When the notion of sending and paying bills online was introduced several years ago, the idea had all the makings of a killer app. Companies could save on the cost of mailing out monthly bills, and customers could stop writing checks and spending money on stamps. Some experts even predicted that the U.S. Postal Service, which delivers roughly 35 billion bills a year, would have to lay off workers and close facilities as mail volume plummeted.

As with many big ideas, electronic bill payment and presentment has been slow to live up to the initial hype. But, recently, the concept has gained headway. That is especially true in business-to-business interactions because “both billers and payers are more driven than ever to lower administrative costs and overhead,” Gartner Inc. (www.gartner.com) research analyst Avivah Litan says.

As a result, businesses are on their way to finally achieving the promised cost savings. They actually are getting more savings than they bargained for because companies are finding that customers who handle bills online are also inclined to handle other interactions electronically, answering questions for themselves. That can greatly reduce the volume of calls that companies have to handle.

“The real cost savings is occurring on the customer-service side,” says Penny Gillespie, senior industry analyst at IT advisory firm Giga Information Group Inc. (www.gigaweb.com).

The vast majority of customer-service calls relate to bills, so making them available electronically can let companies resolve billing issues before a service representative even has to get involved. “Anything companies can do to push customers away from the phone is a huge benefit,” says Ted Morgan, a vice president at edocs Inc. (www.edocs.com) which supplies online billing software to more than 80 companies, including a host of telecom carriers, health-care providers, and financial-services companies.

Telecom companies, for instance, can offer customers the ability to click on phone numbers that appear on their bills to see whom they belong to. In the past, customers would call up the phone company and ask. The telecom companies can also make it easy for a customer to figure out why a bill went up from a previous month. These types of features are of particular interest to business customers.

Companies also are at least starting to save money because it’s so much more efficient to send a bill online than it is to print a bill and pay to mail it. ITC^DeltaCom [www.itcdeltacom.com], a small telecom company serving customers in the Southern U.S., says it expects to save $300,000 this year even though only 10% to 15% of its customers have elected so far to receive and pay bills online. Visiting its loading dock shows graphically where the savings come, and how they’ll grow as more customers choose e-billing: The company prints tens of thousands of pages of bills each month, then shrink-wraps them on shipping palettes, and dispatches them by truck each month to corporate customers. “Just getting the bill off the loading dock is time-consuming,” says Moss Crosby, director of marketing at ITC.

In the process of moving customers to online billing, ITC also is finding that it can make them happier, by providing tools that customers can use to analyze their bills more easily and rein in their own spending.

Still, getting consumers to abandon paper can be a challenge, particularly in financial services. “When it’s their money,” people want to be able to hold a hard copy of their statements, see their trade confirmations and keep them on file, says Francie Kuehner, director of e-business at Franklin Templeton Investments [www.franklintempleton.com], a mutual-fund company. The company thinks it has a better chance of saving money by getting customers to sign up to receive electronic versions of prospectuses. “The prospectuses and the shareholder reports are very important documents, but most people pitch ’em when they get them in the mail,” Kuehner says. “If we are not printing up 100-page prospectuses, it saves on fund expenses,” which shareholders typically pay when they invest in mutual funds.

The benefits of online billing also may take a while to surface because companies have to make significant investments in technology upfront to make systems more efficient. BellSouth Corp. (www.bellsouth.com), the huge regional phone company, says it will be three to five years before it sees significant savings from the system it built to handle billing and payments online. That’s because the company had to invest in a system that could ultimately accommodate the vast majority of BellSouth’s 45 million customers—so far, some 400,000 customers are participating in its eBill service, and more than 1.2 million customers pay their bills online.

“We do save on postage,” says Klaus Werner, general manager of BellSouth e-commerce. But, to really achieve big savings, the company needs to “reach critical mass,” he says.

In addition, companies are having to spend to adjust their initial plans for electronic billing. In the early stages, consumers were expected to pay bills via their banks’ Web sites. Some do, with the behind-the-scenes help of companies such as CheckFree Corp. (www.checkfree.com) and Spectrum EBP LLC (www.spectrumebp.com), which provide banks with the technology to offer the bill-paying services to their customers. But, mostly because banks decided to charge for those services, a recent survey by Forrester Research Inc. (www.forrester.com) found that 78% of consumers prefer to get their bills by e-mail from the companies they do business with, rather than paying their bills at a bank site. So, increasingly, the billers themselves—phone companies and credit-card issuers, for instance—are bypassing the banks and e-mailing bills directly to their customers.

Still, Gartner says companies will generate a return on their investment in e-billing systems once just 2.3% of business customers or 9% of consumers view and pay bills online. And, now that the move to electronic billing is finally well under way, analysts expect it to only gather speed from here.

BellSouth’s Werner predicts that eventually people will look back and say: “Can you believe that we used to mail our checks?”

Kelley is looking for a way to stop her bills from coming at all.