Define and explain how electronic billing presentment and payment systems (EBPP) systems work. Describe each of the main EBPP business models.

Question

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Answer 1

EBPP refers to electronic billing presentment and payment systems, which are systems that enable the online delivery and payment of monthly bills. EBPP services allow consumers to view bills electronically using either their desktop PC or mobile device and pay them through electronic funds transfers from bank or credit card accounts. More and more companies are choosing to issue statements and bills electronically, rather than mailing out paper versions, especially for recurring bills such as utilities, insurance, and subscriptions.

There are four main types of EBPP business models: online banking, biller-direct, mobile, and consolidator. The online banking model is the most widely used today. Consumers establish an online payment service with their banks and use it to pay bills as they come due or automatically make payments for, say, rent. The payments are made directly to the seller's bank account. This model has the advantage of convenience for the consumer because the payments are deducted automatically, usually with a notice from the bank or the merchant that their account has been debited. In the biller-direct model, consumers are sent bills by e-mail notification, and go to the merchant's website to make payments using their banking credentials. This model has the advantage of allowing the merchant to engage with the consumer by sending coupons or rewards.

The biller-direct model is a two-step process, and less convenient for consumers. The mobile model allows consumers to make payments using mobile apps, once again relying on their bank credentials as the source of funds. Consumers are notified of a bill by text message and authorize the payment. An extension of this is the social-mobile model, where social networks like Facebook integrate payment into their messaging services. The mobile model has several advantages, not least of which is the convenience for consumers of paying bills while using their phones, but also the speed with which bills can be paid in a single step. This is the fastest growing form of EBPP. In 2016, Facebook and PayPal announced a deal in which Facebook users can pay for purchases on Facebook using PayPal. Facebook Messenger can be used for P2P payments and payments to groups to pay for meals and other activities. Facebook is not charging for these transfers and receives 97% of its Messenger revenue from advertising.

In the consolidator model, a third party, such as a financial institution or a focused portal such as Intuit's Paytrust, Fiserv's MyCheckFree, Mint Bills, and others, aggregates all bills for consumers and permits one-stop bill payment. This model has the advantage of allowing consumers to see all their bills at one website or app. However, because bills come due at different times, consumers need to check their portals often. The consolidator model faces several challenges. For billers, using the consolidator model means an increased time lag between billing and payment, and inserts an intermediary between the company and its customer.

Supporting these primary business models are infrastructure providers such as Fiserv, Yodlee, FIS Global, ACI Worldwide, MasterCard RPPS (Remote Payment and Presentment Service), and others that provide the software to create the EBPP system or handle billing and payment collection for the biller.