Balancing the payment deficit

Electronic billing is key to e-business processes. What's it all about?

Electronic billing is key to e-business processes. What's it all about?

Business to business Electronic Bill Presentment and Payment (EBPP) is not a new concept, but the growth of the Internet has provided technology companies with the perfect environment in which to develop products. While the business to consumer market may have been a damp squib in terms of user adoption so far, analysts are predicting great things for the B2B sector. According to research group Gartner, this market will quadruple by the end of 2004, with the number of companies utilising EBPP predicted to rise from 9 to 35%.

But while more businesses might be interested in adopting EBPP, they face a number of challenges. The market is still somewhat immature and it can be difficult to identify a comprehensive range of products on offer. "There really hasn't been anyone in the market to establish a leadership position so far," claimed Bruno Perreault, vice-president of strategic development at iPin, which provides technical and payment services to the financial and telecoms industry. "There has been a lot of development in electronic purchasing, but little on the payment side of e-billing, because companies have focused on the front end."

According to Lisa Cebollero, an analyst with the Yankee Group, UK companies are interested in implementing an EBPP solution, although most firms are still just looking to deliver invoices electronically, rather than actually receive payments on the Web. "In Europe, companies are strictly using EBPP for the presentment of invoices, including multilingual ones. Even some of the large carriers in the US don't have solutions yet, but they are telling me their customers are asking for it, so this time next year the numbers should be pretty high."

Cebollero believes the B2B will outstrip its B2C counterpart by a wide margin. "The hype in the beginning with B2C was much bigger than the numbers actually turned out to be. B2B is still in a fairly early stage, but the uptake is going to be much faster," she insisted. Perreault reckons traditional manufacturing companies, as well as high-tech companies, will lead the way in the B2B sector in terms of adoption, as they tend to have real challenges in controlling costs for purchasing and payments.

A B2B EBPP system needs to be fully integrated into a company's back-office in order for the full benefits to be realised. Garry Young, an e-business consultant with service integration company Logica, stated that until recently, a cost-effective business process solution had not been developed to handle the more complex requirements of conducting business online. For example, the need for invoice analysis and dispute resolution, as well as seamless interfaces into accounts payable and accounts receivable systems.

Cebollero agreed: "In the beginning, developers had B2C products which they thought could do B2B. But B2B needs more robust analytical capabilities that enable a company to drill down and see details of information. There are also different levels of authorisation and payment features, so you have to accommodate that. Companies have now realised that these need to be built into B2B applications and are coming to market with more applications aimed at B2B."

The keenest adopters of B2B EBPP are likely to be new companies, according to Cebollero. "The idea of solely offering electronic billing will be easier to deploy for new service providers since customers are not already accustomed to being billed via paper methods," she said. "Service providers with existing customers will begin to migrate towards this type of solely electronic billing once B2B EBPP becomes more widespread."

There are three different types of EBPP model, although companies may choose to adopt more than one.

  • Seller Direct: This system requires buyers to view invoices on the seller's system, which may also include additional functionality such as work flow protocols, payment initiation, seller and buyer accounts system integration, dispute management and analysis tools.

  • Purchaser Direct: Suppliers post invoices on to the buyer's system (usually a large company). The system is typically integrated with the buyer's accounts payable system and may include similar features to the seller direct model.

  • Consolidator: A consolidator collects invoices from multiple sellers for multiple buyers eliminating point-to-point connections. Consolidators may partner buyers or sellers, either of which could require their commercial partners to use the consolidator's site. This type of model will need to reach a mass of buyers and purchasers and would typically be the model for banks or trading exchanges.

EBPP developer Auxinet Group recently brought a consolidator product to market. Platima is designed to enable buyers and sellers to operate through an exchange with user-ids and passwords. Each company can opt to set up a number of buying accounts within their organisation. Mondus, is an Internet service launched last October using the Platima product to offer an e-procurement B2B exchange to small to medium-sized businesses.

Areas of benefit
There are a number of advantages to companies opting to use an EBPP system. For sellers, the main areas of benefit include cost savings, improved customer service and a reduction in the invoice to settlement process. For buyers, electronic invoices can be requested at a certain level of complexity or format, facilitating in-depth analysis.

  • Cost: Larger companies can regularly send out a single bill of 1,000 pages, so reducing print and paper costs by sending these electronically would be a significant benefit, said Charlie Peters, group sales director at iDesk, which produces an ASP EBPP model called ebillity. "We've seen a paper bill range from $5 (£3.50) to $40 per customer, so there is a definite cost saving from using this application to present that bill," agreed Cebollero.

  • Customer service: Allowing customers to access documents relating to invoices online should improve the supply chain relationship, and if used effectively, reduce the cost of manning customer call centres. "If you can successfully do EBPP, then you manage to cut down on human involvement and bring the cost of a transaction down from pounds to pence,' said Clive Longbottom, service director at business and IT analysts Quocirca.

  • CRM: Sending out invoices online also enables companies to tailor hyperlinks to an individual business. However, Young claimed this form of direct marketing is really only useful with SMEs: "In a business, the person supervising the payment of an invoice is often not the person who ordered the goods, and so CRM is less important for larger companies."

  • Reduced settlement time: Providing customers with access to business documents such as proof of delivery and purchase orders should reduce the time of invoice authorisation, dispute process and customer service calls. Young claimed sellers may be able to halve the average cost of manually resolving an invoice dispute from $20 per call to $10.

  • In-depth analysis: Invoices can also be broken down into component parts, offering subtotals by department or individual and analysed with other electronic documents such as proof of delivery. "Companies can download files into Excel and analyse the data to their heart's content, which allows them to look at where costs are going much more sensibly," explained Peters.

Leading lights in the EBPP market currently include: Anacron with its Pulse product, Auxinet with Platima, Avolent with Bizcast, Edocs with eaSuite, EDS with Open Bill Xpress (customer-built in larger companies), iDesk with its ebillity ASP model and systems integrators such as IBM and Logica. "[Implementing EBPP] is not cheap, but what we can demonstrate is there is rapid return on investment by automating this process," said Young.

Despite a slow beginning, business to consumer e-billing is also set to increase over the next couple of years, according to analysts. South East Water recently automated its billing process with iDesk's ebillity product, enabling customers to pay bills online, and High Street names such as HSBC are also tailoring EBPP for consumers.

Incentives to use an online service, such as loyalty points, are likely to be offered in order to attract online payers. A recent Gartner survey found that the main reason consumers were signing up for e-billing was for cash incentives such as a discount or $25 in cash.

Gartner's research concludes that adoption of e-billing is likely to be driven by well-designed applications that offer consumers a good reason to use them.

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