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Is the market ready for electronic bill payment and presentment? Vendors have been saying so for years, but what's the real story?

When a market leader commands a whopping 1% to 2% of the market, can it be much of a market to pursue? With a stranglehold like that, in an industry where new technology erupts with the consistency of Old Faithful, how tenuous a grip does the leading technology have on its particular niche?

That is where providers of electronic bill presentment and payment solutions and their service provider customers find themselves today. The Web-based technology that drives this market is great and getting better. But telecom consumers aren't convinced. They are flocking to this technology by the hundreds - not hundreds of thousands as expected - leaving the door open for some rogue technology to steal away its market share.

Year after year, the gift-giving season provides us with head-shaking examples of master marketing and consumer frenzy for one hot, holiday item or another. From Furbies to Cabbage Patch Kids, consumers en masse are convinced they can't do without the year's must-have merchandise. This year it was PlayStation 2 - respectfully more high-tech, but still just a toy.

So how do they do it? And why can't the same be done for electronic bill presentment and payment?

With the exception of some examples you will see here, the industry-wide average adoption rate of consumer and business electronic billing is stalled at less than 2%.

Granted, EBPP is a complicated technology, but when done right, it is no more complicated for the consumer than PlayStation - unless you are over the age of 35 and never got beyond Pac-Man and Missile Command. And it is certainly less complicated than understanding a Furby or learning to keep a virtual pet alive. Perhaps the demographers would say this age thing has more to do with slow EBPP adoption rates than we think. Only time will tell as tech-savvy, less settled joystick jockeys begin to pay their own bills.

For now, we can listen to a few market leaders explain why Web-based EBPP is still poised to take off. And we can listen to a few others tell us why direct e-mail billing may be the rogue technology knocking at the door.

The good news One of the things secure e-mail providers are waiting for is a banner customer they can use to show the world they are on the right path.Web-based EBPP providers have plenty of them. Nearly every telecom service provider has implemented some form of EBPP. Their struggle is with the consumer adoption rate, which is a paltry 2%.

However, there are exceptions. One service provider bucking the trend is TriVergent Communications. The aggressive Greenville, S.C.-based competitive carrier has signed up 23% of its customer base for EBPP.

In addition to its local, long-distance, advanced data and messaging services, Tri-Vergent is an ISP. The company has tapped this market for its initial campaign to accelerate adoption of EBPP.

"They are a fairly easy group to go after. They are pretty Internet-savvy and are used to doing things along this line and aren't afraid to pay bills on the Web," says Vincent Oddo, former vice president of information technology and chief information officer at TriVergent.

TriVergent offers different levels of online participation to its mix of business and residential customers. Some use the online presentment to view and analyze bills, some to make payment. Some want e-mail notification that their bill is ready; some don't.

Of TriVergent's 25,000 customers, 5775 have signed up for EBPP and use it "in some fashion or another," Oddo says. Although some of those customers may merely toy with the system, a comparatively high percentage is using it to its full extent.

"The second slice of the pie, the ones using it in a meaningful way, is 3347 [customers]. We are really pleased with that," Oddo says.

Meaningful means paying online and it is most meaningful to TriVergent. The company offers an auto-pay service, which customers can use to pay bills online using a stored credit card or debit card. With 13.5% of TriVergent customers paying bills this way and 11% of them no longer receiving paper bills, EBPP already has proved worthwhile. The company saved $66,000 last year by eliminating the printing of those bills.

"Its not a boat-load of money, but it lets us take this to the next level. It gives us leverage to keep the project going," Oddo says. "And there is another tangible benefit to getting folks to pay [online]: We get the money a lot faster than we would normally."

Since November 1998, TriVergent has received about $3.25 million in payments through EBPP. "Assuming we get it 30 days early, that's a good financial benefit." Oddo says.

An EBPP derivative As with most EBPP solutions, the benefits increase with adoption: lower printing costs, less postage, quicker payments, more Web advertising dollars and fewer calls to the call center. With the business models of some EBPP solutions providers, higher adoption spells survival.

Derivion was founded in 1998 with a pay-as-you-grow vision of EBPP. The company was one of the first to offer its e-billing solutions as an application service provider. This model provides a low cost-of-entry for service providers. Derivion offsets the low implementation expense by relying on a transaction-based model to generate revenue.

To drive this model, a major part of Derivion's solution is what the company calls "activation marketing." Activation marketing helps service providers promote their EBPP solutions and is part of Derivion's DigitalCare initiative, which includes 24/7 customer care and client services.

This initiative not only drives adoption, it allows Derivion to position itself as more of a value-added ASP, says Read Ziegler, chief marketing officer at Derivion. "There is a lot more value in the ASP model than the way it has been positioned by some as a cost-savings play," Ziegler says.

And although many of Derivion's customers rank right up there with the 1% to 2% industry average, they, too, have an account that exceeds that average and shows that higher adoption rates are possible.

Microcell Solutions is a national PCS provider in Canada that used Derivion's activation marketing to drive adoption to 23%. "Before we started the program they had 52 customers installed. After 30 days working with activation marketing, they had 2300 customers and in the first 75 days they had 5000,"Ziegler says.

While Derivion has more customers in the U.S. than in Canada or in Europe where it recently opened an office, the adoption rate is expected to be higher outside the country, at least for now.

"Canada is actually a very wired country and it has a real propensity for online banking, which lends itself to the acceleration and momentum in the e-billing space as well," Ziegler says. "The number of people doing online banking in Europe also is much greater than the U.S."

U.S. carriers are in the game, but so far they are playing just for fun.

Turn up the volume Princeton eCom serves two large U.S. service providers and has taken on a bigger role in helping its service provider customers market electronic billing. "Most billers we work with have not marketed very aggressively. We believe adoption rates will at least double as resources are added to marketing efforts," says Ron Averett, president and chief operating officer at Princeton eCom.

Princeton eCom is one year into its contract with Verizon Wireless and has worked with Ameritech for about six months. The adoption rate for these two carriers as well as its other customers ranges from 1% to 2.5%.

The company is optimistic that this percentage will climb. "More and more customers are beginning to ask for the service. There is a residual effect of home banking beginning to take hold," Averett says. "As more people have interactions with home banking, they are asking themselves, `Why can't I see my other bills here?'"

Like Derivion and other vendors in this space, Princeton eCom is trying to make it easy for billers, or service providers, to get in the EBPP game.

"Companies like ours are not giving the store away, but in order to grab market share, we're making the cost of getting in the game pretty nominal. It doesn't cost in the millions of dollars; it's more like tens of thousands."

Averett believes the market is still too young to expect dramatically different results. "You have a lot of companies in the market that are start-ups. They are just starting to have the manpower and intellectual horsepower to do a better job," he says.

A shaded sapling There are no guarantees in this industry. Sometimes even the most promising technology never takes root and grows to its full potential. Telco labs and storerooms are littered with picture phones, Iridium technology, CDPD modems and ISDN line cards.