Financial software giant Intuit, Inc. and TransPoint, a joint venture between Microsoft and First Data Corp., are teaming together to tackle one of the last bastions of paper-based commerce — the sending of 63 billion bills yearly to small businesses and consumers.
The new service would allow consumers and small businesses to receive their bills online, which could siphon billions of dollars in revenues away from the U.S. Postal Service (USPS) and trigger a upward spiral of increasing first class postal rates that would drive more and more people to online billing.
Intuit and TransPoint
Intuit said that the new service will be available through its Quicken.com Web site, America Online (AOL) and Excite.com. The companies said that the bill payment component of the system will utilize the customer’s regular bank account.
While Intuit already offers bill payment on its Quicken.com Web site, TransPoint is working with 750 major billers for electronic bill presentment and payment. The billers range from telecommunications and utility companies, to credit card companies, financial services and cable television companies.
By combining together, the two companies hope to create a combination of services that finally breaks the log jam that has kept online bill paying growing at a much slower rate than many analysts and online companies have anticipated.
Consumers Resisting Online Bill Payment
Online bill paying and personal account data access has the potential to be widespread throughout the United States. Each year, about 63 billion bills are issued and then paid, which generates approximately $37 billion (US$) of the USPS’ total revenues of $60 billion.
Only about three million people currently pay their bills online — a mere drop in the bucket that has no impact on postal rates. The major impediments to online bill paying are habit, costs and loss of the float.
Most online payment services, for example, are charging in the range of six dollars per month. That figure is too high, according to a recent study by GartnerGroup. The research shows that only six percent of its respondents are willing to pay more than five dollars in monthly fees, while sixty percent are unwilling to pay any fees for the transactions.
Slingshot to Major Growth
The service by Intuit and TransPoint could be the spark that online bill paying needs to get it over the hump and start major growth. If successful, the service will have a spiraling impact on both bill payments and USPS prices.
As more bills are delivered electronically and then paid online, the USPS’ revenue base will decrease. To cover its fixed overhead, postage prices will have to rise. This increase, of course, will spark more online bill deliveries and payments, amounting to a deadly spiral of rising prices.
GartnerGroup forecasts that the one percent of bills being paid online today will increase to 13 percent in 2002 and 25 percent in 2004.
At today’s rate of $0.33, the lost postage for the payment alone would amount to $5 billion by 2004. Of course, electronically delivered bills would cut USPS revenues even further.
Should USPS Be Alarmed?
Pundits have been predicting escalating first-class rates for many years because of the prospect of services like e-mail and online bill paying. While the USPS would be severely affected by such escalation, no one is suggesting that it will be put out of business.
It now seems that the USPS would be well advised to have a plan in place for a time when it is only delivering 5 or 10 billion pieces of first class mail yearly.