While the federal government's in a cost-cutting mood, electronic payment providers are actively promoting their wares to the agencies and companies affected by the new constraints. 

"We're seeing more RFPs from big government agencies that are interested in finding a way to do electronic payments," says Rene Lacerte, CEO and founder of Bill.com, which sells online invoicing and bill payment services. 

The government is tightening its belt on a number of fronts. Congressional Republicans and the Obama administration could not agree on a deficit reduction package by March 1, triggering automatic cuts—or sequestration. These cuts will gradually go into effect, totaling about $85 billion in 2013, with similar cuts over the next nine years. While that's been the main public focus of government spending cuts, it's just one source of austerity. The United States Postal Service is expected to cut delivery on Saturday by this summer, and a number of government agencies also face legal mandates to reduce their use of paper.

Payment companies are talking up the efficiency their products offer. Electronifying payments allows agencies to claim they are wasting less money on administrative tasks and supply chains, since the mandatory cuts likely can't be recouped outside Congressional action—and most Social Security, Veterans benefits and Medicare payments are already automated.

"People who work in government are just like people who work in industry," Lacerte says. "They travel and make purchases, and you can't manage this stuff efficiently on paper."

That pitch should find a receptive audience says Nancy Atkinson, a senior analyst at Aite Group.

"Given the circumstances and the concerns about budget cuts, agencies will have to look at a way to cut expenses, and removing paper from processing is a great way to go about doing that," she says.

Some government agencies have already made a move toward automated payments. The U.S. Department of Veterans Affairs last week mandated electronic invoice submission from suppliers to the VA Financial Services Center (VAFSC).  The center purchased electronic invoicing services from OB10, which offers payments services and Health Insurance Portability and Accountability Act (HIPPA) compliance.

Veterans' benefits, medical care and administrative costs are exempt from sequestration. The VA's move was actually part of another government cost-cutting effort—the Improper Payment Elimination and Recovery Improvement Act. President Obama signed the act into law in January. The General Services Administration also moved to electronic payments, and is replacing its use of checks for fleet purchases.

"I do think and an increase in digital payments is coming for government agencies," says Atkinson. "For example, there are a number of defense departments and areas that use card payments, including issuing cards to soldiers to buy the haircuts and uniforms they use in basic training."

The United States Postal Service is planning to eliminate Saturday delivery and close some centers. This presents an opportunity to promote bill payments among businesses that rely on mailed payments.

"[The Saturday mail cuts] will accelerate the move toward electronic bill payment and presentment," says Keith Theisen, executive vice president and director of product management for Wells Fargo, which sells MyCEO.

Wells Fargo is not overtly marketing postal cutbacks as a reason to adopt electronic corporate bill payments, but is including it among the variety of reasons it urges clients to suppress paper.

"It's another reason to make automation a focus for payments. Not only can you help monitor collections and flow, but it's more efficient to make a payment electronically," Theisen says.

Subscribe Now

Authoritative analysis and perspective for every segment of the payments industry

14-Day Free Trial

Authoritative analysis and perspective for every segment of the industry