Types of EBPP( Electronic Billing Presentment Payment )/ Two competing EBPP business models:

 Two competing EBPP business models:

a) Biller-direct (dominant model) Model

• The biller–direct system was originally created by utility companies that send millions of fo bills each month. Their purpose is to make it easier for their customers to pay their utility bills routinely online. Today, telephone and credit card companies also often offer this service, as well as a number of individual stores (such as in the USA).

•  This system is commonly used by utility companies today. For example, the utility company will send an electronic bill to the customer and the customer will make a payment directly to the company. There is no intermediary used in this transaction.

b) Consolidator Model

• In this model, a third party, such as a financial institution (banks) or portal, aggregates all bills for consumers and ideally permits on–stop bill payment. Financial institutions have been more successful than portals (such as Yahoo! Bill Pay) in attracting online bill payers.

• There are two types

i. Think Consolidator

In thick consolidation, both the bill summary and bill detail are stored at the consolidator's site.

ii. Thin Consolidator

In thin Consolidation, only the summary bill information is available, and the consumer must click on a link to access a detailed bill that is stored at another location, such as the biller’s site or elsewhere.

 The consolidator Model faces several challenges.

• For billers, using the consolidator model means an increased time lag between billing and payment, and also inserts an intermediary b/w the company and its customer.
• For consumers, security continues to be a major issue. Most consumers are unwilling to pay any kind of fee to pay bills online, and many are concerned about sharing personal financial information with non – financial institutions.
• Today more and more banks are offering online bill payment free to some or all of their customers as an enticement.

                                     OR,

Types of EBPP

The two main types of EBPP are biller-direct and consolidated. While they both offer convenience to customers and save time and costs for billers, the solutions they offer are somewhat different.

a)Biller-direct EBPP

• In biller-direct payment systems, biller and customer have a direct relationship. The biller sends the customer an electronic bill (that’s electronic ‘presentment’).

• Electronic bills have two big advantages: they’re cheaper and quicker to send, and they’re more convenient for customers to pay immediately since they’re already online when they receive the bill.

• To pay the bill, the consumer logs into the biller’s website. If the bill is sent electronically, it may contain the customer’s billing information and a link to the biller’s website. For security reasons, though, many billers don’t ask consumers to follow links in emails because of the risk of phishing scams. Instead, billers simply send instructions on how to pay online.

• Although electronic bills are normally submitted by email, in the mobile age that is no longer the only option, with the emergence of mobile-based and text-based billing services.

• When the consumer pays online, they use a debit or credit card and the funds are sent to the biller using the ACH system.

The key advantages of biller-direct payment systems are:-

• Convenience for consumers

• Faster bill payments for billers, improving cash flow

• Reduction in late or missed payments for billers

• Electronic consumer dispute resolution can reduce time spent on disputes. Given 50% of all customer service calls go unresolved, reductions in calls is likely to improve customer satisfaction

• The biller continues to “own” the customer relationship. When the customer pays the bill, they see the biller’s branding, and can be targeted for special offers, upgrades, to receive marketing materials, and so on.

The disadvantages of biller-direct payment systems are:

• Every electronic bill requires logging into a different website

• Billers need the expertise to maintain their own payments system

• Billers face the costs of building and maintaining their own system

• Because EBPP involves credit and debit cards, billers must meet strict, PCI-compliant security standards.

• A variation on biller-direct payment systems is the use of a secure, hosted payment site. A hosted payment site can be branded and customized to suit the biller, but avoids the technical issues and costs of maintaining a biller-direct system.

b) Consolidated Payments System

• In a consolidated payments system, a service provider acts as a hub, aggregating billing information and sending it to a single portal where customers can see and pay bills (usually a bank, but not always). When the consumer pays the bill, the service provider receives and issues the payment instructions.

• It’s usual to distinguish between “thick” consolidation (where all the customer’s billing information is in one place) and “thin” consolidation (where only the basic details of the bill are sent).

The key advantages of a consolidated payments system are:

• Consumer convenience of paying multiple bills at once

• Ability to outsource billing functions to service provider

• Ability to include billers who don’t accept electronic payments (who can be paid by check)

The key disadvantages of a consolidated payments system are:

• The benefits of consolidation depend on other billers participating

• Business cash flow may suffer if customers wait to pay multiple bills at once

• Lack of direct contact with customers during the billing process

• Lack of marketing and branding opportunities

• With ‘thin’ consolidation, the biller still needs a way to make bills available to consumers electronically

• Potential lack of accountability because of number of intermediaries

• Personal information is shared with third parties, so privacy issues must be resolved

• While a third-party vendor may be handling day-to-day payments, billers are by no means off the hook for PCI compliance.

EBPP has clear advantages

Both systems have their strengths and drawbacks, but the benefits of an electronic payment system are clear. As a provider of EBPP and hosted payment systems, we see the benefits that EBPP offers billers:

• an average 15% reduction in missed payments with the introduction of EBPP

• nearly half of all customers paying their bills the same day they’re received

• For more information about our EBPP solutions, contact our sales team to schedule an online demo.