Expect this to change. As more B2B trading partners conduct business and provide customer service over the Web, it makes sense to handle invoicing, billing and payment processing in the same fashion. B2B trading partners have specific motivations for online billing: Billers want to receive payments faster and with less manual processing, while payers want to streamline the cumbersome payment-approval process. Thus, the payment stage of any EBPP implementation must be able to integrate tightly with A/R (accounts receivable) and A/P (accounts payable) systems, support back-end payment-processing work flows and procedures, and provide detailed reporting capabilities.

To handle payments for billing interactions, market giant CheckFree Corp. is the undisputed leader. But other biller-centric vendors, including Metavante and Princeton eCom, also have strong offerings and are becoming market forces. Billers seeking full-service EBPP solutions that include presentment as well as payment services should consider this class of vendors.

For basic transaction processing and related services, CyberCash, CyberSource Corp., VeriSign and others of this ilk make sense. But such services are more broad-based commerce payment solutions that are not necessarily focused on bill payment. For companies that want to implement secure payment for their commerce sites and integrate these same services into their EBPP apps, these services make sense.

Finally, a number of electronic-check vendors, including PayByCheck.com and X.com Corp., are extending their services beyond person-to-person payment with offerings for businesses. In the near term, these solutions are most well-suited for small-to-midsize companies that merely want to give their payers a simple way to pay via electronic checks. It remains to be seen whether major billers will rely on such services for high volumes of payments.

State of the EBPP Market

Although the online billing market has received plenty of attention, it hasn't taken off as fast as many analysts had predicted. In the B2C market, it's a classic chicken-and-egg situation: Billers are reluctant to get into online billing until a critical mass of consumers shows a willingness to pay online, and consumers are reluctant to pay online until more of their bills are available that way.

Of course, there are other hurdles impeding widespread adoption, such as finding an acceptable cost to consumers. In addition, privacy and security concerns continue to make customers hesitant.

But momentum for online billing is finally starting to build. Forrester Research predicts that 30 percent of all U.S. households will be paying bills online by 2004. For billers, EBPP is not just a cost-cutting or timesaving application but a way to get closer to their customers. In addition, many large businesses are now looking at EBPP for B2B transactions with their supply-chain partners.

Whether in B2C or B2B, most biller-customers now consider EBPP a strategic application that is a key part of their larger e-commerce and customer-relationship management strategies. It's a value-added service for customers that access the biller's Web site for purchases, customer service, support and so on. At the same time, savvy billers in the B2C space realize they have to provide options by syndicating their content to multiple payment sites or consolidators. Many consumers would rather have all their bills in one place, so billers need to offer this alternative.

Dozens of companies are providing software and services for online billing. In addition, there has been considerable activity in mergers and acquisitions. The most notable moves have been made by payment-processing market leader CheckFree, which acquired chief rival TransPoint, purchased software vendor BlueGill Technologies and formed a strategic alliance with Bank of America in which the bank acquired 16 percent of CheckFree's stock.

Payment Considerations

No matter what method of EBPP you implement (see "The Other 'P' in EBPP"), realize that payment processing can be highly complex. For your customers, you will need to support multiple payment options, which might include credit cards, electronic checks, automatic balance transfers and debit cards. Electronic fund transfers are the most prevalent transactions in the B2B world, but some business customers prefer to pay by other means. And whatever payment methods you accept, you'll need to integrate those services with your own A/R system.

Payment processing is made even more complicated by the number of parties that can be involved. For example, accepting credit-card payments means interacting with the credit-card companies or a third party like CyberCash. Accepting an electronic fund transfer means the processing will pass from the customer's financial institution to the ACH (automated clearing house) network for settlement. And if you syndicate your bill presentment to multiple sites, you must work with multiple consolidators, portals and CSPs (consumer service providers) to get paid. If you're a biller, this means the payment service you choose must be able to integrate with the many channels that may be involved in processing your payments.

Although accepting electronic payments usually means you get money faster, you should realize that most electronic-payment mechanisms are neither real-time nor online. The ACH network and credit-card infrastructures are batch-processing-intensive. No matter which service provider you choose, some level of integration or customization will be required for you to be able to accept batch-payment data transfers from external parties.

Another key concern is security. Be sure to choose a vendor with a sound approach for encrypting its data transfers. Related to this is the data-center infrastructure the payment provider offers. The payment vendor should have clearly documented backup and recovery procedures, and should ensure high levels of availability, reliability and performance through its SLAs (service-level agreements). The payment vendor should provide you with reporting or audit-trail data for your internal analysis, ideally accessible through a Web-based administration interface.

Finally, standards compliance is becoming more important. For example, XML will play a critical role as a standard format for billing data, making it easier for trading partners to ingest such data into their own back-end systems.

In addition, emerging standards for financial transactions, such as OFX (Open Financial Exchange) and IFX (Interactive Financial Exchange), will also play a role. OFX, created by CheckFree, Intuit and Microsoft in 1997, defines a means for financial-services companies to exchange financial data over the Internet. IFX is a similar initiative designed specifically for online bill presentment and payment; specification 1.0.1 was released in June.

All these standards will play a role in providing an alternative to EDI, an expensive approach to electronic commerce that to date has been implemented only by very large companies with many trading partners and a strict B2B focus. Of the three, XML has the most momentum, thanks to the general push for more standard methods of B2B integration. OFX and IFX are in the early adopter stage.