The Total Economic Impact™ of Electronic Bill Presentment and Payment
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July 30, 2002
The Total Economic Impact™ of Electronic BillPresentment and Payment
Penny Gillespie and John Ragsdale
Contributing Analysts: Robert Cormier, Norman Forbush, Paul Hamerman, Elizabeth Herrell and Claire Schooley
Although electronic bill presentment and payment (EBPP) was slow to garner consumer adoption in the pastlargely due to Internet privacy concerns and an inadequate number of bills being available electronically,consumers are becoming increasingly Web savvyabout online account management and bill payment. With the potential cost savings involved in migrating customers to online channels, Giga recommends that companiesnot currently offering EBPP begin plans to add EBPP as an offering in the future. Not only do cost savings liein migrating from paper to electronic delivery, but additional benefits also exist in the areas of customer service,accounts receivable and marketing. A well thought out EBPP implementation reduces bill-related customer service calls, decreases accounts receivable processing time and provides the opportunity to communicateconsistently and personally with customers. As the invoicing and payment process become more streamlined,making it easier for consumers to pay promptly and address disputed items through the use of partial payments,the days sales outstanding (DSO) also decreases, putting money in suppliers’ pockets more quickly.Giga’s assessment of the Total Economic Impact
(TEI) of EBPP is that companies that implement EBPP can
achieve a positive return on investment (ROI) with as little as 10 percent to 12 percent customer adoption
Corresponding paper invoices are no longer required.
EBPP implementation incorporates customer self-help.
Customers are made aware of both the opportunity and the benefit.This demand will only increase as the value (to both buyer and supplier) continues to increase. We expect thatmost companies making an initial investment in electronic presentment and payment (EPP) will continue to seea positive return from the investment [.9p], with payback appearing within the second to third year dependingon the adoption rate and the risk factor used. In the case of complex implementations, payback might be slightlylonger; in the case of aggressive adoption, payback may occur quicker. In the short term, we expect earlyadopters to gain some competitive advantages by migrating from paper to electronic transactions and possibly picking up new customers that request electronic invoice presentment and payment (EIPP) from their financialservices, communications and utility providers and others that bill them on a regular basis. As more companiescome on board, we expect the overall benefits to increase for all participants.
Giga’s TEI model for analyzing and supporting IT investment decisions can be applied to investments inelectronic invoice presentment (EIP) as well as EBPP. The model involves four factors for analysis (seePlanning Assumption,Total Economic Impact™: An Extension of the Basic Cost Model, Part 1, ChipGliedman):1. Cost