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The Total Economic Impact™ of Electronic Bill Presentment and Payment

The Total Economic Impact™ of Electronic Bill Presentment and Payment



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Forrester Research: The Total Economic Impact of Electronic Bill Presentation and Payment

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Published by: fakharimran on Mar 16, 2009
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Planning Assumption
The Total Economic Impact™ of Electronic Bill Presentment and Payment
© 2002 Giga Information Group, Inc.All rights reserved. Reproduction or redistribution in any form withoutthe prior permission of Giga Information Group is expressly prohibited. This informationis provided on an “as is” basis and without express or implied warranties. Although this information is believed to be accurate at the time of publication, GigaInformation Group cannot and does not warrant the accuracy, completeness or suitability of this information or that the information is correct.
© 2002 Giga Information Group, Inc
Copyright and Material Usage Guidelines
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  
Giga Position
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
The Total Economic Impact™ of Electronic Bill Presentment and Payment
Penny Gillespie and John Ragsdale
Planning Assumption
 © 2002 Giga Information Group, Inc.Page 2 of 12
2. Benefits3. Flexibility4. Risk Although companies would need to calculate actual TEI for EPP based on circumstances at their company, thisTEI analysis provides guidance on how to make the calculations, providing the underlying assumptions thatwere made in the calculations.Although consumers have been slow to adopt EBPP due to its perceived inconvenience or sheer cost of consolidation, they are starting to show more interest. EBPP’s benefits include the payment features of EBPP(the ability to submit future-dated payments, make partial payments, view complete account histories, know thestatus of outstanding payments, customer self-help with billing questions, etc.) and eliminating paper  processing (opening the bills, cutting the check, finding appropriate postage, returning the bill and payment tothe biller). Past survey work has indicated that awareness is the first key to adoption (see Planning Assumption,Electronic Bill and Invoice Presentment: Move Over B2C, Here Comes B2B, Penny Gillespie). And, althoughduring the past few years, security concerns have remained an issue (approximately 60 percent of consumershave expressed concern about whether the Internet was a safe place to conduct financial transactions), thenumber of fearful consumers is decreasing. Consumer research conducted by Corillian earlier this year indicatesthat the fear factor has subsided more than 50 percent, declining from 49 percent in previous survey work to 23 percent earlier this year (see Planning Assumption,Internet Banking: Myths, Legends and Opportunities, PennyGillespie). Also, as secure e-mail becomes an extension of the biller direct model, more consumers are likely toembrace EBPP (see Planning Assumption,Secure E-mail Creates New Model and Minimum Requirement for EBPP, Penny Gillespie and Jonathan)Experience is also indicating that simply presenting electronic statements can also be very beneficial — especially if statements are presented to internal constituents as well as to customers. One company was able to pay for its implementation by using the service internally, which was its initial implementation. The companywas mailing brokerage account statements to its financial advisors and brokers for viewing when advising andconsulting with their customers. By converting internally to electronic statement delivery where the advisorsand brokers accessed customer data online (vs. paper receipt), the company paid for its implementation. In thecase, an internal rollout was followed by the customer rollout. Not only has the original cost-cutting measure behind EPP (i.e., reduce the costs associated with paper deliveryof bills and payment) materialized with EBPP implementations, but even greater benefits have been discoveredas well, such as customer service self-help, improved accounts receivable processing and decreased DSO. Allof these benefits allow suppliers or billers to reduce operating costs or increase funds available for reinvestment.The customer service benefit lies in reducing customer service calls pertaining to the bill. Telecommunicationsand utility companies are incorporating answers to frequently asked billing questions within the framework of their EPP solutions. For example, most EPP providers can give telecommunications customers a called number look-up capability that enables the reviewer to determine to what person or location a call was made, and thisand other unique account management features are only available online, enticing customers to migrate to theWeb for both account management and bill payment. Utility companies are being proactive about assisting their customers’ understanding of usage and cost by offering the opportunity for their customers to understand howmuch their current bill increased from previous ones and why. Knowing how many customer service calls arereceived pertaining to billing and the reasons the calls were made can help to build the business case for EPPsolution, since many of these calls and associated costs can be eliminated with an EPP implementation.A good example of the call center problem to be solved by EBPP comes from the consumer wireless division of a large communications company, which has begun using software from
for online consumer accountmanagement and EBPP. The company reports that 43 percent of its subscribers call every month, averaging 7
The Total Economic Impact™ of Electronic Bill Presentment and Payment
Penny Gillespie and John Ragsdale
Planning Assumption
 © 2002 Giga Information Group, Inc.Page 3 of 12
million calls per month. Seventy-five percent of the calls to customer care are bill related and could easily behandled by Web self-service and/or EBPP. The company anticipates that launching the edocs product will begindeflecting calls from customers, lowering call volume and reducing call center costs.Statement reprint requests and billing disputes are other activities that can consume a large amount of acustomer service representative’s time. Thanks to electronic delivery, reprint requests can be cut significantlyand the amount of time for dispute handling can also be greatly decreased. In many instances, EPP providersoffer parameter-driven dispute features that allow billers to set a dispute amount below which disputes aresettled automatically without human intervention. For example, if the cost of handling a dispute is deemed to be$25, a company might determine that all disputes under $25 will be accepted as long as the customer does notdevelop a pattern of abuse.Since EPP avoids many of the delivery problems associated with invoices (i.e., the invoice being lost in themail or within the recipient’s house) and allows for partial payments, the number of DSO is reduced, whichleads to quicker receipt of funds and an improved cash flow for the biller.
Applying the TEI Framework to EBPP
For the sake of discussion, a sample company was devised that serves the consumer market segment. Generalassumptions are identified in Table 1. In attempting to determine EBPP costs and benefits, the number of customers and the adoption rate play a large role. Obviously the larger the client base, the greater the number of  bills generated and the quicker the adoption rate, the greater the cost savings and potential value of EBPP. Thismodel assumes a software license approach (vs. an application service provider (ASP) solution) due to thecompany’s existing infrastructure and current 24x7 capabilities. The company also has sufficient firewalls in place and its technical staff has Java proficiency. If any of these conditions are not met, additional costs will beincurred or perhaps an ASP solution should be considered. Typically, ASP solutions are more appropriate for companies that do no have technical expertise or operational environment for the application or simply want totest the concept. Traditionally, as volume increases, ASP users look to take the solution inside the enterprise.The implementation is completed in January during year one to maximize the benefits for the year. Companiescan use this template as guidance in creating a more personalize TEI model for their situation.Table 1 identifies the baseline profile and assumptions for the TEI model, using a large size company withconsumer customers.
Table 1: Sample Company Basic Profile
Category Baseline
Annual revenues
$270 millionNumber of customers 7 million
Average number of bills per year per customer 
12Total number of bills
84 million
Number of calls pertaining to bill 75%
Payment to invoice ratio 1:1Baseline days sales outstanding 40
Estimated EBPP adoption 10%
Source: Giga Information Group
Incremental growth assumptions (see Table 2) were made about the fictitious company for this analysis. Modestsales gains are expected in years one through three of 2 percent, 3 percent and 4 percent, respectively. Bills are presumed to be delivered monthly, totaling 12 per customer per year. Adoption is projected to reach 10 percentduring the first year, increasing to 13 percent in year two and 18 percent in year 3. Note, however, that some

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