Many banks believe that the rather stilted take-up of e-invoicing will be boosted by growth in demand for supply chain finance solutions. Liz Salecka reports.


Although market penetration of e-invoicing is still below 10% in most countries globally, volumes of e-invoices have doubled over the last three years, and the potential for much greater take-up is recognised by both independent service providers and banks. According to recent findings by financial research and consulting firm Celent, business-to-business e-invoicing volumes in the US are lower than in Europe, despite the country being ahead in the adoption of business-to-consumer invoicing.

In Europe, meanwhile, business-to-business e-invoicing has achieved a double digit share of the invoice market in Finland (31%), the UK (24%), Denmark (18%) and Norway (12%), but lags behind in many other countries, including Sweden (4%). In Asia, there is generally low penetration of e-invoicing across the region, but countries such as Hong Kong, Singapore, Taiwan and South Korea have made progress, with much of this development being around their broadening supply chains.

A number of issues have affected the adoption of e-invoicing globally, including the ability of e-invoicing service providers and banks to secure the critical mass of corporate or end-users needed to make it a viable business proposition. As Celent points out: “The value in e-invoicing lies in the network effect.

Just as the value of the phone network is related to how many phones there are, so is the value of e-invoicing.There is a long way to go, as 80-90% of invoicing is still paper-based globally, and even higher when considering cross-border transactions,” says Chris Bozek, managing director, global trade and supply chain product head, Bank of America Merrill Lynch. “The challenges to overcome include developing a stronger business case for buyers, and overcoming hurdles to enable critical mass supplier adoption to deliver the promised benefits.” Another major issue that has held back the adoption of e-invoicing is the lack of unified regulation and standards for e-invoicing.

“Above all, there are still issues relating to VAT and tax legislation, authentication and the audit requirements for e-invoicing, which are still not unified in either the European Union or Asia. In Europe, there are still several drawbacks to cross-border e-invoicing,” explains Markus Wohlgeschaffen, head of global trade finance and services, UniCredit.

He adds that being able to achieve consistency in the e-invoicing space also relates to simple things such as whether e-invoice data should be filled in on the left or right-hand side of a form; where the currency should be shown, and the use of commas or dots. However, he notes that the EU is working on a number of measures to create a more consistent legal framework for e-invoicing, and accelerate adoption of the technology.

Meanwhile, in certain regions, such as Asia, local issues such as a traditional preference for paper-based documentation, and a reliance on paper processes, have limited the market potential for e-invoicing. “E-invoicing will happen eventually in Asia, but it is not happening yet because trade is so heavily based on paper. The conversion around switching to electronic invoicing is happening but this is a slow process,” explains Gautam Jain, global head of client access, Standard Chartered. “Changes to regulation will have a big role to play in this journey, and there are definitely some signs of improvement. Banks have to push for this as it will clearly make trade more efficient.” He adds that when it comes to trade within Europe, the movement of goods is faster than the movement of paper. “E-invoicing makes sense (in Europe) as it will allow the invoice to arrive at the same time as the goods, if not earlier,” he says.


However, in spite of this, many large corporates have already recognised the benefits of e-invoicing, including the ability to fully automate invoice management and remove the costs associated with manual processing. Bozek points out that in today’s economic and financial environment, the need to drive down processing costs and optimise working capital is universal.

“We are seeing interest in e-invoicing across all regions,” he says, noting that buyers, particularly large ones, are expected to continue to drive market adoption of e-invoicing. “It is possible that one of the biggest drivers will be public sector spending. Increasingly we are seeing government mandates on paperless procurement in which e-invoicing is a condition of selling to governments, and this is driving the adoption of e-invoicing by both large suppliers and small to medium-sized enterprises (SMEs).” Similarly, Wohlgeschaffen points out that one of the biggest drivers of e-invoicing in Europe is that it offers the opportunity to reduce both operating risks and costs.

“The cost of labour is much higher in western and eastern Europe than in regions such as Asia, meaning that high costs can be attached to the processing of paper,” he says. “This is less the case in low-cost labour markets where it may prove more expensive to fund the cost of purchasing a computer than to use manual resources.” Here, he also stresses the automation capabilities of e-invoicing, pointing out that “simply sending an invoice electronically is not where the real benefits lie.”

“The benefit lies in the ability to electronically match and map an e-invoice against a purchase order, which constitutes a payment claim that can be sold, purchased or financed, and thereby automate the entire payment and reconciliation process with an end-to-end solution,” he says.

Wohlgeschaffen believes that Swift’s new Bank Payment Obligation (BPO) solution, which is being accredited by the ICC Banking Commission to become a globally accepted standardised solution, will also help to promote e-invoicing. “The BPO will accelerate the concept of electronic data matching and this will change the entire market,” he says, pointing out that the BPO will emphasise the benefits of presenting purchase order data electronically and have the ability to match that data electronically against an e-invoice.

What role for banks?

Although banks have sought to take advantage of the opportunities presented by e-invoicing, independent e-invoicing service providers dominate in the provision of standalone solutions.“Large buyers want to do e-invoicing for cost purposes, and one of the first questions they always ask is how many other companies are already on an e-invoicing service provider’s network,” says Tom Raider, vice-president, product strategy, Bolero International. “But banks cannot fully demonstrate this scale of take-up yet.”

This is acknowledged in Europe by UniCredit’s Wohlgeschaffen, who points out that automated invoicing is already being used by corporates in industries where electronic networks are well-established for communications, information and data exchange. These corporates may not typically turn to a bank for e-invoicing services. “For banks, the provision of e-invoicing on its own (as a standalone solution) is not reflected in current market demand,” he says. “Where a company specifically wants only e-invoicing services, there are other service providers that can offer this. This same functionality is offered for example by SAP and Oracle Enterprise Resource Planning (ERP) systems.”

Integration with SCF

However, banks that have made major investments in e-invoicing capabilities do perceive a strong future to offer these capabilities as an integrated component of their supply chain finance solutions. UniCredit offers supply chain finance and e-invoicing solutions alongside each other in a number of European countries to large buyers setting up financing facilities for their suppliers. “E-invoicing is more likely to be a prerequisite offered alongside, or as part of a supply chain finance solution, rather than on a standalone basis in Europe,” says Wohlgeschaffen, who believes that the growth of e-invoicing (as part of an integrated offering) will be spurred on by regulatory changes that encourage the growth of supply chain finance.

“We now face substantial changes in the regulatory environment, particularly in relation to Basel III. For banks, one of the main implications is that in short-term transactions, where transaction-based finance is offered against, for example, an invoice, the actual capital requirements will be lower,” he says. “This is expected to substantially encourage their provision of supply chain finance to companies as an alternative to working capital facilities.” Meanwhile, at Bank of America Merrill Lynch, which offers both standalone (modular) e-invoicing solutions and combined solutions, Bozek believes that bundling e-invoicing with supply chain finance creates a more compelling proposition for buyers, suppliers, banks, and service providers.

“Combining the two is particularly powerful in driving supplier adoption of e-invoicing, as supply chain finance provides them with a consistent source of working capital at competitive rates. This will help e-invoicing usage to grow.” Here, Bozek points out that, even in Asia’s traditionally paper-based trade environment, growth in the provision of supply chain finance facilities will stimulate the take-up of e-invoicing solutions offered by banks as part of a total solution. “Traditionally, reliance on paper is directly linked to documentary finance, which is critical to Asian suppliers. As open account financing, such as supply chain finance usage, grows in the region, so will open account processing, including e-invoicing. Longer-term awareness and subsequent usage of BPO-based financing will help here as well,” Bozek concludes.

In Asia, Standard Chartered offers integrated e-invoicing with its supply chain finance solution, but its e-invoicing solution can be made available to clients who want it on a standalone basis. “It makes a lot of sense when e-invoicing is offered to suppliers as part of an integrated supply chain finance solution since using e-invoicing on a standalone basis offers little advantage. Offering e-invoicing as part of a supply chain finance solution will serve as the encouragement to adopt it,” confirms Standard Chartered’s Jain, who points out that the decision to adopt e-invoicing is often based on what it can do for the suppliers concerned.

“From a buyer’s perspective, e-invoicing can make the buy-side process much more efficient, but buyers need to show added value to their suppliers.” However, he also notes that large suppliers can also drive the adoption of e-invoicing solutions: “Whenever there is a large party in a trade transaction – be it a buyer or a seller – they are the most likely party to drive this discussion,” he says. However, Raider believes that, although the positioning of e-invoicing as part of a supply chain finance solution has its merits, the argument is not totally conclusive. “Offering e-invoicing as part of a supply chain finance solution is a quality objective but the reality may be different. At the end of the day, the important bank product here is always going to be the supply chain finance,” he says, pointing out that the ability to offer e-invoicing is not critical to a bank’s successful roll-out of a supply chain finance programme. “From the large corporate’s prespective, meanwhile, adopting an e-invoicing solution is often nothing to do with the financing of suppliers. For them, e-invoicing is a proposition that can help them to reduce costs.”

Raider believes that independent e-invoicing service providers will play the leading role in the provision of e-invoicing solutions in the future, and that some banks may need to look at working in closer collaboration with such providers. “The recession has pushed a lot of independent providers out of the market and there has been industry consolidation among those that remain. I believe that this will become an independent services provider market, no different to that of the telecoms industry, with four to five e-invoicing providers coming to the fore over the next four to five years.”

The potential for banks to work more closely with independent providers of e-invoicing has also been given weight by a recent Celent report. It concluded that partnerships with e-invoicing providers could present banks with a better option, while the former would benefit from an additional channel to market for their e-invoicing solutions. “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, Celent banking group. “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.”

European Union initiatives

Although a lack of common unified standards for e-invoicing remains an issue in Europe, the European Commission is a major advocate of paperless trading, and is looking to remove barriers that have hindered its adoption. According to its own studies in Europe, adoption of e-invoicing across the region could save €240bn over six years – the equivalent of 1% of GDP for Europe.

The commission is working on four objectives to promote e-invoicing:

  • Creation of a consistent legal environment for e-invoicing. As of January 1, 2013, new VAT rules on e-invoicing will require member states to treat paper and e-invoices equally. They will no longer be allowed to add specific requirements such as insisting that e-invoices be based on advanced electronic signatures.
  • Increasing awareness of e-invoicing among SMEs
  • Creation of an environment that stimulates mass take-up of e-invoicing
  • Promotion of an e-invoice standard data model