Transcript EIPP 2004 - Carnegie Mellon University

Electronic Payment Systems
20-763
Lecture 14
Electronic Invoice
Presentment and Payment
20-763 ELECTRONIC PAYMENT SYSTEMS
SPRING 2004
COPYRIGHT © 2004 MICHAEL I. SHAMOS
Outline
• Electronic invoice presentment and payment (EIPP)
• Presentment: displaying notification of debt with
details
• Also Electronic Bill P&P (EBPP)
• Electronic Statement Delivery (ESD)
• B2C v. B2B
• Service providers
• Bill consolidators
• System Architecture
• Future of ePayments
20-763 ELECTRONIC PAYMENT SYSTEMS
SPRING 2004
COPYRIGHT © 2004 MICHAEL I. SHAMOS
What is EIPP?
• Statements or bills rendered on Web (1)
• Multiple bills consolidated
at one site (2)
• Customers visit the site
to view bills (3)
• Customers review bills,
schedule payments (4)
• Remittance information
returned to biller (5)
• Payments routed from
customer's bank to
biller’s account (6)
SOURCE: VALERIE KRAMER, PNCBANK
20-763 ELECTRONIC PAYMENT SYSTEMS
SPRING 2004
COPYRIGHT © 2004 MICHAEL I. SHAMOS
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 USD 20-35 billion per year
– Postage costs USD 17 billion
• Mellon demo (password: “solutions”), Whitney
• Moore demo, PayNet demo, CheckFree demo,
PayTrust, Santa Clara 999999999, 1234
• Other providers:
– Logica, Netscape, TransPoint
• Hong Kong: Jetco
20-763 ELECTRONIC PAYMENT SYSTEMS
SPRING 2004
COPYRIGHT © 2004 MICHAEL I. SHAMOS
Savings on $100 Billed Electronically
AMOUNT
SAVED
•
•
•
•
•
•
•
Reduced float
(USD per bill)
Reduced non-payments
Reduced processing errors
Eliminated paper processing
Saved postage
More efficient customer service
Total potential savings
0.15
0.25
0.10
0.90
0.40
0.10
1.90
SOURCE: MCKINSEY
20-763 ELECTRONIC PAYMENT SYSTEMS
SPRING 2004
COPYRIGHT © 2004 MICHAEL I. SHAMOS
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
20-763 ELECTRONIC PAYMENT SYSTEMS
SOURCE: EBILLING.ORG
SPRING 2004
COPYRIGHT © 2004 MICHAEL I. SHAMOS
Electronic Invoice Presentment
Participants
Billers
B B B B
B B B B
B B
Biller Service
Providers
BSP
HOSTING
Consolidator
CSP
HOSTING
Customer Service
Providers
Customers
C C C C
C C
BILLER
DIRECT
C
Distribution Options
SOURCE: APACS
EIPP Biller Models
EBPP
SWIFTBILL DEMO
Biller Direct
Biller Direct with BSP Hosting
Biller
Biller
Service
Provider
CSP with BSP
Hosting
Biller Hosting with CSP
Customer
Service
Provider
Customer
SOURCE: VALERIE KRAMER, PNCBANK
20-763 ELECTRONIC PAYMENT SYSTEMS
SPRING 2004
COPYRIGHT © 2004 MICHAEL I. SHAMOS
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
20-763 ELECTRONIC PAYMENT SYSTEMS
SPRING 2004
COPYRIGHT © 2004 MICHAEL I. SHAMOS
Biller Service Providers (BSPs)
•
•
•
•
•
Acts as agent for billers
Technically enables electronic invoice presentment
Warehouses invoice data
Payment and remittance processing
Players:
–
–
–
–
some banks
PayNet, Metavante
CheckFree
Paytrust
20-763 ELECTRONIC PAYMENT SYSTEMS
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COPYRIGHT © 2004 MICHAEL I. SHAMOS
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
20-763 ELECTRONIC PAYMENT SYSTEMS
SPRING 2004
COPYRIGHT © 2004 MICHAEL I. SHAMOS
Bill Consolidation
Biller
1. BILLERS SEND
BILLS TO
CONSOLIDATOR
Biller
5. BANK PAYS
BILLERS
2. CONSOLIDATOR
ADVISES CUSTOMER
OF BILLS
Customer’s
Bank
Aggregator
Customer
3. CUSTOMER VIEWS
BILLS, AUTHORIZES
PAYMENT
20-763 ELECTRONIC PAYMENT SYSTEMS
4. CONSOLIDATOR
DIRECTS BANK
TO PAY
SPRING 2004
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Thick versus Thin Consolidators
Biller #1
Billing
Appl.
Bill
Data
Biller #2
Billing
Appl.
Bill
Data
Consolidator’s
Web
Page
Thick data consolidated
Biller #1
Billing
Appl.
Biller #1’s
Web
Page
Summary
Data
Consolidator’s
Web
Page
URL link
for detail
Thin - links to Biller’s site
SOURCE: VALERIE KRAMER, PNCBANK
20-763 ELECTRONIC PAYMENT SYSTEMS
SPRING 2004
COPYRIGHT © 2004 MICHAEL I. SHAMOS
EIPP Issues
•
•
•
•
Retain familiar bill format
Information extraction
Bill presentation
Personalization
– understanding customer bill review and payment
habits
• Settlement mechanism
20-763 ELECTRONIC PAYMENT SYSTEMS
SPRING 2004
COPYRIGHT © 2004 MICHAEL I. SHAMOS
The e-Billing Process
 Connect to biller legacy systems
Bill Extraction
& Conversion
 Extract bill data
 Convert to Web output formats
 Integrate with third party systems and databases
Internet Bill
Presentation
 Provide access to bills on biller’s Web site
Internet Bill
Payment
 Facilitate credit card and direct debit payments
Internet
Customer Care
 Provide access to bills on consolidator Web sites
 Process payments and post to customer and biller accounts
 Provide customer account management
 Facilitate 1:1 marketing and e-commerce programs
 Integrate bill analysis tools and applications
SOURCE: LOGNET
20-763 ELECTRONIC PAYMENT SYSTEMS
SPRING 2004
COPYRIGHT © 2004 MICHAEL I. SHAMOS
Invoice Generation
Convert
Legacy
XSL
Stylesheets
MIME
•HTML
•OFX
•Excel
XML
Render
S/MIME
Secure
SMTP
Submit
Modern
User
Input
Demographic
Info
X.509
Certificates
Tracking
Delivery Info
Info
Account Management
SOURCE: STEVE KILLE
20-763 ELECTRONIC PAYMENT SYSTEMS
SPRING 2004
COPYRIGHT © 2004 MICHAEL I. SHAMOS
Invoice Delivery Architecture
Delivered
Statement
Raw
Statements
Statement
Generation
Secure
Email
Distribution
& Tracking
STATEMENT
000.00
000.00
=====
000.00
Archive
Administration
URLs
(web links)
Account Management
Action/Payment
Manager
Actions
20-763 ELECTRONIC PAYMENT SYSTEMS
SOURCE: STEVE KILLE
SPRING 2004
COPYRIGHT © 2004 MICHAEL I. SHAMOS
Integrating Payments with
Upstream Processes
Buyer
Seller
Purch
Order
PO
No.
Purchasing
Dept.
Receiving
Dept.
Ship &
Invoice
Shipping
& Invoicing
Dept.
PO
No.Invoice
No.
Accounts
Payable
Sales
Dept.
AOP,
Payment
Invoice
No.Payment
No.
SOURCE: COMMERCENET
Accounts
Receivable
Bill Miner Architecture
SOURCE: LOGNET
BillMiner Architecture
Management
System*
User
Enrollment
System
Customer
Query
System
Consolidator
System
Legacy
System
Biller
Application
Data
Conversion
Stream
Module
Semantic
Analyzer
Bill
Database
End -User
Presentation
Engine
Internet
Auditing &
Licensing
Advanced
Features
Module
Payment
System
Accounts
Receivable
System
BillMiner System
SOURCE: LOGNET
20-763 ELECTRONIC PAYMENT SYSTEMS
SPRING 2004
COPYRIGHT © 2004 MICHAEL I. SHAMOS
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
20-763 ELECTRONIC PAYMENT SYSTEMS
SPRING 2004
COPYRIGHT © 2004 MICHAEL I. SHAMOS
ILLUMINATED STATEMENT
SOURCE: ENCIRQ
EIPP Projections
50
40
Billions
30
EBPP Presentments
EBPP Payments
20
10
0
1999
20-763 ELECTRONIC PAYMENT SYSTEMS
2005
SPRING 2004
COPYRIGHT © 2004 MICHAEL I. SHAMOS
SOURCE: KILLEN & ASSOCIATES
20-763 ELECTRONIC PAYMENT SYSTEMS
SPRING 2004
COPYRIGHT © 2004 MICHAEL I. SHAMOS
EIPP Status
• Only 3 countries with widespread offering
– US, Canada, Australia
• Others – small scale or coming
– Scandinavia, NZ, UK, Hong Kong, Switzerland
• All are finding EIPP is complex
– Scale- and/or partner- dependent
20-763 ELECTRONIC PAYMENT SYSTEMS
SPRING 2004
COPYRIGHT © 2004 MICHAEL I. SHAMOS
EIPP Major Ideas
• EIPP is data-rich
– Interactive bill detail, challenge, resolution
• EIPP is complex
– Interaction with legacy accounting systems, data interchange
• EIPP requires service providers
– Biller service provider
– Customer service provider
• Are bills necessary?
20-763 ELECTRONIC PAYMENT SYSTEMS
SPRING 2004
COPYRIGHT © 2004 MICHAEL I. SHAMOS
Future of Electronic Payments
20-763 ELECTRONIC PAYMENT SYSTEMS
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COPYRIGHT © 2004 MICHAEL I. SHAMOS
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.)
20-763 ELECTRONIC PAYMENT SYSTEMS
SPRING 2004
COPYRIGHT © 2004 MICHAEL I. SHAMOS
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
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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
20-763 ELECTRONIC PAYMENT SYSTEMS
SPRING 2004
COPYRIGHT © 2004 MICHAEL I. SHAMOS
Ubiquitous Computing
•
•
•
•
•
Limitations on processor speed/size
Solution: more processors
Computers in walls, desks, cars
Seamless movement of money
Will money exist in several forms?
– Accounts, e-scrip, cash, e-cash?
• PDAs
20-763 ELECTRONIC PAYMENT SYSTEMS
SPRING 2004
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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?
20-763 ELECTRONIC PAYMENT SYSTEMS
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Micropayments
• Transaction cost vs. transaction value
• Rivest prediction: method of choice for purchase of
information over the Internet
• Aggregation
• Digital rights management
• Hierarchical approach
– Aggregate amounts < .01 cent until they reach 1 cent
– Aggregate pennies until they reach dollars, etc.
• Alternative economic models
– Subscriptions, taxes
20-763 ELECTRONIC PAYMENT SYSTEMS
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Microcredit
• Small loans in underdeveloped nations (e.g. < $50)
• Commercial banks unable to serve the needs of lowincome households and microenterprise
• Cost of granting credit, servicing loan. Low return.
• Apply micropayment principles to microcredit
– Hierarchical aggregation
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International Aspects
• Currency conversion
• Controlled currencies
• Banking laws
• Alternative monetary systems
• Credit cards, checking: minor importance
• Availability of credit: major importance
20-763 ELECTRONIC PAYMENT SYSTEMS
SPRING 2004
COPYRIGHT © 2004 MICHAEL I. SHAMOS
Major Ideas
• Integration of payment with business processes
– Straight-through processing
• World trend toward globalization of currencies
– Euro, HKD/USD, Eastern Caribbean dollar
• Instantaneous settlement
– Increases volatility
– Reduces risk
– Effect on currency control?
• Future of currency
20-763 ELECTRONIC PAYMENT SYSTEMS
SPRING 2004
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Q&A
20-763 ELECTRONIC PAYMENT SYSTEMS
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BillCast Architecture
OFX = OPEN FINANCIAL
EXCHANGE
(XML STANDARD)
SOURCE: AVOLENT
BillCast Internal Structure
VRU = VOICE
RESPONSE UNIT
SOURCE: AVOLENT
20-763 ELECTRONIC PAYMENT SYSTEMS
SPRING 2004
COPYRIGHT © 2004 MICHAEL I. SHAMOS
BillCast Payment Model
SOURCE: AVOLENT
BillCast Bill Distribution
IFX = INTERACTIVE
FINANCIAL EXCHANGE
OFX = OPEN FINANCIAL
EXCHANGE
SOURCE: AVOLENT
BillCast Thin Consolidator Model
SOURCE: AVOLENT