The United States Postal Service finds itself an unfortunate casualty in the terrorists' crusade to destroy America. In the wake of the Sept. 11 attacks, mail to the New York and Washington metropolitan areas has been gradually climbing back to its pre-attack levels. However, with anthrax introduced into the equation, mail service nationwide has slowed as the Postal Service attempts to decontaminate affected facilities. With an approximate 7% decrease in first-class mail, the USPS is feeling the effects.

While some Americans are afraid to even touch their mail, others are more concerned about their bill payments not being delivered in time. That is why some analysts predict that there will be a new surge in electronic bill payment.

Research from Dove Consulting, for example, shows that 7% of consumers have either enrolled to pay their bills online or have increased the number of bills they already pay online due to their concern over handling mail and delayed payments.

"The number one concern (among study respondents) was getting payments to billers in time," says Richard Crone, a vice president of the Boston-based firm.

In addition to the mail slowdown, he says, many billers have created separate operations to scan and clean incoming mail. All these factors add up to greater delays.

Given the current zeitgeist, the market is ready for an upsurge in electronic bill payment (EBP) as consumers begin to realize its advantages out of necessity. Yet some electronic payment companies have been reticent about commenting on the situation due to the sensitivity surrounding it. CheckFree, for example, declined to comment.

Andrei Arkhipov, a financial technology analyst with Aberdeen Group, says that e-billing service providers' reluctance to make statements or provide statistics on the current state of the industry is no mystery; it's simply too early to make judgments.

"There has been a fairly small amount of time since the attacks until now," he explains. "Most people haven't experienced delays through more than one postal cycle."

Once the late fees start piling up even though checks were mailed in time, people will begin to take a second look at EBP, Arkhipov says.

In addition, when one considers the impact that mail delays will have on businesses, the situation becomes even more grim. With over 26 billion invoices processed by the U.S. postal system annually, enterprises are now being exposed to greater risk to their days sales outstanding (DSO), according to Arkhipov. Due to businesses' typically larger invoices, late fees and a bad credit history become even more problematic.

"The finance charges for enterprises can be huge," he says. And with an economy that is in recession, the question remains as to how long vendors will wait to be paid. "In a down economy, people are paying more attention to their cash,," he says.

It is for these reasons that Arkhipov predicts a long-term stimulation of the adoption of EBP, certainly by enterprises. But the magic word here is "long-term." There is never an easy solution to a difficult problem, for although EBP can help companies and consumers alike dodge the specters of anthrax and finance charges, it will not solve anyone's problems immediately.

"It takes time to deploy these systems and get them running," Arkhipov says. "It takes time to find the technology provider, set up contracts, implement these systems and then tell your customers about it." But, in the long run, he adds, an EBP system is a worthwhile investment.

So have the acts of a handful of deranged madmen unwittingly created the window of opportunity the EBP industry has been seeking? It would seem that way since the spikes in EBP activity occurred relatively soon after the attacks.

But Crone and Arkhipov are cautious. Crone believes the momentum was already there for EBP since the beginning of 2001. He says this growth is a result of billers' marketing efforts, which include advertising EBP on the backs of their envelopes.

"What is significant about the seven percent figure we found is that it means the anthrax scares have increased people's awareness of EBP even more," Crone says.

Arkhipov also found evidence of increased EBP since the attacks. However, he hesitates to attribute this small spike solely to the terrorist plot. "E-billing was already growing steadily," he says. "Weve seen a 20% increase in EBP since the attacks. But whether 100% of this is due to the terrorist incident or existing growth is hard to say."

Crone says that billers have been providing the muscle behind EBP's adoption, and with account aggregation among the fastest online technologies adopted by banks, the EBP market would have ultimately succeeded on its own. In other words, this growth spurt still would have been evident with or without the "help" of terrorists.

Yet what of the federal government? Fortunately it has not turned a deaf ear to the situation. In December, legislation was introduced in Congress that would waive late fees for people whose mail was delayed due to anthrax or similar scares.

The House Financial Services Committee met with financial industry leaders and agreed to establish procedures that would waive finance charges.

The financial industry associations will notify their member companies that fees should be waived. The procedure will be activated when the USPS determines that mail has been significantly disrupted.

At press time, utilities and department stores were not covered under this legislation, but were being encouraged to participate.

It is strange the way things change. Arkhipov reflects, "The value proposition initially for EBP was losing paper and improving invoice processing.

"Now the value proposition is reducing risk from payment delays. (The anthrax threat) has certainly opened the eyes of some accounts payable managers."

Copyright 2002 Thomson Financial. All rights reserved.

From: Bank Technology News
Jan 7, 2002
By Maria Bruno