Bill payments? Click to clear

Electronic bill payment or online bill payment means that as a customer you are able to view, pay and manage your bills electronically, online, anytime and anywhere. However, you continue to receive your paper bills through snail mail.

Who offers this service?

There are three kinds of service providers in the market today. The utility itself may allow direct payment, your bank may want to be your errand boy or a company, acting as an aggregator between customers and corporations will offer to save you time, sometimes for a fee.

Which is better?

The first method may be too cumbersome 8211; to pay bills by logging onto ten different sites may not exactly be the time save you were looking at. The bank route presupposes an account with the bank offering the service. It also needs you to give separate Electronic Clearance Service ECS mandates or letters to all your service providers informing them about your bank account number and vesting them with the right to debit your account to the bill amount. The real problem though is the lack of choice you may face with your bank. If your bank does not have a relationship with the utility you use, you cannot use the service.

This is where the third option becomes viable. You have the choice between two companies today 8211; BillDesk and BillJunction. These are the 8216;aggregators8217; between customers, service providers and banks. So, if you register with any of these sites, you just need to sign one letter of authority to the site who in turn will deal with all your service providers and banks. 8220;We become the intermediary between the customer and the rest of the system,8221; says M N Srinivasu, Director BillDesk that has over 2.25 lakh customers. 8220;If we do not have a tie-up with a particular bank in which the customer has an account, then our payment is routed through the Reserve Banks Of India,8221; he says. In this case, clearance may take a little longer time. Sumit Chopra Director of BillJunction puts the number of his customers at 3.4 lakh individual customers and 2,500 small and medium entrepreneurs SMEs.

What does it cost me?

The banks usually give this service free as a sweetener to their clients. The two commercial bill payment sites have different revenue models. BillDesk offers its services free, while BillJunction charges a minimal activation charge from its customers. 8220;We charge our service providers and the banks and not the customer,8221; explains Srinivasu. It makes sense for the bank to pay for such a service because it is estimated that a bank saves upto Rs 8 each time that it does not have to process a cheque.

How does online payment work?

Your service provider, like a phone utility or an insurance company will create an electronic bill along with the paper bill that it sends you by post. The electronic bill is sent through the internet to the intermediary, usually a bank or an online bill payment site. The online site, in turn will send a message instantly, either through email or SMS to you and also a message to your bank account. You can choose to pay at once or just a day before the last due date.

What if you are short in the account?

If your intermediary is a bank, then you have to top up your account for the transaction to go through. However, if you are using a bill payment site, then you have the option to instruct it to get the amount debited from an account in another bank. Most bill payment sites have tie ups with multiple banks. Worst case, if the company has no tie up with the customer8217;s bank, the payment is routed through the Reserve Banks Of India RBI.

What are the problems with online bill payment?

The biggest problem is the inability of the government institutions to recognise these services. Says Singh, 8220;During annual audit of my bank account. I did not have any paper bills to show my CA.8221; Singh had to get in touch with his bank and they in turn sent a statement saying that these bills have been paid under the ECS guidelines of RBI. Security issues around credit card theft are also important, though says Singh, 8220;if I can trade stocks online, why not pay bills like this?8221; Other problems include customers not understanding technology and having to give a maximum limit to the utility provider. For example, the customer may decide to keep an upper limit for a phone bill. If his bill exceeds this limit, he will have to make payment by cheque. This could lead to late payment.

Online bill payments reduce many logistical problems, but be sure to read the fine print before you sign on. Existing customers find extricating themselves from such arrangements usually difficult.