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The potential for e-invoicing has long been recognized by the banking industry, but even though volumes are steadily increasing, doubling in the last three years, the level of penetration is still below 10% in most countries. In a new report, Celent looked at how banks can best harness the opportunity that e-invoicing enables. "Most banks would struggle to name more than five e-invoicing providers, so it comes as a shock to some that there are over 700 in the marketplace," says Gareth Lodge, senior analyst with Celent's Banking Group and author of the report. "Many of these players have already built the functionality required, so why would a bank spend money replicating this? The trick will be how to harness investments that have already been made by others." · While there has been significant progress in recent years, volumes globally are still a long way from being mainstream, and the business case is difficult. But Celent does believe that there is a business case, and that the benefits are from the digitization of the relationship. Research by the European Commission estimates that in Europe alone, that benefit could be as much as €240 billion over a six-year period. Only a portion of this will directly benefit banks, but they will benefit indirectly from much of it. · Celent is of the opinion that partnering is the best option for banks. Many service providers argue that banks do not have a role to play in e-invoicing, but the one thing that unites all corporations is that they have a relationship with one or more banks. Banks therefore offer potential access to those corporations. Although service providers perhaps will (and should) continue to target the large corporations, smaller businesses account for the largest proportion of the total market. The cost of recruitment is higher, and so banks should be a potential channel to those businesses. · Banks therefore need to consider which service provider they partner with, and how. Banks need to first understand what the needs of their clients are; are there certain geographies or sectors that need to be supported, for example? Second, Celent believes that banks ought to be partnering with multiple service providers because no single provider is likely to be sufficient. The criteria for additional providers is likely to be based on their reach-that is, how many organizations can be addressed through their network? · The next step is determining how to best manage that relationship. Here Celent believes that there are three broad options. First, direct. This is likely to be the preferred route for key suppliers, because it is likely to provide the highest levels of integration. The second option is via a bank-owned network, such as an ACH. This has both advantages and disadvantages. The advantage is that it drives adoption as it opens the option to all participants, and the service provider only needs to integrate once. In essence, this is what Isabel and SWIFT are doing, by making it a shared platform that connects to the banks, although both networks were built by the banks for other purposes. · There is a downside. ACHs typically (though not always) are run by large groups of banks, as a form of central utility. This can make the decision-making process very slow at the best of times, and very difficult if the service won't universally benefit all the banks. In this instance, the benefit will only be to those banks that have corporate customers. Celent can understand the arguments, but we believe that these banks will also ultimately benefit from the digitization of the customer relationship. Although online banking has been widely adopted in many countries, it is often in addition to other channel preferences, with the consumer still managing much of their account by paper, and more broadly, receiving bills from corporations such as electricity suppliers on paper as well. · Celent is not claiming that enabling e-invoicing will automatically generate electronic bill presentment and payment, but that it will further enhance the attractiveness to all concerned. Isabel is a good example. A service called Zoomit operates on top of the e-invoicing platform. This allows many of the 41,000 companies that send and receive e-invoices to deliver bills and wage slips electronically directly into the online banking packages of their consumer customers. For consumers, the benefits include greater control and visibility over their finances. · The third option is to connect to third party-networks. Here there are a number of variations. First are those networks that are e-invoicing centric. That is, a network where e-invoicing takes place, though not necessarily as a core activity (in particular, trading portals where the focus is on the facilitation of trade). The case here for banks has traditionally been on the opportunity to provide some form of financing, and as such, the platforms typically only have a handful of banking partners. The case here, though, is about being alongside customers and being able to integrate more tightly into their banking supply chain. As such, the trading platforms will be those where their clients are, or should be. · The second variation is a growing number of networks that link groups of corporations for other reasons. One such example is SAP's new Banking Services Network. This service aims to link via a cloud platform the users of SAP's ERP solutions to banks. One stated aim is to provide connected parties value-added solutions on demand. Celent believes that the acquisitions of Crossgate and Ariba will play central roles in the development of this network. · There are over 700 e-invoicing service providers globally, and there are tens of thousands of banks, but there are few examples of the two working together successfully. Celent is not suggesting that this will be easy. But it is a necessary step for both parties. Unless they work together, banks will never truly benefit from e-invoicing, and the service providers may find that, without regulatory intervention of some sort, e-invoicing becoming mainstream may remain tantalizingly close but ultimately unattainable in many countries. The prize for getting there is sufficiently large to create the incentive. Banks may find that their business cases are based on a combination of indirect benefits, but those benefits are massive. http://www.celent.com/reports/navigating-e-invoicing-service-providers
[This article was posted on August 6, 2012, on the website of ABA Banking Journal, www.ababj.com.] Set as favorite Bookmark
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