The electronic bill presentment and payment (EBPP) industry has received plenty of attention lately--and with good reason. It is estimated that EBPP solutions can save billers $15 billion per year when compared to traditional, paper-based billing methods. In addition, billers can reduce customer support costs by up to $22 billion per year.
Telecommunications service providers--especially those that have multiple services to sell to the same customers--view good customer relations as a strategic asset. For these relationship-centric billers, Internet billing will function as more than just a means to be paid. When competitors are only a click away, the electronic bill will provide a unique opportunity for service providers to increase the frequency and quality of contact to create a stronger customer bond. Information personalized to each customer will be the foundation of a mutually beneficial relationship and will become the new competitive opportunity for service providers. Thus, Internet billing will be more than just cost-effective electronic delivery of the bill--it will form the basis for an experience tailored to each customer.
With such a wealth of opportunities waiting, it is no surprise that telcos are eager to take advantage of Internet billing. However, with only about 4 million consumers paying bills online, according to GartnerGroup Inc. (www.gartner.com), many are wondering how to speed up the growth of the market.
An increasing number of companies look toward open standards for the answer. The benefits of a widely accepted standard for distributing bills and handling payment are clear. Open standards enable rapid parallel development of Internet billing solutions by multiple parties. A single, shared standard also will create more choices, lower prices and generally lead to a broad base of technical talent and widely available development tools.
The most important benefit of open standards is interoperability between billers, biller service providers and customer service providers. A single standard will allow companies to communicate quickly and easily with one another without being hindered by supporting multiple proprietary approaches. Since billers will be able to work with multiple distribution channels, consumers will have the flexibility to view and pay their bills where it is most convenient for them. According to most analysts, the convenience and choice created by interoperability is key to mainstream consumer adoption of Internet billing.
Recent developments demonstrate industry leaders not only acknowledge the benefits of interoperability, they are actively pursuing it. In June 1999, Chase Manhattan Corp. (www.chase.com), First Union Corp. (www.firstunion.com) and Wells Fargo & Co. (www.wellsfargo.com) created "Spectrum" to provide an open, interoperable mechanism for exchanging electronic bills between billers, biller ser-
vice providers and customer service providers. Spectrum is based on the open financial exchange (OFX), which means that a seamless interchange of information will be possible regardless of the vendors and technologies selected by its individual members. With the nation's largest banks involved, many believe Spectrum's commitment towards interoperability fills a significant gap in the Internet billing market and will play a key role in accelerating the growth of the industry. Spectrum began live operations in November and recently announced it has signed letters of intent with eight additional banks interested in Spectrum membership.
Other leading organizations have recently licensed open standards-based software for their own electronic billing systems. AT&T Corp. (www.att.com) is working on a standards-based system using OFX, which underscores the importance AT&T places on providing customers with a choice of where to access their bills. Quicken.com, Intuit Inc.'s (www.intuit.com) leading e-finance site on the web, recently announced an electronic bill presentment and payment service that is based on the OFX specification to maximize flexibility and connectivity. In addition, Bank of America Corp. (www.bankofamerica.com), one of the largest banks in the United States, is implementing an extensive, open and interoperable approach to electronic billing based on OFX and has already started introducing expanded services.
The Standards
OFX was created by CheckFree Corp. (www.checkfree.com), Intuit and Microsoft Corp. (www.microsoft.com) in the fall of 1996 as a protocol to facilitate the exchange of data for banking, investments, bill payment and bill presentment applications. It was originally created for communication between personal financial managers such as Quicken and Microsoft Money and financial institutions. In the area of bill presentment, OFX was extended to provide support for server-to-server communications. This allowed billers and biller service providers to send bill summary information to consolidators and customer service providers.
In OFX 1.5, bill presentment includes the following transactions:
- Sign On--The customer authenticates with the biller or bill presentment service provider;
- Enrollment--The customer enrolls with a bill presentment service provider, and is then able to receive bills;
- Activation--The customer activates bill presentment for a specified billing account. (Customers may have more than one account with a biller and, therefore, may need to activate each account separately.);
- Bill Summary Request--The customer requests bill summaries of activated accounts. (A customer service provider also may make a request on behalf of a group of customers.) The bill summaries contain the due date of the bill, the biller, the amount due and a URL that points to the bill detail image, usually an HTML page;
- Notification--A customer or customer service provider "notifies" the bill publisher that a bill has been "viewed" by the customer.
In early 1998, the OFX consortium teamed up with Banking Industry Technology Secretariat (BITS) (www.bitsinfo.org), a consortium of banks, IBM Corp. (www.ibm.com) and Integrion Financial Network LLC (www.integrion.com) (a venture owned by IBM and several banks that provides interactive banking and e-commerce services to the financial community) in an attempt to merge OFX with Integrion's "Gold" standard. While Gold is similar in scope to OFX, the implementation technology is quite different. For example, Gold supports stateless clients while OFX supports unreliable connectivity. The resulting effort is the forthcoming interactive financial exhange (IFX) specification.
IFX provides a consistent framework for exchange of financial information among different players. Unlike OFX and Gold, IFX addresses communications of participants ranging from automated teller machines to desktop clients to portal sites to backend service providers. IFX stems from a larger group of industry participants and contains more enhancements for EBPP than previous standards.
IFX should put an end to the interoperability issues surrounding bill presentment and payment. In the meantime, companies adopting an open approach are counting on OFX to provide the interoperability they need. Intuit and CheckFree, for example, have been using OFX for their bill presentment and payment pilot for more than a year. Spectrum has announced that it will use OFX 1.51 until IFX becomes widely available, and AT&T and Bank of America also have chosen software that is OFX-compliant. All are quick to point out their software has migration support for future standards.
In March 1999, an IFX 1.0 "message specification" was released, but this version only serves as a reference point for progress. Since then, a significant amount of effort has been put toward creation of an updated version. Called IFX 1.0.1, this updated version contains 1.0.1 message specification, an extensible markup language (XML) guideline document and a document type definition (DTD) for the XML implementation. IFX 1.0.1 is suitable for implementation. Members of the IFX Forum (www.IFXForum.org), the organization responsible for producing IFX, have already started work on an even newer version of IFX, which they plan to have ready by the middle of this year. It will be backward compatible with IFX 1.0.1 and will contain enhanced capabilities for high-volume transactions, data transfers between billers and biller service providers, customer care support and customer enrollments.
The Role of XML
XML, meanwhile, was created by the World Wide Web Consortium (W3C) (www.w3.org) to allow users to create a language that describes information precisely while using standard tools. One of the big promises of XML is standardized business-to-business transactions on the Internet.
XML forms the foundation of IFX and, with its vendor-neutral document types, should alleviate any remaining concerns about proprietary systems. The past year has seen numerous features added to the basic XML specification, and some analysts believe that widespread implementations will come as early as 2001. An increase in the availability of XML tools and applications also should speed up adoption of IFX.
Although IFX 1.0.1 will rely mainly on the basic elements of XML, future versions will take advantage of the more advanced features. For example, in January, W3C released XML Namespace, which allows XML elements within a named scope to be identified by uniform resource identifier (URI) references. Future versions of IFX will take advantage of this feature to implement custom elements and versions
of the specification.
The IFX XML working group, a subgroup of the IFX Forum, has decided to stick with DTD for the next release of IFX, but many believe that "XML Schema" will completely replace it in future versions. XML Schema will supplement areas of the XML document such as structure, attributes and data type that DTD either does not provide or is weak in defining. There is already a working draft of XML Schema available and the final release is scheduled for the first half of this year.
Many other industries, including insurance and e-commerce, have begun building XML schemas to promote interoperability within their individual markets. The IFX Forum hopes to partner with some of these industry consortia to leverage its expertise and implement the latest technical advances in XML for the IFX specification.
The telecommunications industry stands to gain a great deal through the mainstream use of electronic bills. The future is clear. The only way to achieve Internet billing's true potential will be through widespread adoption of interoperability among all segments--the billers, the biller service providers and customer service providers. It is essential for all telecom service providers implementing an EBPP to recognize the importance of open standards and the intricate billing relationships, and incorporate them into their Internet billing offerings.
Edward Un is vice president of advanced technologies at Just in Time Solutions (www.justintime.com). He can be reached at edu@justintime.com .
