As the payments industry continues to nudge consumers toward electronics, the Federal Reserve Bank of Cleveland and Dollar Bank of Pittsburgh are pushing the idea of using the automated clearing house (ACH) network as a universal backbone for electronic bill payment.
Under a proposal by the Cleveland Fed, the ACH network, which already routes payroll and Social Security payments, would act as the gateway to route bills to a common, secure repository, typically within a bank's Web site, where consumers could view and pay bills.
Called Electronic Billing Information Delivery Service, or EBIDS, the proposal is an alternative to mailing or e-mailing bills directly to consumers.
"There needs to be someplace for bills to be aggregated and easily accessed by consumers," said Richard Oliver, senior vice president for retail payments at the Federal Reserve Bank of Atlanta. Oliver is responsible for projects involving the ACH system and retail payment projects undertaken by the 12 Federal Reserve banks.
The ACH network is accessible to all financial institutions. It's also cheap, with fees ranging from under a penny to five cents per transaction.
"The ACH network will allow participating financial institutions to provide customers with a dedicated mailbox within their home banking system to view all aggregated bills," Oliver said.
Joining the Cleveland Fed on the project are Dollar Bank of Pittsburgh, Allegheny Power, which serves Pennsylvania, and BillServ, a biller service provider that will host and create electronic bills on behalf of Allegheny. Editor's Note: BillServ has been notified by Nasdaq that it will be delisted unless its shares trade at $1 or higher for at least 10 consecutive days before Nov. 19.
The group will establish universal standards, or format codes, that will read and carry billing messages across the ACH network. "Building and refining the types of service our customers can access through the Internet is viewed as an important channel of service delivery which builds upon our existing system," Al Williams, senior vice president at $4.5 billion Dollar Bank, said at a recent symposium hosted by the Cleveland Fed.
The process, described as a "round-trip" bill presentment and payment service, integrates a variety of bills into the online experience. Each month the biller compiles standard information for a summary bill. The biller's bank sends this information, along with a Web link back to the biller's site, through the ACH, just as it routes payroll direct deposits and Social Security payments.
The e-bills are then sorted and deposited into the correct recipient's mailbox for presentment.
As customers sign on to their home banking site, they can view the summary bill, and click on a URL that provides a detailed view of the bill. When they click "pay," the bank will generate an automated credit to the biller's account (in contrast to the automated debits commonly used to pay mortgage and insurance premiums).
"The customer retains control over the timing and amount of the payment," Williams explained. "Summary bill information and bill payment occur at the same place-the customer's bank."
The National Automated Clearing House Association (NACHA), which develops business practices and operating rules for the ACH network, is studying the proposal. If NACHA approves it, a pilot could be underway by year-end.
"The idea is to get wider support for this effort, and get investment for a pilot," Oliver said. "Today, this is still an idea on paper." The next steps are to determine the software, formats and standards that are needed.
EBIDS won't be the last electronic bill presentment concept, noted Oliver.
"Electronic bill payment and presentment (EBPP) is still early in its evolution, and business cases and consumer behavior still need to be built."
With some studies showing that customers still prefer to view and pay bills directly at billers' sites, more education is needed to sway them toward banking sites.
The opportunity is huge: half of consumers who write checks say they will use one electronic alternative within the next year, according to one study.
"The industry needs to educate and show consumers different tools that are available," said Oliver, "and then consumers will be inclined to use these vehicles."