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Electronic Payment Systems 20-763 Lecture 14 Electronic Invoice Presentment and Payment. Electronic Billing. U.S. consumers pay 18.2 billion bills per year Occupies 2.4 billion man-hours U.S. businesses pay 26 billion bills per year Generating bills costs $20-35 billion per year
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Electronic Payment Systems20-763Lecture 14Electronic InvoicePresentment and Payment
Electronic Billing • U.S. consumers pay 18.2 billion bills per year • Occupies 2.4 billion man-hours • U.S. businesses pay 26 billion bills per year • Generating bills costs $20-35 billion per year • Postage costs $17 billion • PayNet demo, checkFree demo, iBill on-line checks demo • Example providers: • BlueGill, Logica, Netscape, PayNet, TransPoint • Key for customer retention (convenience)
What is EIPP? • Statements or bills rendered in electronic form on Web (1) • Multiple bills consolidated at one site (2) • Customers visit the site to view their bills (3) • Customers review bills and schedule payments (4) • Remittance information returned to biller electronically (5) • Payments routed from the customer's bank account to the biller’s account (6) SOURCE: VALERIE KRAMER, PNCBANK
EIPP Participants PERSONAL FINANCE SYSTEM, AGGREGATOR, BANK DATA PARSING BILL FORMATTING BILLER HOSTING DATA FLOW BILL INFO PAYMENT ORDERS MONEY FLOW PAYMENT AND REMITTANCE PROCESSING SOURCE: EBILLING.ORG
EIPP SOURCE: VALERIE KRAMER, PNCBANK
Biller Direct Model • Biller hosts its own site to present bills • Works through a financial institution to reach the settlement system to process payments • Requires payors to visit the biller’s site • Various vendors provide software to assist in internal development
Biller Service Providers (BSPs) • Acts as agent for billers • Technically enables electronic invoice presentment • Warehouses invoice data • Payment and remittance processing • Players: • some banks • EDS, IBS (Interactive Business Systems) • CheckFree, Transpoint • BlueGill • Paytrust
Consolidator Model • Bills from multiple billers are presented on a consolidated site • Site can be hosted by a financial institution or third party • Benefit to payer is one-stop bill payment • Key to success is critical mass of billers
Thick versus Thin Consolidators Biller #1 Billing Appl. Bill Data Biller #1 Billing Appl. Summary Data Conso- lidator’s Web Page Conso- lidator’s Web Page Bill Data Biller #2 Billing Appl. URL link for detail Biller #1’s Web Page Thick - data consolidated Thin - links to Biller’s site SOURCE: VALERIE KRAMER, PNCBANK
EIPP Issues • Retain familiar bill format • Information extraction • Bill presentation • Personalization • understanding customer bill review and payment habits • Settlement mechanism
Connect to biller legacy systems • Extract bill data • Convert to Web output formats • Integrate with third party systems and databases Bill Extraction & Conversion • Provide access to bills on biller’s Web site • Provide access to bills on consolidator Web sites Internet Bill Presentation • Facilitate credit card and direct debit payments • Process payments and post to customer and biller accounts Internet Bill Payment • Provide customer account management • Facilitate 1:1 marketing and e-commerce programs • Integrate bill analysis tools and applications Internet Customer Care The e-Billing Process SOURCE: LOGNET
Management System* End -User Semantic Analyzer Bill Database Internet BillMiner Architecture User Enrollment System Customer Query System Consolidator System Legacy System Data Stream Conversion Module Presentation Engine Biller Application Advanced Features Module Payment System Auditing & Licensing Accounts Receivable System BillMiner System SOURCE: LOGNET
Customer Interface • Designing electronic bills • Typically varies from paper • Input from marketing • Requires internet expertise • May require regulatory approval • Possible legal issues • Advertising • Enrollment process…on-line is best! • Requires a fully structured and integrated customer service model SOURCE: VALERIE KRAMER, PNCBANK
Data Management • Extracting data from legacy systems • Various vendor tools can assist • Can be a significant work set • Account for on-going billing data stream changes • Integrating remittance and payment data into the A/R system • Will create additional payment streams SOURCE: VALERIE KRAMER, PNCBANK
Financial Aggregation • Idea: allow access to all assets through a single portal SOURCE: VERTICAL ONE
Financial Aggregation Issues • Account consolidation • Different accounts in one bank • Different accounts in different banks • Combine brokerage, insurance with banking • Web BillPay • Requires registration of vendors • EIPP
Mobile Aggregators WIRELESS BANKING: EDS SEE ALSO YODELEE2GO SOURCE: VERTICAL ONE
Money Supply Chain and Value Chain • Where does it come from? • More electronic flow • Role of banks? • Can money be transferred without banks? • Financial intermediaries • Banks, insurance companies, stores, stockbrokers • Agents (sports figures have them because they’re rich) • all vying to park your money • Increasingly, payment will be viewed as part of the supply chain. (Just one more piece of data.)
Role of Cash • Will never vanish • Portability • Offline use • Authorized by government • Increasingly useless • Risk of theft • Not sufficiently liquid! (Must deposit in bank. How?) • Role of stored value cards
eCash • Where does the technology stand? • Security • Anonymity, pseudonymity, privacy • Rivest: anonymity may be a value-added feature • Double spending • Chaum’s protocol • Does not work completely offline • Not for large transactions • Possibility of detection not a deterrent • Outside the banking and Federal reserve system • Decline in importance of offline transactions
Ubiquitous Computing • Limitations on processor speed/size • Solution: more processors • Computers in walls, desks, cars • Seamless movement of money (e.g. EZ Pass) • Will money exist in several forms? • Accounts, e-scrip, cash, e-cash? • PDAs
Checking • Holdover from paper processing system • Future view : check is just a type of payment order for moving notational money • More research needed on clearing and settlement systems • Instantaneous clearance & settlement. Why not?
Micropayments • Transaction cost vs. transaction value • Rivest prediction: method of choice for purchase of information over the Internet • Aggregation • Hierarchical approach • Aggregate amounts < .01 cent until they reach1 cent • Aggregate pennies until they reach dollars, etc. • Alternative economic models • Subscriptions, taxes
Microcredit • Small loans in underdeveloped nations (e.g. < $50) • Commercial banks unable to serve the needs of low-income households and microenterprise • Cost of granting credit, servicing loan. Low return. • Apply micropayment principles to microcredit • Hierarchical aggregation
International Aspects • Currency conversion • Controlled currencies • Banking laws • Alternative monetary systems • Credit cards, checking: minor importance • Availability of credit: major importance
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