effect of the Internet on payment processing, The

Work Process Improvement Today, Dec 1998 by Lamm, David R

Should you own the system or use an outsourcer?

Should the bill and payment data be warehoused at a third-party site or at your payment center?

What kind of interactivity with your customer is desired?

What kind of advertising and demographics are desired?

What efforts and materials will be needed to drive customer adoption of e-billing?

BROAD-BASED INTERNET USAGE

Strong adoption of EBD will most certainly occur during the next decade. The Internet is gaining momentum with consumers and businesses alike, and accessibility to it is becoming increasingly easier. In 1993, less than 1 in 100 PC users were online. In the ensuing years, growth in Internet usage has been phenomenal. By the year 2002, it is estimated by Jupiter Communications that over 180 million people in North America will be using the Internet, a growth rate of 420 percent during the six years from 1996 through 2002 (see Figure 1). This audience of connected users is the perfect recipient of online billing and payments.

The Internet is being used for a broad range of personal and work-related activities, including receiving and sending e-mail, and conducting research. According to a report by Forrester Research of Cambridge, Mass., in the past five years the number of people in the United States using e-mail has increased from 2 percent of the population to IS percent-a total of 40 million users. That number is expected to reach 135 million by 2001.

In 1998, only about 425 million bills will be paid electronically, but over the next four years this volume is expected to increase eight-fold, according to The Tower Group (see Figure 2).

It is not just the young, PC-aware customers who will be the potential target market for electronic payments and other electronic commerce. According to a twopart study by Charles Schwab & Co. and SeniorNet, performed 34 months apart, senior citizens are the fastest-growing group on the Internet. According to the study, 40 percent of seniors reported having a personal computer at home in 1997, compared to 29 percent in 1995. Even more revealing is that in 1995, just 17 percent of seniors reported regular use of an online service, and only about 10 percent said they had accessed the Internet sometime in the past month. Thirty-four months later, 70 percent of senior computer owners reported being able to access the Internet from home, and nearly 80 percent said they have accessed the Internet in the past month.

These very encouraging statistics point to rapid adoption of the Internet for bill delivery and payment, not just by the young, but by potential customers of all ages.

BECOMING A `SETTLEMENT CENTER'

Your operation can become the local settlement center in your organization for payments of all kinds, not just paper. The sources of payments can be from other paper remittance centers, check and list payments from PC-based payment servicers, point-ofsale payments, credit card payments, direct debits (automatic payments) and other electronic payments.

With the advent of EBD, a new form of electronic payment from Internet consolidators will enter the mix using Interactive Financial Exchange (IFX). IFX is an emerging transmission standard being developed as a combined effort of NACHA and BITS, the Banking Industry Technology Secretariat. Other forms of electronic payments are alsc developing, such as smart cards and payments from Internet commerce. Settling all of these payments will provide a single upload to the legacy system that balances with bank deposits.