunch of money in a pot and build a payment network.  Ultimately I don't think a single payment was made through Integrion when they folded up shop.

Apparently the lessons learned from this endeavor were soon forgotten and the banks decide to tee it up again.  They threw some more money in a pot and formed Spectrum. This time with even loftier goals.  Not only did they want to rout all payments through their network, they were going to manage all bill delivery as well.  This network met a similar fate of not processing a bill or payment before it was quietly put to rest.

Both of these networks met a similar fate because they didn't follow what in hindsight seems to be blindingly obvious.  There needs to be a value proposition for all participants in the network or it just won't work.  The reason eBay is successful is because they offer tremendous value to both the buyer and the seller.  The ATM network is even a better example and the banks certainly get some credit here.  Banks avoid paying tellers to handle withdrawals and consumers get the convenience of 24x7 access and avoiding long lines.

Spectrum and Integrion failed because they didn't make their networks financially compelling for billers to rout their bills through.  They were good concepts and certainly there was enough friction to make this interesting, but imposing a tariff that exceeds the value is a sure fire recipe for failure.

Ultimately someone will figure out a working bill presentment and payment network that will be compelling for all participants - banks, billers, and consumers - but it's a hard problem.  Billers don't have the necessary IT infrastructure, consumers have ingrained bill payment rituals that are hard to change, and banks move slowly - and that's why it hasn't happened yet.  Or maybe I'm wrong.

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.

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.