Turning Bills Into Bits

Spectrum EBP is a two-year-old bill presentment "hub" owned by Chase Manhattan Bank, First Union and Wells Fargo. Additional participants include BB&T, First Tennessee National, FleetBoston Financial, Hibernia National Bank, Marshall & Ilsley Bank, Provident Bank and Union Bank of California.Tim Barnett was recently appointed chief technology officer of Atlanta-based Spectrum. Previously, he was chief technology officer at Nova Information Systems, a third party processor/acquirer, and held jobs in the networking and data communication industries. In an interview with BS&T associate editor Ivan Schneider, Barnett discusses the Spectrum business model and the future of electronic bill payment and presentment (EBPP).

BS&T: Describe the Spectrum technology platform.

BARNETT: Right now we're in the process of bringing up our next-generation platform. It's both an OFX and an IFX-based platform for payments and presentment. I'm really excited to have the IFX piece in there. Editor's Note: Open Financial Exchange (OFX) and Interactive Financial Exchange (IFX) are industry-standard message specifications for bill payment and presentment.

Our biggest challenge will be to move software vendors and the banks to start using IFX.

BS&T: What's IFX going to allow?

BARNETT: With IFX you can support split payments. Suppose you have your mortgage presented online, and you want to pay 'X' dollars towards your principal and the rest towards the interest. IFX would actually split those out within a single payment.

IFX also helps send remittance data back to the biller. People who put bills online today often just view them online and then still write a check and mail it in, which really causes more work because the original invoice isn't with the check.

BS&T: What about credit card payments?

BARNETT: Our next-generation switch will also support credit card payments. We're not going to be an acquirer, but if someone did choose to pay their bill using the Amex card because they want frequent flier points, we're not going to dictate how that happens. It doesn't really impact our model at all either. Unlike an acquiring bank, we don't make money on interchange and dues and assessments and things like that. It's a straight transactional model- it's just another transaction to us. We'll facilitate the transaction but we don't participate in the interchange revenue.

Certainly from a biller's perspective, they would much rather have the payment take place from one DDA account to another.

BS&T: How does Spectrum make money?

BARNETT: When the banks join as members of Spectrum, there are membership dues as with an association model. We also get money through both presentment of the bills and payment of the transactions.

The idea is to become the low-cost provider in order to spur adoption. If a bank has a relationship with Spectrum, they get very attractive transactional pricing.

BS&T: What are the reasons to sign up?

BARNETT: If I'm a small bank and I join Spectrum, the great thing for me is that I get all of the billers that have been brought there by the other banking entities-my customers have access to them. At the same time, any of the billers that the banks bring into the relationship with the switch can post their bills at any of the other banks.

There have been a number of different bill payment models. Some of the larger billers use a biller-direct model, where you go to one place to pay your phone bill, another place to pay your gas and electric bill and so on. Overwhelmingly, in all the studies that are being conducted, people really want to pay their bills at their bank. That's their most trusted entity. The banks have the relationships with both the consumers as well as with all of the businesses.

BS&T: How do billers participate?

BARNETT: First, they'd select a BSP, or a biller service provider. There are a number of companies that do that, such as Avolent or edocs. They certify with Spectrum, get all the messaging correct, and then offer a turnkey application for these smaller banks and their billers.

The billers need to be sponsored by a bank. We would have professional relationships with BSPs, but the billers would have to come through the banks.

BS&T: Can large billers act as their own BSP?

BARNETT: There's nothing preventing large billers from physically hooking directly into Spectrum as long as they were sponsored by their bank, and they coded to the proper IFX-OFX message interface.