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What is E-bill?  How does Electronic Billing Work?

E-bill, or electronic billing, enables billers to create and distribute digital bills to their customers instead of printing and mailing out paper bills. The obvious advantage of e-bill from a biller perspective is related to cost, especially as postal delivery fees continue to rise.

For large, major billers, there are two predominant distribution methods for e-bill, biller-direct, and/or through a consumer service provider (CSP). Many billers choose to distribute e-bills via both channels, as opposed to just choosing one.

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Biller Direct Channel

In the biller direct model, the consumer accesses the biller web site to view, and usually pay, their bill.

This allows the biller to control the user experience and also enables the biller to grant immediate credit for consumer payments made at the biller direct site.

It also creates an opportunity for the biller to cross-sell or up-sell additional products or services to the consumer since each visit to the biller website is a consumer touch point. Billers that have the most success with this model usually have content on their website that the consumer perceives as having value, and as a result the consumer may be visiting the website on some regular basis regardless of whether the biller offers e-bill or not. An example of potentially valuable biller content is purchase transaction level detail at a credit card site or call level detail at a wireless provider site.

For billers where their website content does not naturally draw consumers to the site on a regular basis, consumers may not be as compelled to visit the biller site for the purpose of receiving and paying e-bills, and may prefer the CSP model instead. For example, a water utility billing company or a refuse service company offering biller direct e-bill may not see the same consumer adoption success as a credit card company.

CSP Channel

The other primary channel for distributing e-bills is referred to by service providers as the CSP channel, or the consumer service provider channel. This channel mostly consists of banks with online banking web sites, or other financial institutions, such as brokerage firms. This channel can also include web-based portals and providers who have tried over the years to offer e-bill and payment services, but with limited success. As an example, in the late 1990’s, Yahoo! offered both free and fee-based e-bill and payment services to users with registered my.yahoo accounts. In 2007, Yahoo! announced that they were discontinuing this offering. Historically, experience and research suggests that most consumers prefer to pay their bills through their bank where they already have a trusted and established financial relationship.

In the CSP model of e-bill, the consumer requests that e-bill be enabled within their online banking bill pay application. Note that all billers don't participate or support the distribution of e-bills, so the bill pay application needs to be smart enough to recognize this capability on a biller by biller basis.

The e-bill request is forwarded by the bill pay service provider to the biller, who has the ability to electronically approve or reject the request. An e-bill request might be rejected because the biller may not be able to definitely identify the customer with the information provided to them by the bill pay provider. The biller will then respond back to the service provider with a status noting acceptance or rejection. For requests that are accepted, the actual e-bill delivery will usually occur during the next monthly billing cycle for the given biller.

Should the consumer decide at some point that they no longer want to receive e-bills from a biller, they have the ability to turn the e-bill service off within the online bill pay application. Such requests are forwarded to the biller and the consumer begins receiving paper bills again.

There are two ways that the biller can deliver the e-bill to the service provider. These options are referred to as the “thin bill” model and the “thick bill” model.

In the thin bill model, during the monthly billing cycle the biller will send a file to the service provider of summary bill detail (account number, amount, due date) along with a URL link to the actual bill itself. In this model, the biller hosts the bill detail on their website, and when the consumer wants to view their bill detail from their banking bill pay application, the bill pay application automatically links them to the biller site and the bill detail is displayed in a browser window.User authentication to the biller site occurs automatically, and the consumer is not required to login to the biller site.

In the thick bill model, the biller sends over a file of actual bills, and the service provider hosts the bill detail for the biller. When the consumer wants to view the bill detail, it is served up directly by the service provider without the need to access any data back at the biller website.

As consumers make payments against outstanding e-bill balances in the bill pay application, they usually do not receive immediate credit from the biller for payments made. Rather, the bill pay provider will send a file to the biller at the end of a processing day.  The biller processes this file and applies the requisite credit to their customer accounts. Because of this delay in granting credit, the biller direct model usually offers the consumer more ability to make a last minute payment than does the CSP model.

In the CSP model, the biller is charged a one-time implementation fee by the bill pay service provider, and they are also charged transaction fees for bills delivered to the consumer. During the implementation process with the service provider, there is technical work that is required on the part of the biller to enable e-bill.  E-bill service providers usually will require minimum monthly fees or transaction amounts from the biller. As a result, most of the e-bills that are distributed through the CSP channel come from the largest billers in the country, and smaller businesses cannot as easily participate in this distribution channel.

The market place is pretty evenly divided between consumers who receive and pay e-bills at the biller site versus at their financial institution or banking website. In fact, most consumers that receive and pay their bills online usually will not just do it a single way, but may choose to pay some bills via their bank and others directly to the biller on the biller website.

Most billers who offer e-bill services to their customers stop printing and mailing paper bills when the customer has signed up to receive e-bills. There are some billers that continue to send paper bills if the customer requests that they do so, but this makes the return on investment for a biller challenging to justify. As e-bill matures in the marketplace, it is expected that fewer and fewer billers will continue to offer this feature as an option.

“Scraped” bill providers

An alternative way to deliver e-bills in the CSP channel is through a process referred to in the industry as “scraping” bills. In this model, the biller has enabled e-bill at their own biller direct site, but has chosen not to participate in the distribution of e-bills in the CSP channel.

Some 3rd party bill pay providers have enabled the ability to automatically and regularly log into the biller site on behalf of individual billers, and extract the important bill data like amount due and due date for presentation within the CSP based bill pay application. In order to accomplish this, the user is required to supply the bill pay provider with their username and password to the biller direct site at the time when they request that e-bill be enabled within the bill pay application.