Taking E-Invoicing Global
A recent survey conducted by the Banks & Future Innovation Forum and initiated by the Fraunhofer IAO in Stuttgart, Germany revealed that the market is ready for e-invoicing. In co-operation with several international banks and IT partners, this forum investigates interests and research issues regarding the current and future needs of banks. Equens has extended this survey with a number of specific questions to find out which services will fulfill the future needs of both clients – ie, banks – and their respective customers. The results are clear: for 75% of the respondents, e-invoicing is the most welcome innovation.
And indeed, e-invoicing or electronic billing is a field that potentially offers great opportunities. More than 90% of all invoicing worldwide is still performed on paper. This usually involves an extremely inefficient process of photocopying, distributing, and archiving paper and re-entering data. This can sometimes drive up the cost of an invoice (from sending to processing) to several tens of euros apiece. E-invoicing makes this process a lot cheaper and simpler through portal-based digital communication, e-mail and – particularly for the B2C market – with the help of online banking.
Other benefits include easy archiving and the option to link the system to management information systems. Users are also able to add options to e-invoicing, such as dispute reports and enclosing electronic appendices. An added bonus is that debtors, thanks to the greater convenience offered by the system, actually pay their invoices sooner. In other words, e-invoicing is an extremely welcome tool for effective debt management. And by providing this service, financial services providers can distinguish themselves in the market.
A number of different e-invoicing initiatives have been launched in Europe varying in size and sophistication and focusing on across the business and consumer market. The companies providing these services are called ‘billing service providers’. Some of them are banks, while others may be major IT companies. At a national level, they act as a ‘central invoicing facility’for companies and their business and private customers.
A business-to-business (B2B) solution is a generic solution provided by the billing service provider. This is where companies store their invoices. Business debtors receive an e-mail – sometimes containing a hyperlink to the website – to alert them. They can use the service to retrieve the invoices, download them to their own accounting or ERP system and then continue to process in accordance with their own creditor procedures. Large companies that do not have the resources to invest in the system can also choose a solution on their own corporate site as an e-invoicing alternative. One advantage of this method is that the invoice function can then be provided entirely in the company’s look and feel.
The business-to-business consumer segment can choose between a number of digital solutions, whereby the invoice may be sent directly to the consumer’s online banking environment. This is effectively the digitised version of the paper giro slip, though unlike that somewhat antiquated payment method, the recipient does not actually have to copy the details on the invoice. This facilitates the payment process, rules out the possibility of errors and immediately provides the creditor with a reconciliation score of 100%.
All the e-invoicing initiatives launched so far have been at the national level, because, until the introduction of SEPA, all payment systems were essentially established by the countries individually. For cross-border e-invoicing, the national payment processors (i.e. the hubs between the payers’and the recipients’banks) need to make substantial investments, as invoicing processes vary significantly from country to country. There are also differences in tax treatment. The European Commission is aware of these limitations and committed to finding a solution. At the end of 2007, it requested to assemble a small group of international experts, with the goal of identifying a European e-invoicing framework that addresses the legal, operational and standardisation issues. Furthermore, Equens is an active participant in the EC Expert Group on e-invoicing. So in addition to being involved in developing rules, standards and protocols related to e-invoicing, we are very active in gaining experience in how to put into practice the theory of the European e-invoicing framework.
Equens and three leading national billing service providers in three European countries recently announced they will set up a cross-border pilot project for these three countries. In this pilot, the internationally active customers of the three billing service providers will gain international reach in e-invoicing – and all they have to do to achieve that is sign an e-voicing contract with a single provider.
As with the international (SEPA) payment system, Equens serves as a switch between the three parties. Going by the maxim ‘billing should be as easy as paying’, it established the Equens Billing Grid, which companies from other European countries can also join.
Scale is a crucial element in the European payment processing market, and Equens pursues a clear growth strategy. It is generally believed that an annual transaction volume of €10bn is necessary to survive. The number of transactions in the euro zone is approximately 50 billion per year. This means that, in the long term, three to five players will remain in this market.
In addition to e-invoicing, the organisation is pursuing a two-track innovation policy that incorporates innovation of the core business, payments and cards, with the systems and infrastructure SEPA compliant and SEPA-ready in time. The company also cooperates in innovations related to pure payment processing. These may be initiatives in line with our European strategy, such as the e-invoicing initiative, but they may also be national innovations that have the potential to be applied internationally.
As an example, Equens provides all telecom providers in the Netherlands with a service with which consumers can top up their pre-paid balance on their mobile phone. Prepaid gift cards are another example: paper vouchers are increasingly being replaced by electronic pre-paid solutions. Equens has so far issued over 2.5 million pre-paid gift cards. Both mobile payments and pre-paid gift cards are business areas that will be further built out and developed in the future. A third example is the pilot Tip2Pay – pay with your fingertip – which is being conducted in co-operation with Albert Heijn (Dutch Ahold’s largest supermarket chain). For a period of six months, customers of Albert Heijn will be able to pay for their shopping using their fingertips. The objective of the pilot is to investigate the potential of this technology as a new payment method and establish whether it is received positively by consumers. This is the first pilot of its kind in the Netherlands.