Trough the centuries, people have witnessed a number of technological inventions that have changed the course of human social history. In the area of communication, the Gutenberg printing press, along with low-cost, massproduced paper, revolutionized the distribution of knowledge and ideas during the Renaissance. More recently, the telephone and radio extended communication dramatically. At the end of the 20th century, the Internet joins these inventions.
E Trough the centuries, people have witnessed a number of technological inventions that have changed the course of human social history. In the area of communication, the Gutenberg printing press, along with low-cost, massproduced paper, revolutionized the distribution of knowledge and ideas during the Renaissance. More recently, the telephone and radio extended communication dramatically. At the end of the 20th century, the Internet joins these inventions. It is interesting that the indelible marks left by these inventions were not always envisioned by their inventors. The printing press, for example, was invented primarily to massproduce the Bible, which until then had been slowly and painstakingly hand- lettered by monks. It evolved into the means for introducing reading and writing to the world at large, fostering the expansion of learning and education to the entire culture, not just to the elite. Similarly, the Internet was developed to allow academicians and the military to easily share information between disparate computers over a web of networks around the world. It is just within this decade that we have witnessed its remarkable evolution into a global communication and electronic commerce channel. The Internet is transforming the way people communicate, do business and carry on their daily lives. Businesses often struggle to anticipate how a new technology might affect what they do, or how they do it. Failure to recognize a new technology's impact can have disastrous results. During the first half of this century, railroads dominated transportation. Over the next 20 years, airlines began to compete for this business, eventually causing the demise of personal transportation by rail. The railroad companies saw themselves as being in the "railroad business." They failed to recognize that they were actually in the "transportation business." Today, we might be flying the B&O or the Union Pacific Airline if the railroads had adopted this new technology instead of ignoring it. INCREDIBLE OPPORTUNITY FOR PAYMENT CENTERS We are now at a similar crossroads in the payments world. Your payment center can continue to be merely a paper processing department. Or you can embrace payments of all kinds, including electronic payments, which are not the competition, nor are they irrelevant. The Internet is not a flash-in-thepan phenomenon. It is a juggernaut, and an incredible opportunity for payment centers. Perhaps the biggest potential that the Internet holds is in the area of electronic commerce, specifically electronic payment. "If payment centers view the Internet as a threat, they are missing the boat," said Bob Weirauch, president of Wausau Financial Systems, a supplier of payment processing solutions. "If they see the vast opportunity, they will begin the process of building delivery systems early on." Although the prevailing payment instrument today remains the paper check, within the next decade electronic payments will surely be at least as prominent as paperand perhaps even more important. Today, there are many forms of electronic payments, but those completed over the Internet will provide the most convenience to the consumer, while requiring the least labor and delivering the lowest error rate to your payment center. The introduction of electronic bill delivery (EBD, along with the associated e-payment, allows the payment center to convert labor-intensive paper payments and `check-and- list' to error- and labor-free electronic payments. In EBD, bills that would normally be printed and mailed are sent via e-mail or posted onto a Web site for viewing and paying. The entire experience for the customer is electronic. An electronic payment is conveniently made by merely clicking on a Pay button on the screen. The e-payment returned to your payment center is always accompanied with the proper customer account and payment information. Thus, customers receiving e-bills are eliminated from check-and-list and exception handling. In fact, check-and-list customers are the most likely candidates for early adoption of EBD. You should encourage the shift from paper to electronic billing and payment. Paper payments that become electronic are processed at a much lower labor cost and at a significantly lower error rate. EBD can bring even more value to your organization as a whole because it can drive the customer to your organization's Web site, where you can cross-sell additional products and services. Is your payment center the proper location in the company for EBD? It would seem so. Since EBD can be viewed as a front-end to electronic payments (for each bill, there is an associated payment), you can drive electronic payments using electronic billing. It is beyond the scope of this article to fully analyze the EBD application, but you may want to consider these questions before deciding on a strategy for your organization: Should the bill be delivered using e-mail or be posted on a Web site? How important is the ease of interface to the biller's legacy billing system? 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. If your payment center is run by a bank, the value of offering electronic bill delivery and payment services is even more strategic. If you are not prepared for electronic payments, your revenue will be irretrievably reduced as electronic payments become more prevalent. Only by controlling and offering electronic billing and payment services can the payment center continue to keep its clients and its business. The returns are significant. By controlling this service, the bank builds its commercial relationships, controls the fee structure, controls the ACH origination for its clients and enhances its retail relationships. "My belief is that banks need to be the aggregators, not MSFDC [TransPoint] or the telcos," said Gary Meshell of Benton International in a recent article in American Banker. Joseph S. Pendleton, a former bank executive with CoreStates Financial Corp., also warned recently in Home Banking and Financial Sen,ices, "There is a significant threat because if you have the scenario where someone like CheckFree or MSFDC [TransPoint] has a direct relationship with a biller, the processor could establish a preferred relationship with a financial institution ... and the bank would lose that relationship with the biller." The Internet can represent either a struggle for your payment center or a new opportunity to deliver value to your organization. The rewards stand to be great if you combine your expertise in payments and settlement with emerging electronic payment mechanisms. You can offer innovative and profitable solutions to a new set of problems facing all companies-the assimilation of payments from the Internet. E David R. Lamm President and CEO TriSense Software, Ltd. David R. Lamm is Founder, President and Chief Executive Officer of TriSense Software, Ltd., a Minneapolis-based financial systems software company and maker of the PaySense electronic bill presentment and payment solution. He has overall management responsibility for all aspects of the company, including strategic direction. Lamm has more than 25 years of seniorlevel experience in the areas of financial systems, product management and marketing, including in-depth expertise in the banking industry. His unique skills involve the ability to take a product from the idea stage to practical functionality, including design, problem solving, implementation and market development. Prior to forming TriSense in 1996, Lamm established Document Solutions Inc., a Birmingham, AL-based company that pioneered check and statement imaging for the banking industry. Lamm and his partner sold Document Solutions to BISYS, a major bank service company, in 1995. That year, Document Solutions was an $18 million company serving 300 bank clients. He continued to serve as a support and development consultant to BISYS until he formed TriSense. Lamm also developed two Minneapolisbased start-up companies. In 1978, he founded Concepts in Software, a consulting firm for banking, financial applications and operating systems. Compus, founded in 1971, developed compilers and operating system software for mini-computers. He received a bachelor's degree in theoretical mechanics from the Illinois Institute of Technology in Chicago and has completed two years of graduate degree work.
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