This Month's Spectrum Summary:

(The following is an excerpt from the April 2008 issue of Spectrum, a proprietary monthly briefing published exclusively for the clients of I.T. Strategies, Inc. © 2008)

The State of the Statement
A look at the future of transactional print

Bills, statements and invoices are the most visible elements of the vast amount of "transactional mail" produced around the world. There are also a wide number of informative transactional documents, such as trade confirmations, explanations of benefits, estimates of costs and coverage, and more.

Transactional documents come from banks and credit card issuers, insurance companies, telecommunications, and public utility companies. In addition, healthcare providers, financial services firms, cable and satellite TV providers, retailers, and more all send out bills and statements. Collectively, they send out billions of pages every year. It is a large, complex and very fragmented market. And it cannot change easily because much of it is regulated by state and federal governments. This prevents--for the moment-- a broad shift to electronic delivery of transactional documents.

Population and account growth are driving the increase in transactional mail in the US. People are reluctant to give up paper mail, seeing it as more convenient and easier to use. However, many people don't like the numerous promotional inserts included with bills and statements, and would prefer to receive their bill without advertising material enclosed.

The present efforts by some equipment vendors and some companies to put promotional marketing offers on transactional documents, a process called trans-promo, is not necessarily appealing to customers at this time. Mail delivery is funded largely by first class mail, although half of mail volume is direct mail that receives lower postage rates. Postage accounts for about 65% of the cost of each bill sent out, and this cost must be controlled (limited to no more than 70%) or the companies that send the majority of transactional mail may be forced to shift to electronic delivery, which could have a huge impact on the US postal system.

Many companies would like to shift to electronic delivery but customers remain resistant. This will change over time, but it will likely take 10 years or longer before there is a significant shift away from paper bills, statements and other transactional documents. Transactional mail was once primarily done by the companies issuing a bill or statement which meant the process was decentralized--having many locations. The associated process costs have instigated a shift a few very large outside service bureaus, centralizing a substantial volume of transactional print to a few locations. These large bureaus can achieve substantial economies of scale that minimize printing costs.

This poses a long term challenge for print engine providers because the negotiating power of these big service providers is so great that equipment companies' margins will be lower, despite the volume of equipment and consumables used. The volume of transactional documents being printed at the largest service bureaus makes it more difficult for small to mid-size service bureaus to compete, but they still find they can serve the needs of smaller companies that lack the volume to fit well in the workflows of the biggest bureaus. At the same time, equipment vendors must pay attention to the needs of these smaller shops as they still contribute an important revenue stream.

Looking to the future, It is important to remember that transactional printers are a subset of the transaction processing market. The processors--the organizations that electronically process all the credit card sales, check card transactions, electronic bill payments, bank statements for smaller institutions, and more--are multi-billion dollar companies. As these automated clearinghouses grow some are buying up medium-sized service bureaus to provide statement printing as one of their services This will play out over the next few years, and is yet another change in the landscape of transactional printing.