Magazine article American Banker

Electronic Payment: Still Pushing the Envelope

Magazine article American Banker

Electronic Payment: Still Pushing the Envelope

Article excerpt

Boiled down to its bare essentials, paying a bill via personal computer isn't much different from writing a check and sending it through the mail for now.

Until the back-office processing loop is closed with widesspread use of electronic bill presentment, the delivery mechanism for many computer generated payments remains the Postal Service.

More than half of all bill payments sent via PC or telephone end up as paper checks sent through the mail to the billing company, bill payment processors say.

As a result, most popular electronic bill payment mechanisms are no quicker-and sometimes are even slower-than the current cycle of mailing bills and remitting checks.

But electronic-payment proponents say that even in its current state, the convenience for consumers in using PCs or telephones to pay bills overrides these objections. And, they say, that process is expected to become easier as financial institutions offer more incentives for consumers and billers to eliminate the paper trail.

"The biggest value in electronic banking is to build a system that can continue to add to the evolution of services that customers are going to demand," said Peter J. Kight, chief executive of Checkfree Corp., the largest electronic bill processor.

"Our vision is that more than one-third of the U.S. population will be involved in (paying bills via computer) by the year 2000," he said.

To achieve that goal, electronic bill-payment programs must provide better integration with billing companies' accounts-receivable systems.

Almost all major billers have account information calibrated to produce paper bills that can be assembled, mailed, and processed with maximum efficiency. Physical bills are created through a "print stream" of biller data for each customer whose billing cycle concludes on a given day.

Generally this print stream includes the customer's name, address, billed amount, and an account number code printed on the remittance stub that can be read by the billers' computers.

Because fewer than two million consumers pay their bills electronically, most payment providers consider their chief competition to be paper-based remittance systems, not one another.

"We aren't talking about the latest, greatest whiz-bang technology," said Matthew S. Lewis, Checkfree vice president. "We are talking about an alternative to the Postal Service."

But following the process of an electronic bill payment from origination to settlement shows it is still a paper-driven process.

Instead of pulling out a checkbook, the electronic bill payer picks up a telephone or runs a bill-payment program on a personal computer-including such popular personal finance software as Intuit Inc.'s Quicken, Microsoft Corp.'s Money or Meca Software's Managing Your Money. …

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