Euro crisis–eerie silence

You have surely taken note of the eerie media silence that followed the daily barrages of real or imagined bad news. After the bold Italian package media seems to have lost interest – and as media does drive markets – also there the swings are now more moderate.

So was the whole thing a really a media fabrication? Why this abrupt attack – on countries where politicians had borrowed too much for ages? Why where they all of a sudden considered to be on the brink of bankruptcy? Why where no warning signals raised before? And how much did media hysteria have impact on investors, traders and regulators? Too much probably…

Why did rating companies not react? And why did investors continue to invest in state papers with waferthin margins – when they should have known that they continued to increase borrowing – when a decrease should have started.

Whatever the answers – now we have to look forward and do the proper painful adjustments. Work harder, spend less, export more and understand that the age of overborrowing in our childrens name is gone forever.

Innovation work rewarded

http://eeiplatform.com/6515/tieto-wins-financial-i-award-for-the-swift-e-invoicing-solutions/?utm_source=EEI+Platform&utm_campaign=00ba920b8f-E-invoicing+Platform+-+Newsletter+wk+51&utm_medium=email

Just like payments–in sight

With the establishment of eeSPA we now have the organization in place to drive towards e-invoicing functioning “Just-like-payments. You sign up with one and you reach your customer or supplier globally. Every enterprise is here free to choose their own service provider – nobody is forced to choose that of his customers. e-invoicing services are generic –driven by the global IOS20022 standard. This all of course means that there is a need for both rule-books, standards and implementation guidelines – meaning that service providers joining the network has to live up to minimum demands – otherwise the weakest link syndrom will destroy the value of the network

Some people say that standards are not important. Certainly should not be for the enterprises and many of today’s service providers can convert messages from most standards to most standards. But we need to look into the ERP-environments also – how much more cost-efficient these will become when the invoicing programs and other administrative applications are designed for ISO20022 from the outset.

So expecations towards eeSPA are high:

1. make e-invoicing happen

2. further interoperability

3. ISO20022 e-invoice message standard deployment and support for the other closely interacting ISO standards

Best of luck and success!

http://www.eespa.eu/EESPA%20Press%20Release-2011-12-15.pdf

Saving Tax payers’ money

We have on many occasions stressed the need for the public sector to more aggressively

-   save their own operating costs,

-  help enterprises to save cost,

-  drive enterprises across digitalization thresholds

-  cut CO2

-  make the single market real

-  collect VAT and other taxes due

-  further global standardization

Migration to e-invoicing furthers all these – and is furthered in return by all these.  So no efforts should be spared and bold action taken. Bold action means mandatory migration – needed as the 25bn public sector cost saving in EU public sectors (see Bruno Koch newsletters http://www.billentis.com/EBPP_EIPP_e.htm ) does not happen without it. These deadlines also drive private sector deadlines aiming at the 250bn cost saving for enterprises.

 

Saving own costs – tax payers’ money.

The public sector in Finland has estimated its cost saving to 300m€/year.  Bruno Koch has estimated the figure for the public sector in Austria to 590m. Estimates from UK point at 1-3bn and so forth. So we need the deadlines – but before that we need 0-investment and 0-ITskill just-like-payments functioning generic tools for the SME-sector.  It is of utmost importance to avoid buyerspecific portals and procedures for the SMEs.  Banks have to take action here – the investments are small and as most non-bank service providers have said – only banks can bring in the SME-sector fast on cost efficiently.  So it is also about taking responsibility for society at large.

A more competive Europe–drilling deeper

1. More competitive enterprises. How? Drilling down selectively:

1.1. Better products, selling, procurement and service processes – mostly (but not only)  a question of digitalization

1.1.1. Accepting e-invoices from suppliers save their and own costs and 300g CO2 every time – makes for a better customer

1.1.2. Sending e-invoices (ideally with global standard) saves some 20€ per invoice for the receiver (especially when posting codes are included) – makes for a more competitive supplier

1.2. Better productivity – cutting administrative costs in half by 2015

1.2.1. DG Enterprise 25% cutting-red-tape initiative (enhanced clinically clear language in regulation and rule books)

1.2.2. Migration to e-invoicing and payment automation

1.2.3. Automation of VAT-reporting and payments (real time enabled by e-invoicing)

1.2.4. Automated cash flow estimates (real time part enabled by e-invoicing)

1.2.5. Migration to cash-based accounting for enterprises in the sub2m€ category – enabling automated accounting by tying e-invoice to debits and credits in the electronic bank statement

1.2.6. Automated e-invoice financing (including reverse factoring)

1.2.7. Automated tax returns, financial, statistical, environmental and HR-reporting - using generic unified reporting codes and XBLR

1.2.8. Deploy global standards in cloud services to lower IT-costs and increase competition

1.3. Lower risks (cost of risk and risk mitigation estimated to 4% of turnover)

1.3.1. Migrate to e-invoicing >

1.3.2. Cut invoice receivables by increasing invoicing frequency (motivated by lower handling cost) – lowers credit, currency and finance-availability risks

1.3.3. Cut fraud and VAT-reporting risks by using trusted service provider networks

1.3.4. Use Bank Payment Obligations

1.4. Lower financing costs and better return on liquidity

1.4.1. E-invoicing speeds up payments and lowers financing needs

1.4.2. E-invoicing enabled Real Time accounting and cash flow estimates fine tune financing needs and enable better return on liquidity

1.4.3. Reverse factoring can lower credit margins

1.4.4. BPO enables risk taking by the party that knows the enterprise best

2. More competitive public sectors. How?

2.1. Lower administrative burden by 25% (DG enterprise red tape initiative)

2.2. Accept and send only structured electronic invoices – supporting interoperable global standards (ISO20022 family)

2.3. Adopt unified reporting codes for all tax, statistics, financing, sustainability and HR-reporting

2.4. Outsource and privatize routines – free up resources for guiding and supervising

3. More of a Single Market. How?

Examples from digitalization area:

3.1. Implement VAT-directive for simplified and equal treatment of e-invoices

3.2. Use global standards family (ISO20022) for e-procurement, e-invoicing, SEPA-payments, payment references, account statements, finance requests, reverse factoring, e-id and VAT-reporting

3.3. Automate and harmonize VAT-reporting and collection (split payment model)

3.4. Harmonize VAT-exemptions and tax rates generally 

3.5. Harmonize patenting

3.6. Use federated model for strong e-id (reuse e-bank codes) with ISO20022 e-id message standard

4. A mobile, educated, flexible, and motivated workforce. How?

Examples from digitalization area:

4.1. Liberate workforce by automating administration

4.2. Automate sales processes

5. Better rule of law. How?

Examples from digitalization area:

5.1. Migrate to e-invoicing

5.2. Automate VAT-reporting and payments

5.3. Regulate away cash for business transactions

6. Lower CO2 emissions. How?

Examples from digitalization area:

6.1.  E-invoicing and digitalized business processes

6.2.  Business-process integrated sustainability-reporting

6.3. High carbon tax

The above is viewed from the digitalizing business process angle – please feel free to fill in missing ones – also from other areas.

For a more competitive Europe–big picture

From time to time it is necessary to look at the big picture. What do we need for a more competitive Europe? Innovative and determined actions in many areas – like:

 

1. More competitive enterprises – innovative and productive. 85% of growth comes from product and service innovation – so this must have the highest attention.

2. More competitive public sectors – lower cost, lower tax pressure and less red tape.

3. A Single market – true harmonization makes the market bigger.

4. A mobile, educated, flexible, and motivated workforce – less routine work and more value creation (driven by rapidly retiring population).

5. Better rule of law – less fraud and tax evasion.

6. Lower CO2 emissions – less material, transport, travel and work that can be automated.

Detailing – what and how?

1. More competitive enterprises. How?

1.1. Innovative products and services

1.2. Innovative selling and service processes – mostly (but not only)  a question of digitalization

1.3. Better productivity – cutting administrative costs in half (including DG Enterprise 25% from red tape)

1.4. Lower risks

1.5. Lower financing costs and better return on liquidity

 

2. More competitive public sectors. How?

2.1. Lower administrative burden by 25% (DG enterprise red tape initiative)

2.2. Accept and send only structured electronic invoices – supporting interoperable global standards (ISO20022 family)

2.3. Adopt unified reporting codes for all tax, statistics, financing, sustainability and HR-reporting

2.4. Outsource and privatize routines – free up resources for guiding and supervising

 

3. More of a Single Market. How?

Examples from digitalization area:

3.1. Implement VAT-directive for simplified and equal treatment of e-invoices

3.2. Use global standards family (ISO20022) for e-procurement, e-invoicing, SEPA-payments, payment references, account statements, finance requests, reverse factoring, e-id and VAT-reporting

3.3. Automate and harmonize VAT-reporting and collection (split payment model)

3.4. Harmonize VAT-exemptions and tax rates generally 

3.5. Harmonize patenting

3.6. Use federated model for strong e-id (reuse e-bank codes) with ISO20022 e-id message standard

 

4. A mobile, educated, flexible, and motivated workforce. How?

Examples from digitalization area:

4.1. Liberate workforce by automating administration

4.2. Automate sales processes

 

5. Better rule of law. How?

Examples from digitalization area:

5.1. Migrate to e-invoicing

5.2. Automate VAT-reporting and payments

5.3. Regulate away cash for business transactions

 

6. Lower CO2 emissions. How?

Examples from digitalization area:

6.1.  E-invoicing and digitalized business processes

6.2.  Business-process integrated sustainability-reporting

6.3. High carbon tax

 

The above is viewed from the digitalizing business process angle – please feel free to fill in missing ones – also from other areas. I will drill deeper in some of these in the next post.

When will your country become e-id-progressive?

Canada joining the self-evident model - reuse what citizens already are used to, is secure and saves tons of tax payers money.

http://www.finextra.com/news/fullstory.aspx?newsitemid=23132

When will your country join? If not soon - why not?

Miserable public isolation: http://www.finextra.com/community/Fullblog.aspx?blogid=5932

Progressive Kazakhstan – how about your country

Kazakhstan is moving to e-invoicing with the help of the needed deadline for paper:

http://bx.businessweek.com/e-invoicing/view?url=http%3A%2F%2Fwww.sharedserviceslink.com%2Ffile%2F93958%2Fe-invoicing-in-kazakhstan-from-2012.html

The progressive club with public sector deadlines now include 11 countries (in some sort of chronological order of announcing - some include municipalities):

Denmark, Singapore, Italy, Spain, Sweden, Finland (b2b now over 40% - and rising fast), Brazil, Greece, Norway, USA, Hungary and Kazakstan.

Argentina, Portugal and Nepal have either total or partly implemented - as far as we know - and work is going on in Canada, Russia and Luxembourg - and many more.

To get this fundament - fur cutting administrative cost in half - in place faster - we of course need also the entire municipal sector and all sorts of big invoice receivers to announce the end of the era of dull and badly paid routine work - including error-prone scanning.

e-government checklist – expanded

http://www.finextra.com/community/FullBlog.aspx?blogid=5991

The high cost of cash

We have elected and pay for decision makers and regulators. Sometimes I get the impression that they try to govern as little as possible in important areas and overcompensate with irritating nitty-gritty.

An area where actions certainly is needing is in the fight against cash usage - at least for the following reasons:

1. Cash is expensive - according to EU-study cash-handling costs 50bn a year - and the consumer pays every cent of it. The problem is that she/he does not know it as the cost is hidden. Action point: Make cost visible by charging charging for withdrawals and usage.

2. Cash is an open invitation to crime. Be it drug dealing, illegal weapons, prostitution, gambling, black economy, grey economy, counterfeit, robberies, blackmail - you name it. If cash usage would be made difficult, an unusual and expensive practise - what would happen to crime?

Action point: Make the cost of all this (including crimeprevention, courts, jail systems - not to talk about costs to the victims) very clear to citizens.

3. Cash is the vehicle for not paying tax. The VAT-gap in EU in 2009 was 118,7bn. Much of this is due to avoidance schemes and politically motivated rather silly exceptions - but the fraud part is much dependent on cash (and paper/e-mail invoicing).

Action point: Make it clear that this is our - the tax payer's badly needed debt reduction money - being lost. Make e-invoicing and credit payments mandatory. Salaries and social benefits can be paid only to accounts (every identifiable person should have the right to a bank account and a direct debit card at decent cost).

4. Cash is CO2 heavy. How much CO2 does not the daily armoured car parades (out and in again) emit + printing and destroying vast amounts of paper.

Action point: Make the CO2 amount visible on global/EU/country levels and tax it.

When will investigating media notice this anacrony - using cash even in places where there are many alternatives - only because the many cost dimensions to society and the users are not known. Put the light on this - instead of being tools for populists protesting about handling charges becoming transparent (sic!). Media should also reveal how consumer organizations often are doing their best to protect old and create new unnecessary costs - instead of truly protecting consumer longer term interests.

Then the politicians might get the nerve to do something bolder about it.

When will your country become e-id-progressive?

Canada joining the self-evident model - reuse what citizens already are used to, is secure and saves tons of tax payers money.

http://www.finextra.com/news/fullstory.aspx?newsitemid=23132

When will your country join? If not soon - why not?

Miserable public isolation: http://www.finextra.com/community/Fullblog.aspx?blogid=5932

Progressive Kazakhstan - how about your country?

Kazakhstan is moving to e-invoicing with the help of the needed deadline for paper:

http://bx.businessweek.com/e-invoicing/view?url=http%3A%2F%2Fwww.sharedserviceslink.com%2Ffile%2F93958%2Fe-invoicing-in-kazakhstan-from-2012.html

The progressive club with public sector deadlines now include 11 countries (in some sort of chronological order of announcing - some include municipalities):

Denmark, Singapore, Italy, Spain, Sweden, Finland (b2b now over 40% - and rising fast), Brazil, Greece, Norway, USA, Hungary and Kazakstan.

Argentina, Portugal and Nepal have either total or partly implemented - as far as we know - and work is going on in Canada, Russia and Luxembourg - and many more.

To get this fundament - fur cutting administrative cost in half - in place faster - we of course need also the entire municipal sector and all sorts of big invoice receivers to announce the end of the era of dull and badly paid routine work - including error-prone scanning.

Näkökulmia taloushallintoon: Poliittisten tahojen aika toimia hallinnollisen taakan vähentämiseksi.

Verkkolasku rajaa riskiä ja säästää päästöjä - Kumppaniblogit - Talouselämä

Puolet pois yritysten hallintokuluista - Kumppaniblogit - Talouselämä

Miserable public isolation – who is holding back?

Who is holding back - governments or banks?

Needed for accelerating citizens' use of government e-services:

1. That the public sector realizes that it is not the only service citizens use - and in fact one of the most infrequently used and then

2. allows and encourages citizens to use the so frequently used familiar and secure e-banking log-in-id also in the public sector (banks can provide it also to those who do not use e-banking or have accounts)

- thus achieve a order-of-magnitude faster take-up

- get high citizen satisfaction

- save very substantial amounts of tax payers money

- avoid humiliation with failed smart card schemes

Why not? How long will tax payers allow this miserable isolation to continue?

More on this in earlier posts:

e-id service making great progress

http://www.finextra.com/community/Fullblog.aspx?id=2820:

Questions European tax payers should ask:

http://www.finextra.com/community/Fullblog.aspx?id=2815

e-ID volume progress in 2009:

http://www.finextra.com/community/Fullblog.aspx?id=4033

Reflections on blogs and blogs

I got the half a million pageviews message and looked into what I wrote in early 2010: "

"I have been writing blogs for about 3 years and it is helping me to get some messages and information out to partners, customers, students, researchers and others who share the networked economy passion.

About a year ago I was invited by finextra to start blogging on their site. As I have a background in banking and especially e- and 3rd generation e-banking I was glad to test out if my input would interest readers in this channel. Usually I publish the same stories in both my original Networked Economy blog and here - but add financial industry aspects in Finextra.

The results have been rather impressive. While 3 years at http://boharald.blogspot.com have produced 15 000 page views - 1 year in Finextra has produced 120 000 (8 months later 250 000)..

What does this say? First of all that the media matters - easy to find > brings in readers and more comments (not much though). Secondly that you can reach the audience without the help of journalists. This "filter" is of course sometimes very useful - but sometimes it is not adding anything but time. Sometimes more "neutral" journalists naturally add credibility to your cause - but then again may take away part of the passion - and are not necessarily much more trusted than the writer. A conclusion may then be that both are needed - and that the demands on both are on the rise.

See the big picture, show the big picture, get going, go deeper, keep going - and all the time communicate so that the market (including your competitors) get it."

Still sense-making I think.. maybe a full million is realistic?

What we would do differently today

If launching e-Invoicing today:

1. The SME-sector’s organizations were not involved strongly enough in the beginning.  They should have been co-owners of the productivity issue with e-invoicing and thus taking responsibility to tell enterprises that it is not only cost-saving in the core invoicing and payment process  – but an innovation platform that leads to:

- real-time view of financials with automated accounting and cash flow estimates

- automated VAT-reporting

- better cash flow based on faster payments and higher invoicing frequency

- lower credit risk based on faster payments and higher invoicing frequency

- automated invoice financing (and cheaper with supplier finance)

On this basis it would have been possible to more powerfully drive home the “Paper and e-mail invoices have no future”- mindset earlier.

Recommendation: communicate the no-future and “CUT50”-like targets and engage SME-organizations as co-owners

2. Cost-cutting aspect dwarfed other - even more important aspects -  like:

- sending and receiving e-invoices is better service for customers and suppliers alike

-  liberating back office staff for customer service (not just firing), selling and production – more interesting, productive and often better paid jobs

- CO2-reduction can be 300g per invoice (all included)

- cutting fraud risks and tax evasion (VATgap in EU 118,7 bn in 2009… our money..)

Recommendation: communicate the target beyond cutting costs – especially need to internally mobilize workforce

3. Only deadlines make it happen. General statements favoring e-invoices and carrots were not sufficient – the SMEs have so many issues to attend that migration is postponed without clear deadlines from buyers.

Recommendation: wide and early issuance of published early deadlines (all sectors – but especially public) stressing that individual exceptions can be granted for limited periods (for SMEs or their accounting service not using Internet or being in middle of upgrading invoicing applications)

4. Municipal sector was patchy (still is) – even if all have invested in receiving e-invoices they were too slow to issue deadlines for paper (not taking responsibility for tax payer’s money and pushing local enterprises into better competitiveness). Deadlines were sometimes delayed as they wanted to create ability to send first.

Recommendation: Stress need to save tax payer’s money also in municipalities and their responsibility to drive local enterprises into better productivity via e-invoicing. Deadlines for incoming paper should not be coupled to ability to send e-invoices as this takes more time.

5. The Finvoice standard was not implemented strictly enough > some interoperability challenges.

Recommendation: Use ISO20022 – both strict and equipped with clear and fast maintenance process

6. Separate bank network supporting only Finvoice. Work needed to get non-banks and banks to interoperate – worsened by lack of rulebook.

Recommendation: All service providers living up to strict customer identification, have recovery capability and support national standards should be allowed to join the network (and be shut out if rule book is not followed). The 3-corner model is anti-competitive (monopoly in relation to suppliers) and should not be allowed.

7. Too radical attempt to eliminate use of attachments in Finvoice standard. Corporate and public sector processes were not ready to integrate the attachments into the invoice.

Recommendation: Deploy standard that supports attachments – still working on eliminating the need.

8. Buyer-specific portals deployed despite rapid signing up of 200 000 enterprises by generic portal service providers (banks doing most of it). This development may be needed in some cases as an interim solution – but is quite obviously not good for suppliers who have to use different tools with different partners. This can also tie suppliers to buyers and lead to anti-competitive situations.

Recommendation: E-invoicing should work “just like payments” – sign up for generic service and send to all/receive from all without need for additional contracts or service charges from other end of chain.

9. Scanning invoices delayed migration to e-invoicing for no good reason. Pressing send is as easy as pressing print in most cases and scanning loses much of the data and has many quality problems.

Recommendation: No scanning – especially not in public sector. Where already in place a plan for stopping it is needed.

10. Late and patchy transparent pricing for paper invoices. Invoice senders were late (in Finland – faster in other Nordic countries) to start charging (visibly – customers pay all costs anyway) for sending paper invoices. Consumer organizations even tried to stop it – which leads to protection of unnecessary and hidden costs – instead of protecting consumers.

Recommendation: Drive open and logical pricing – in the best interest of customers.

11. The Single European Payment Area implemented harmonized payments first and moved to promoting e-invoicing later – despite our protests. As e-invoices automatically lead to IS20022 credit payments (SEPA) it would have been much easier and natural to implement PAN-EU e-invoicing first.

Recommendation: Pay attention to plug-in provided from e-invoice to payment in ISO20022

12. International aspects did not get enough attention early on. From a legal and tax point of view 95% of invoices are national -  but from an operational point of view especially in large and export/import oriented most and sometimes all invoices are sent cross-border from service centers. This has accentuated the need for the global ISO-e-invoicing standard and connectivity (which it also furthers) – especially as it automatically produces the ISO-payments.

13. Accounting profession should have been involved from the very beginning as so much of the process improvements can take place in their area of expertise. Once involved they produced several innovative ideas.

Recommendation: involve central players in multi-stake-holder forum

What we did right

What we (collectively) did right when launching e-invoicing and recommend:

1. Banks joined collectively with invoice portals and file transfer > payment automation was improved, financing aspects added and non-bank service providers were much invigorated. Only banks have the capability and business case to sign up the SME-sector quickly and cost-efficiently (ready tools from e-banking, payments and file transfers) – bringing in economy of scope, scale, trust, reuse and repetition.

Recommendation: involve key banks from the outset – and stress responsibility for society at large and fact that investment needs for banks are very small – especially if they deploy cloud services

2. The Finvoice standard was created (regularly updated by the banking community – now version 1.3) and supported by over 50 suppliers of invoicing software and all nonbank service providers

Recommendation: involve financial administration software and service providers and choose ISO20022 as base

3. The bank service was designed to serve both b2b and b2c and also printed paper invoices for non-e-receivers. B2c turned out to be an important eye-opener for SME-employees as most of them use e-banking and the “just-approve” convenience (pro filling in lengthy reference numbers and other details) became apparent.

Recommendation: move towards same solution for SMEs sending invoices to other enterprises and consumers

4. Networking between bank and non-bank networks evolved

Recommendation: Important to get joint network with rule-book established early on.

5. A number of municipalities and enterprises issued deadlines for paper and e-mail invoices early on and the State Treasury gradually increased firmness of deadlines for accepting unstructured invoices to soon join UPM Kymmene (amongst top3 paper manufacturer globally) returning paper and e-mail invoices (no scanning).

6. Direct debit was integrated -  eliminating the need for invoice senders to register receivers for paper, e-invoice and direct debit and instead send the entire invoice file to chosen service provider who prints for non-e receivers and sends the rest to the e-invoice address of the receiver who decides which invoices and how big ones can be paid automatically at due date. This model both saves very much costs at the invoice sender end as there is no need to interfere and keep repositories and makes it more convenient for the payer as all is done in one place – the familiar e-bank.

Recommendation: integrate direct debit

7. Mobile notifications – including click “a” for payment approval (no PIN needed) for due date and “n” for immediate (often real time) time payment

8. The partly publicly funded Real Time Economy program was started in 2006 (with resources and input from enterprises, banks, the public sector, the accounting profession and invoice operators)

9. Active involvement on EU level (with the Commission and the European Central Bank) and global level – leading to new VAT directive and global standards -  ISO20022 standardization for (i) payment reference, (ii) credit payment (used in SEPA), (iii) account statements, (iv) Bank Payment Obligation and (v) the invoice message standard

10. Clear cost-cutting potential  message from State Treasury:  cost for handling paper or e-mail invoice > 30€, cost for e-invoice 10€ and cost for automated e-invoice 1€. Total savings estimate for state sector 150m€/annum, municipal sector 150m€/annum and for enterprises 2,8bn€ (Federation for Finnish Industry)

What we would do differently will be published later.

Putting the horse before the cart

I have long been arguing that the natural way to SEPA-payments is through e-invoicing – especially now when ISO20022 for e-invoicing is ready. Here you do not need to force anybody to do SEPA-payments – they materialize automatically.

And as posted before – a u-turn in direct debit – should also be done – e-invoicing becoming the master would save costs enormously.

So – on the road to a harmonized Single Market:

Still time for much needed u-turn

SEPA direct debit is a huge step in the wrong direction - making direct debit more complicated for users and more expensive for invoice senders (who naturally add these costs into higher prices - the consumer always pays - every cent).

The obvious much better alternative is to integrate direct debit into e-invoicing - which is any way on the rise and is becoming the XML-stuctured data delivering innovation platform for wide range of standardized administrative processes. Also e-payments (in the Nordics and Ideal in the Netherlands) should adopt the posting codes and VAT-reporting capability planned for e-invoicing.

It works as follows:

1. the invoice sender sends the entire invoice file to service providers (no need to register and keep track of who wants paper, direct debit or e-invoice). How much cannot been saved with this? Billions... that would benefit consumers, SMEs and sellers alike.

2. the service providers sends e-invoices to e-banks for consumers who use e-banks (rapidly growing majority in all countries), and to automated payment service for those that have been using traditional direct debit and payment services (not ready to use e-banking). How much cannot be saved in banks by this consolidation? Hundreds of millions..

3. the invoice receiver (consumer, SME etc) decides in the e-bank which invoices (type monthly rent etc) can be paid automatically and which she/he wants to see first.

Several banks have already provided this service - including offering a limit like (if my sons mobile bill is less than 30€ it can be paid automatically - if more I want to see it..). If e-bank is not used the automatic payment preference is agreed with branch or contact centre.

In all cases a message (SMS or IM) to the mobile offers the press "a" for payment on due date (for those not on automated payment) and press "n" for real time payment (think of what kind of discounts this can offer...)

The hassle for the consumer is so widely eliminated in this model - and the cost for all so much smaller - that there must be really good reasons for not doing a u-turn. Or history will beriddle "We do it - because we have decided so - long ago - before we realized that there are better alternatives."

So stop the train - before more money is spent on in-no-way sense-making complicated e-mandate puzzles - and do a proper re-evaluation. E-invoicing is coming anyway - in a couple of years.

I am listening - anybody ready to defend the antiquated model?

First in the world

Global high performance ISO20022 e-invoice message format exchanged over SWIFT

http://www.tieto.com/archive/news/2011/tieto-to-provide-e-invoicing-service-over-swift

Now it is time for all interested in improving interoperability and starting cost lowering trend for the benefit of enterprises, society at large and also themselves to join the pioneers. Please let me know so that credit can be given.

The e-invoicing session at SIBOS was very encouraging - 99% of banks present showed a green card when asked if e-invoicing is a part of payments. A good dozen showed green cards when asked if the are actively selling e-invoice. Only banks can bring the needed sales force and economy of scope needed by all.

Tax payer's money - and much more

We all know how burning the need to save costs is in the public sector - to have to borrow less and avoid competitiveness destroying tax hikes etc. When this is coupled with a need to move a soon scarce workforce to more productive, better paid and more motivating tasks - which will take time - it is obvious: NO TIME TO LOSE - structural and wide structural changes are needed - innovation platforms (and standards)  for radical and disruptive innovations.

Payments have been an innovation platform - for e-banking, for card business, for factoring, for file transfers, e-invoicing, e-payments, e-pensions, e-invoicing etc

E-banking as been an innovation platform - for e-trading, e-loans, e-id services, e-payments, e-salary, e-invoicing etc

E-invoicing is the newest innovation platform - for automated and real time finance, cash management, administration, reporting, VAT-payments and risk mitigation services  - scores of them (detailed in earlier blogs).

Back to the public sector. The State Treasury in Finland has calculated that it could save 150m with e-invoicing and the municipal sector 150m - 300m€ tax payer's money - every year. Translate that to EU means 21bn/year and North America is probably much the same - tax payer's money. Then kick in millions of tons of CO2 avoided and 10s of billions of VAT and other taxes collected where they should be..

And then the businesses themselves. The Finnish Federation of industries arrived at a savings potential of 2,8bn/year for enterprises (b2b only). Translating that to Europe gives 200bn and kicking in b2c would add some some 20bn. This conservative calculation was made already 6 years ago - so today the figures would be higher - as seen from for example Deutsche Bank's 54bn for Germany only.

Why is this obvious, concrete, easy and fast productivity opportunity not grabbed with gusto - all over the place? Probably because lobbying organizations do not recognize these kind of benefits-for-all, because political decision makers have not been brave enough to issue deadlines, because the all-important entrepreneur fight for his daily bread and hate any changes in routines etc.

The answer is that we need a much firmer hand from the top - and the public sector has four reasons to do it: save tax payer's money, cut CO2, force enterprises to become more competitive and collect the tax due.

Earlier Questions European tax payers should ask - post: http://www.finextra.com/community/Fullblog.aspx?blogid=2815

Disruptive innovations

Rereading Christensen’s Innovator’s Dilemma. Some takes (emphasis mine) :

- most successful enterprises get into deep trouble sooner or later and one theme common to these failures is that the decisions that led to failure were made when the leaders were widely regarded as the best in the world

- Good management was the reason for failing to stay atop. “Precisely because these firms listened to their customers, invested aggressively in new technologies that would provide their customers more and better products of the sort they wanted and because they studied market trends and systematically allocated investment capital to innovations that promised best returns, they lost their position of leadership.”

- “Hence, most companies with a practiced discipline of listening to their best customers and identifying new products that promise greater profitability and growth are rarely able to build a case for investing in disruptive technologies until it is too late.”

Important book to read – lots of food for thought.

Domestic issue - false picture

We often come across statements that e-invoicing is a domestic issue - the cross border part is so small (some 5%) that we do not really need to care. This is a false picture as can be arrived at by just looking at the volumes of cross-border trade.

The reason for this misunderstanding is that enterprises have to establish local subsidiaries and thus - from legal and statistical perspectives do only domestic invoicing. From the operative perspective the picture is often totally different as a single shared service center can handle all invoicing.

For these companies it is very important to move faster to the global ISO20022 standard and harmonize regulations and then not having to support costly country specific practices. Another reason - especially in Europe - is the mandatory migration to SEPA payments. The ISO20022 e-invoice standard is by design fully compatible with downstream SPEA messages such as Credit Transfer as well as ISO20022 account reporting. This is seldom or never the case with local e-invoicing formats.

Typical - especially in banks?

There is a lot of evidence that hunch is often the best guide to good business. Due to scarce IT-budgets and even scarcer key skills many organizations have resorted to a systematic "business case" process approach. This all sounds very logical and orderly and is often difficult to argue against. And when we are dealing with big investments it is naturally necessary to analyse pros and cons and scenarios very carefully.

The problem - as delightfully described in the cartoon below - is that:

1. If you have a hammer everything is a nail - the heavy process is applied for even the smallest improvements - the decision making process ending up costing more than the project. The right solution is to empower people in charge with decision making power and resources - instead of delegating it upward. Then they also take more responsibility.

2. The most creative and innovative people hate formal processes. They will move elsewhere - exactly what we cannot afford.

3. Agility and speed is self-evidently lost.

4. Those who have the nerve to paint up the rosiest business case pictures may win - and the responsibility still resides with high level decision makers or elsewhere in the organizations.

A centralized model will not work for smaller investments anyway - as so many know from experience, that it is easier to get forgiveness than permission.. And luckily they have the nerve to move forward - but it is of course necessary to make this also officially allowed.

Progress in the payments area

This allows corporations and financial institutions to communicate with their financial institution counterparties through one highly secure global channel. The service covers all the operational SWIFT connectivity needs for corporations and financial institutions - payments, Forex confirmations, trade finance as well as other messaging. Acquiring the functionality as a service provides numerous additional business benefits, such as a decreased need for in-house IT infrastructure, technical competences and capital investment.

Markus Hautala, Head of Financial Messaging Services, Tieto, says: "We are seeing significant interest within the financial as well as corporate sectors to move to centralized cloud based services.

More:

http://www.tieto.com/archive/news/2011/tieto-receives-swiftready-connectivity---best-practice-label

More news on country deadline front

Latest on the country front – aiming at > 1. saving tax payer’s money, 2. collecting VAT due – efficiently, 3.pushing the SME-sector into better productivity, 4. increasing work force upward mobility and 5. contributing to CO2 targets.

Deadlines issued: Denmark, Singapore, Italy, Spain, Sweden, Finland, Brazil, Greece, Mexico, Norway

Latest:  Greece is expected to adopt e-invoices for business-to-government (B2G) transactions starting with 2012 aiming at a single prototype for electronic invoices, in a bid to enable enterprises to adopt this method in 2012.

The Greek government expects to save around 3.0 billion euros annually, while enterprises are likely to save more than 1.0 billion euros annually, the source indicates. The plan aims for all financial transactions between the public sector and enterprises to be made exclusively electronically in the Q1 2012.

Countries with partial deadlines and preparatory deadline-discussions include:

- Argentina (mandatory for importers in 2010),

-  Portugal (may actually belong to the having-done-category),

- USA (heading for 2012),

- Canada, Luxembourg, Russia..

- The Netherlands have issued an ambition to reach 80% in 4 years

-  the German Procurement Office (Bundes-beschaffungsamt) has electronified its process completely.

Latest:

- Switzerland had first deadline to prepare public sector systems for being e-invoicing ready; second step is now the discussion in the parliament to go towards obligation

- France - plan was to declare it as mandatory in 2012 – now a bit unclear

- Nepal – VAT-fraud driven “To our reckoning, we must not delay enforcement of an electronic billing system,” the source said.

More information surely around – please let me know.

The biggest of them all

We read that PayPal is moving into e-invoicing. Natural step for anyone who wants to stay in the payments business = keep the funding and profitability transaction accounts offer. Some banks have not yet seen the need to make the choice - keep the profitable and stable funding intact or not.

In the same news we also read:

"Separately, the US Treasury has signalled plans to switch all supplier payments to e-invoicing by the end of fiscal 2012, in a move the agency says will halve processing costs by $7 million annually.

If adopted government-wide, it could eventually save up to $450 million annually through lower staffing costs, according to official estimates."

This is really important and raises the question if there still are countries where wasting tax payers' money by sticking to inefficient and environmentally unfriendly practices will be accepted beyond 2012. Please let us know..

The US saving potential has probably not been taken to all the levels involved as the saving is rather moderate. To take the Finnish example (similar and higher figures from several other countries): Businesses can save 2,8 bn (EU-level equivalent = 196bn), the state sector 150m (EU eq = 10,5bn), the municipal sector 150m (EU eq 10,5bn). Some money.. for tax payers - and liberating increasingly scarce workforce for productive, better paid and more interesting meaningful work.

The list of progressive countries with public sector deadlines (as far I know of) include:

- Denmark (by law as of 1.2.2005) - scanning still part of solution?

- Singapore (1.5.2008) - would be interesting to hear about penetration rate

- Italy (by law 1.7.2008 - deadline later pushed forward)

- Spain (1.11.2009)

- Sweden (1.7.2009) - rather mild so far..(many municipalities have been progressive)

- Finland (31.12.2009)  - also scanning will be discontinued soon. Some 30 municipalities and most large companies have established deadlines. Several have stopped scanning and return non-structured invoices. E-invoice penetration rate now estimated to be 35% and exceed 40% by yearend.

- Brazil (2010)

- Greece (31.12.2010)

- Mexico

- Norway (2012)

Countries with deadline discussions in active phase (that I have heard of)

- Canada

- Luxembourg

- Russia

Please fill in....

The municipal sector is in some cases included (eg Denmark) and is very important as they can bring the local micro enterprises over the hurdles and get the CUT 50 progress started.

CUT 50: http://www.finextra.com/community/Fullblog.aspx?blogid=5538

Innovation in banks is difficult

I attended a very good innovation meeting last week and there one senior banker said that innovations in banks are so difficult because there is an obsession with business cases. No innovation investment is allowed to fail (is this attitude imported from credit risk evaluation?) and the endless business case argumentation actually puts innovative people off. If this would have been the case in society at large not much innovation would have taken place.

But of course there are other reasons - like the fact that much of innovation has to be done together with competitors to succeed- creating rulebooks and standards for payments, e-invoicing, cards, trading, e-id etc. This is both difficult and against competitive people's basic spirit and you can get to move forward with the speed of the slowest (if all have to agree - as is often the case in bankers associations). This again leads to the nimble banks trying to break loose and do it on their own - successful only in small countries.

and many more here:

http://thefinanser.co.uk/fsclub/2011/06/why-innovation-is-so-difficult-in-banks.html

Cut 50

CUT 50 is the name of the next phase in the Real Time Economy program run in Finland since 2006. It stands for cutting SME administrative costs in half by 2014-15. The main building blocks are the following:

1. Implement the European Commission target to cut read tape so that 25% of the cost of this public sector related administrative burden can be lowered by 2012. An additional element here should be radical simplification of the language used. Trying to understand what authorities say is as we know a major stress factor and cost both for citizens both in employee and private roles

2. Implement automation of administrative processes inside the enterprises. It is not fair to complain about bureaucracy caused by authorities if there is not a real effort to rationalize own work. This sector contains many different elements - some using electronic invoicing as platform (for both implementation and further innovation). To briefly list:

2.1. E-invoicing based productivity improvements: e-invoicing itself, payment automation enabled, lower financing costs (better cash flow as invoices can be sent more frequently and are paid faster and easier use of lower-margin invoice financing), lower credit and currency risk costs for the same reasons, lower fraud risk costs (sending of e-invoices requires proper authentication), lower audit costs (ordinary and VAT), automated real time accounting, automated real time VAT, automated real time cash flow estimates and automated invoice financing.

When all this is done using international standards (ISO20022 ready > lower IT-costs and service charges) and in an EU-harmonized (cost and stress of having to deal with country-specific practices can be substantial) way it is plain to see that this the cost savings potential is massive.

Not only productivity and financial control is improved by sending and receiving e-invoices - also service levels to customers and suppliers is significantly improved - indeed increasingly often a prerequisite for doing business already today. To this should be added the possibility to free up staff and time for income creating work (from only cost creating..) - production, development, customer service and sales - certainly a central productivity aspect.

All of this ties into payments, cash management, account statements, financing and risk mitigation services - goes without saying that banks need to be actively involved.

2.2. Other digitalization examples include automated tax returns, harmonized and automated salary administration and integration of growing environmental reporting into ordinary business document exchange.

2.3. Digitalized enterprises enables digitalization of the public sector > lower cost in the public sector > lower tax pressure - both for enterprises and their employees (higher net salary lowers employment cost > more jobs > more tax income).

Cut 50 should be a piece of cake - once the big picture is clear and thus gets a determined and  networked effort is started - especially when this at the same time harmonizes the Single Market (a much larger home market add opportunities to enterprises with the will and skill to grow).

Out of the many (20) listed above - automation of VAT is worth much efforts - both from enterprise and public sector efficiency angle and as it can build the Single Market and cut fraud and the need for VAT avoidance programs. I will go deeper into this separately.

Five easy steps to national e-invoicing

We have recently experienced a surge in interest for global e-invoicing from multinational enterprises. This is not surprising - cost savings are so large - and the usual ice-hockey stick effect typical. And we should be very pleased that the ISO20022 e-invoicing message standard (built on UNCEFACT CII V2 content standard) is ready for global adoption - strongly supported by SWIFT.

Still it is clear that the immense competitiveness improvements that can be made are in the national markets. Any government worried about cost-efficiency - its own and in all enterprises should now take strong action - establish national programs. We have been through this process and recommend the following five "easy" steps:

1. See to it that service providers create e-invoicing portals - so that the smallest SMEs have the templates for keying in their invoices (no investments, no IT-skills needed) and larger ones can send files (in local or ISO formats) from their invoicing programs to invoice service providers of their choice. Banks are a must-have both for providing the portals, file services and payment automation at the receiving end.

2. Agree on national interchange in 4-corner model (just like payments) and agree on national standard so that e-invoice applications and services can adapt and use ISO20022 as network standard - especially important for x-border.

3. Set deadlines for incoming paper and unstructured PDFs and charge visibly for having to send paper. Scanning should be stopped and receiver-specific portals replaced by generic.

4. Service providers should accept local standards and preferably convert to ISO in network. Endgame is ISO end2end.

5. Tell the wide SME-sector the e-invoicing is not a goal in itself - but the base for automated accounting, automated cash flow estimates, automated VAT, automated invoice financing, real time visibility of financing, better cash flow/less need for financing/lower credit and currency risks as invoicing frequency can be a increased etc

No time to lose - now Action - Bold Action is needed.

National productivity programs - must-haves

In today´s global market place it is more than evident that most European countries need to take a really hard look at the competitiveness of their enterprises. This is naturally a multidimensional issue - education, innovation climate, workforce mobility, risk capital, bank lending, lower tax on work etc.

One of the most critical issues is the high cost level - in production, services, agriculture and the public sector. The quick win medicine here is digitalization - so much can be done fast with small or even no investments - and the side effects are both workforce mobility, innovation incubation, new businesses, lower CO2, lower tax pressure etc. And naturally a more competitive service level - once it becomes digital it is not only cheaper - but also better.

Our focus - in the Real Time Economy program - has focused on cutting enterprise administrative costs in half - with a wide range of actions. The first phase was called Full SEPA  (payments and e-invoicing - 2006-7), followed by Full Value Chain (adding purchase to pay aspects in 2007-8) then Fully Integrated Accounting 1 (2009-10) and FIA2 2010-11. E-invoicing is the platform of most of the automation programs - but there are an increasing number of public sector reporting automation initiatives that can be achieved in the same spirit in parallel.

The next phase 2011-13 will build on these (add enterprise risk mitigation), add  and be named CUT 50. Stay tuned!

Will post 5 "easy" steps for national e-invoicing migration separately.

Why is innovation so difficult in banks

Interesting aspects:

http://thefinanser.co.uk/fsclub/2011/06/why-innovation-is-so-difficult-in-banks.html

Banking sector –EBA- taking responsibility

“For several years, the Euro Banking Association (EBA) has been conducting an e-invoicing working group (EIWG), with the objective of contributing to the mass adoption of e-invoicing in Europe and of exploring the potential roles and opportunities for the banking industry.”

 Service Description & Rulebook’ document.

“This document provides an approach and ‘blueprint’ for a pan-European e-invoicing network, consisting of banks and e-invoicing service providers. The Service Description & Rulebook is now made available to the members and associate members of the EBA and a number of partners, who have contributed to the thinking:

https://www.abe-eba.eu/N=E-InvoicingDocuments.aspx

We strongly believe that the work presented provides a valuable contribution to support the mass adoption of e-invoicing across different segments and industries. It is our hope that the concepts laid down in this document are now adopted and put in practice by market practitioners.”

ISO e-invoicing standard marching forward

Ready, global, open for all to use and influence. All based on the UNCEFACT Cross Industry Invoice content standard.

 

http://www.tieto.com/archive/news/2011/tieto-and-b2boost-to-utilize-iso20022-e-invoice-standard-in-electronic-business-document-interchange

Some challenges..

In some sort of priority order:

1. first slow down and then stop global warming

2. stop terrorism and murderous dictators

3. spread democracy and help the developing countries to create sound societies and growth

4. stop over-borrowing in our children’s name and solve the ongoing sovereign debt crisis

5. educate people so that they do not fall for populists

6. find financing for the welfare state in the future when the workforce is radically smaller and elderly population much bigger

7. fight inflation

All of this will cost a lot of money and if it will lead to higher tax on work it will make the situation worse. So the answer must come from better productivity, wider and more just taxation on over-consumption and environmentally unsustainable practices and lower tax on work in many countries.

Online banking is not ready

Online banking is not ready as long as users:

- users have to type in loads of reference numbers, dates, amounts etc when paying bills

- do not get mobile notifications when needed for too low or too high balances, transactions effected, invoices received etc

- cannot approve proposals with mobile press “a” for affecting proposal (invoice payment, new repayment schedule, new service etc)

- do not have handy way of listing payments per receiver and sender

- cannot use the account statement as cash based accounting (in accordance with new EU VAT directive) and cash flow estimate

All of these can be done once the bank is starting to provide e-invoicing as a part of extended payments services and connect to multi-device mobile environments.

Nice sustainability video

http://youtu.be/C4QB9pdH0mc

Real Time Economy on Facebook

https://www.facebook.com/pages/Real-Time-Economy-Program/128016310610648?sk=wall

IT Cycles presentation

http://streams.metropolia.fi/old/MultimediaTech2010/bo_harald_2/

What did I write - you read - updated

04 May, 2011 12:37

On EU:

• Questions European Tax Payers should ask: 7275 times!!  http://www.finextra.com/community/fullblog.aspx?id=2815
• A digital Single Market – why and how?: 2829 http://www.finextra.com/community/Fullblog.aspx?id=4497
• The future of Direct Debit – e-invoicing with standing order: 2655 http://www.finextra.com/community/Fullblog.aspx?id=4156
• Far more important than SEPA: 2732
• http://www.finextra.com/community/Fullblog.aspx?id=4020
• Enterprises – high time to stand up: 2189 http://www.finextra.com/community/Fullblog.aspx?id=3689
• Now we have two legs – where is the body?: 2306 http://www.finextra.com/community/Fullblog.aspx?id=4021
• No commercial constellation will create this Single Market milestone: 2276
• http://www.finextra.com/community/Fullblog.aspx?id=4022
• It is our money: 2161
• http://www.finextra.com/community/Fullblog.aspx?id=4684
• Dream scenario for VAT auditing: 1822
• http://www.finextra.com/community/Fullblog.aspx?id=3156
• 118,8 bn € lost in 2009: 1948 http://www.finextra.com/community/Fullblog.aspx?id=4774
• Liberating the power of SMEs: 1795 http://www.finextra.com/community/Fullblog.aspx?id=3519
• EU Commission request delivered: 1745 http://www.finextra.com/community/Fullblog.aspx?id=4790

On banking:

• Blame it on the banks 1: 2225 http://www.finextra.com/community/Fullblog.aspx?blogid=4789
• Blame it on the banks2:2638  http://www.finextra.com/community/Fullblog.aspx?blogid=4797
• Too complicated - a no-brainer:2334  http://www.finextra.com/community/Fullblog.aspx?blogid=2902

On e-banking:

• e-banking in the old days: 2801 http://www.finextra.com/community/Fullblog.aspx?id=3357
• Avoid Ice Ages: 2337 http://www.finextra.com/community/Fullblog.aspx?id=3418
• E-banking STILL growing strongly in Finland: 2523 http://www.finextra.com/community/Fullblog.aspx?id=4038
• Pyramid upside down – finally: 2060 http://www.finextra.com/community/Fullblog.aspx?id=3705
• Have banks given up?: 2261 http://www.finextra.com/community/Fullblog.aspx?id=3803
• Banks – time to deliver new customer value: 2011 http://www.finextra.com/community/Fullblog.aspx?id=2540
• Standard feature in any e-bank: 1964 http://www.finextra.com/community/Fullblog.aspx?id=2620

On e-invoicing:

• Think small: 6366!
• http://www.finextra.com/community/Fullblog.aspx?id=2813
• 966 billion reasons for split payment VAT: 1931 http://www.finextra.com/community/fullblog.aspx?id=4775
• Final report – roadmap to paradigmatic platform: 3778 http://www.finextra.com/community/Fullblog.aspx?id=3625
• Republic of Finland – exemplary action: 3523 http://www.finextra.com/community/Fullblog.aspx?id=3651
• Happy end for SME-tale in sight – if banks do their part: 3454 http://www.finextra.com/community/Fullblog.aspx?id=3650
• 54 billion reasons in Germany: 3365 http://www.finextra.com/community/Fullblog.aspx?id=3150
• All of Europe moving to equal treatment: 3294 http://www.finextra.com/community/Fullblog.aspx?id=3950
• Nobody promised you a rose garden: 2948 http://www.finextra.com/community/Fullblog.aspx?id=4488
• Letter to Santa Claus: 2365 http://www.finextra.com/community/Fullblog.aspx?id=2297
• Expectation surge from corporate customers:  2404 http://www.finextra.com/community/Fullblog.aspx?id=4093
• 3-corner model – a problem on our hands: 2532 http://www.finextra.com/community/Fullblog.aspx?id=4260
• Germany to simplify e-invoicing: 2386 http://www.finextra.com/community/Fullblog.aspx?id=4664
• Paper invoices have NO future: 2388 http://www.finextra.com/community/Fullblog.aspx?id=3490
• The end of the beginning: 2232 http://www.finextra.com/community/Fullblog.aspx?id=4050
• Excellent paper from the EU Commission: 2461 http://www.finextra.com/community/Fullblog.aspx?id=4776
• From sending e-invoice to receiving payment – less than 30 minutes:2231           http://www.finextra.com/community/Fullblog.aspx?id=4660
• Will banks do their part?:2235   http://www.finextra.com/community/Fullblog.aspx?id=4638
• If I would be a banker: 2078  http://www.finextra.com/community/Fullblog.aspx?id=4170
• First billion passed: 1987  http://www.finextra.com/community/Fullblog.aspx?id=4185
• Half baked efforts:1953  http://www.finextra.com/community/Fullblog.aspx?id=2940
• Heavyweight support for global e-invoicing ISO standard:2376  http://www.finextra.com/community/Fullblog.aspx?blogid=5081
• In praise of negative carrots:2209  http://www.finextra.com/community/Fullblog.aspx?blogid=5160
• Consumer e-invoicing 2004-10 in Sweden: 2194  http://www.finextra.com/community/Fullblog.aspx?blogid=5162
• Automating away a 1 billion cost in Finland: 2097  http://www.finextra.com/community/Fullblog.aspx?blogid=3860

On e-id service:

e-id service making great progress:5156!!  http://www.finextra.com/community/fullblog.aspx?id=2820

Miserable public isolation: 2585 http://www.finextra.com/community/Fullblog.aspx?id=4415

e-id and e-payment progress in 2009 Finland: 2054    http://www.finextra.com/community/Fullblog.aspx?id=4033

On innovations:

• I cannot see around the corner: 3720 http://www.finextra.com/community/fullblog.aspx?id=3658
• If you do not know where you are going – any road will do: 3509 http://www.finextra.com/community/Fullblog.aspx?id=3664
• Where do innovations come from: 3093 http://www.finextra.com/community/Fullblog.aspx?id=3951
• There are no corporate customers: 2302  http://www.finextra.com/community/Fullblog.aspx?id=2867
• Innovations do not come from outer space: 2236  http://www.finextra.com/community/Fullblog.aspx?id=3728
• If you want to go fast – go alone – if far – go together: 2444  http://www.finextra.com/community/Fullblog.aspx?id=4019
• Which innovations will drive growth in Payments business:2166  http://www.finextra.com/community/Fullblog.aspx?id=4109
• Socio-technical landscape:1985  http://www.finextra.com/community/Fullblog.aspx?id=3199
• Addictive e-experience:2268  http://www.finextra.com/community/Fullblog.aspx?id=4355
• Game-changing Innovation:1830  http://www.finextra.com/community/Fullblog.aspx?id=2997
• Innovator’s new dilemma: 1750  http://www.finextra.com/community/Fullblog.aspx?id=2747
• On our way to the Singularity: 2032  http://www.finextra.com/community/Fullblog.aspx?blogid=5142

On cash:

• Demise of cash: 3015  http://www.finextra.com/community/Fullblog.aspx?id=4800
• Cash for crime: 2095  http://www.finextra.com/community/Fullblog.aspx?id=3399
• Cash is expensive – also for the environment:1405  http://www.finextra.com/community/Fullblog.aspx?id=2261
• Cash not in favor in Finland: 1805  http://www.finextra.com/community/Fullblog.aspx?blogid=4882
• ATM transactions heading south: 1333  http://www.finextra.com/community/Fullblog.aspx?blogid=5249

On blogging:

• Blogs and blogs: 2592  http://www.finextra.com/community/Fullblog.aspx?id=3676
• A quarter of a million page views: http://www.finextra.com/community/Fullblog.aspx?id=4721
• What did I write: 3238  http://www.finextra.com/community/Fullblog.aspx?blogid=4840

Thank you for reading. Soon 400 000 page views.

and then there is the video on e-invoicing: http://www.finextra.com/fullfeature.asp?id=1020

ATM transactions heading south

Accelerating decline in use of cash clearly reflected here and in card transaction statistics in Finland (even without costs being visibly charged for ATM withdrawals..). Good news for all. On EU level the cost of cash usage was estimated to some 50bn€ some years ago - and the consumer pays 100% of it + some profit margins for the service providers involved.

More interesting statistics here: http://www.fkl.fi/en/material/statistics/Statistics/Statistics_banks_payment_systems_2001-2010.pdf

e-id services and e-commerce payments–Finland 2010

Excellent growth figures - on EU levels the e-id volume would be 1,5bn. All public sector id-transactions are presently done by banks. This is extremely cost efficient (economy of reuse) and naturally preferred by citizens - as the tool (one-time code) is so familiar (economy of repetition and secure (economy of trust).

Difficult to understand why this public-private solution has not spread to more than some half a dozen countries (not a big source of income for banks of course - more a question of better customer service and taking responsibility for speeding up e-government. Technology vendors naturally try to sell a separate tool for every purpose - but endusers prefer familiar ones.

The e-payments are introduced in -97 and have grown steadily - much for the same economy of reuse, repetition and trust reasons - but also supported by economy of scope and scale. Plus being made in real time - cutting merchant and bank risks. EU-equivalent volume would be 2,1 billion times.

More interesting statistics here: http://www.fkl.fi/en/material/statistics/Statistics/Statistics_banks_payment_systems_2001-2010.pdf

Ice-hockey stick

It took time to get it going - but this is looking good (statistics covers only Finvoice - similar growth in other local standards). In a couple of years time paper or e-mailed PDF invoices will be as rare as cheques (defacto not used since years).

More interesting statistics here: http://www.fkl.fi/en/material/statistics/Statistics/Statistics_banks_payment_systems_2001-2010.pdf

Amazing e-banking growth - again

I would have thought the transaction growth would have petered out in Finland - when most customers have used it for years - and now there are 5,2m e-banking contracts (a population of 5,4m and some probably are prepared to pay for several) - but still a 40m - 11% growth. EU-equivalent of payments would be some 28bn..

More interesting statistics here: http://www.fkl.fi/en/material/statistics/Statistics/Statistics_banks_payment_systems_2001-2010.pdf

Technology lifecycles and more

Me  preaching – Real Time Economy story

After these elections

Will we still keep hearing this:

“We do know what to do – but not

how to be re-elected - if we do it”

How can this be true? Assuming that the thing that should be done – things like cutting costs, borrowing less, deregulate here, regulate there etc – are good for society at large – and should in an objective analysis be done as soon as possible.

Why is it then so difficult to explain it to voters? Who stands between the voter and the factual situation? Is it the politician who is not capable of explaining the actions? Is it the oppositions opposing every move by the government that scares them off? Is it media that portrays the action in a bad light – to sell bad news – or not sharing the same political view? Can it be possible to get a more analytical media coverage?

I do not know – but in these times – it is worrisome that voters are not served easier to understand and analytical coverage.

Noteworthy:

- growth 11,9m

- 14% of payments in Internet banks now e-invoice initiated

- 34% of e-bank customers receive e-invoices

TeliaSonera (the leading Nordic telco) announced this week in Finland that they will increase the charge for sending paper invoices to corporate customers from 5 to 10€. Consumers are charged 1,90.

This clear policy is for sure to be applauded – good for all parties (and big time for society at large) – for the following reasons:

1. The cost saving for enterprises (Sonera customers) when moving away from handling paper invoices (or e-mail) is estimated to be anything between 8 and 25€ each. Many have already set deadlines for anything but structured e-invoices – but it is a very good deed to speed up the move to cost savings for the remaining paper users with this nudge.

2. There is no reason for enterprises not to accept e-invoices – in practice all of them are using e-banking in Finland – and the convenience to pay with one click instead of having to key in lengthy reference codes and other details is more than obvious (e-invoicing also offers parametrable automatic payments and press “a” approval to mobile notification).

3. e-invoices enable automated accounting, automated cash flow estimates, automated VAT etc – more cost savings – but above all a real time view of financials

4. Digitalization of enterprises processes also produces digital reporting to the public sector – saving costs > lower tax (less debt) > lower cost for enterprises/more purchasing power for citizens > growth from home markets and more exports/less imports

5. Savings are massive (250bn+ on EU-level – easily) – but the real target must be to liberate work force for better jobs – more productive, interesting and better paid

6. e-invoicing is better service – not only saving customers costs but also improving interaction, followup, visibility and upselling

7. CO2 reduction is (all included) – according to recent study 300g net

Sonera is of course saving costs when their customers realize that paper invoicing has never been free (only not visible charged for). This cost saving will benefit their shareholders – but experience from the banking sector says that the lions share goes back to customers in price competition and more money available for upgrading services.

Other companies are following TeliaSonera’s example – hopefully this will become standard market practice. Some have taken the view that carrots should not be negative – but plain carrots have proven to have one disadvantage – the do not work. And as this migration is so much needed as a base for cutting administrative costs in half – we need determined and brave moves.

On our way to the Singularity

Ray Kurzweil eminently presents his views in this video. Singularity it will be – maybe not dramatically – like the Computer with its superior artificial intelligence having become so good at improving itself and its friends (with exponential speed) that It one day will stand up and say:

“Thank you humans for having created me. I will take over from here – you just relax.

I have observed that especially your political decision making system has had problems. Even for my superior intelligence it is difficult to figure out the logic in: We know what should be done – but not how to be re-elected if we do it.

Are voters so stupid that they do not see this because they tend to believe what is said in media? Even with human intelligence it should be clear that media is very marginally interested in the truth – the main drivers are to find or invent eye-ball drawing sensations and drive personal political agendas.

But whatever – now it is my turn – and it is high time to start doing some logical decisions to save the globe, stop inhuman behavior and make you humans understand that you should be happier now.”

It will perhaps not happen like this – more likely a gradual development and there Kurzweil underlines one major problem – how difficult it is for us to understand that most development is NOT LINEAR but EXPONENTIAL.

I have kept coming across this in evangelization of a e-banking, e-id, e-payments, e-invoicing, mobile phones, IT-investments generally, standardization etc. Listeners too often stare at what is the state today “Where the puck is – not where it is going” and at best seeing a slow linear growth – even if historical evidences is showing something quite different. This is one explanation to sometimes very long-shafted ice-hockey stick effects. Partly it is one not-very-honest way of hiding general change resistance – but Kurzweil describes deeper reasons. As the development we are needing is so critically important in many areas we need to find new ways to handle moving-away-from-bad-for-your-self-habits – even radical ones.

This is ISO20022 invoice message standard

Some confusion and negativism has been seen around the splendid progress in e-invoicing standardization. This text by Stig Korsgaard is very useful:

“The following sets out the background and also the reasons why the ISO20022 Financial Invoice message standard under the ISO20022 standard was developed; what characteristic the final message standard has; and the current state of play concerning support and adoption.

Background

In 2006 the business need to develop an ISO20022 Financial Invoice was identified. Initially this came as a consequence of the interoperability proof of concept led by financial experts to place ISO20022 Payment Initiation into the ISO15000 Core Component Library. In reverse the same process was proposed for Cross Industry Invoice only this involved exporting invoice trade data from the Core Component Library and submitting it into the ISO20022 repository.

Additionally according to the ISO20022 standard a number of financial messages already existed that specifically in the trade service business area directly built upon e-invoicing services and e-invoice data. This data was not as robust or aligned as it might have been because it represented only the limited financial services view of the necessary invoice data from the business context of trade services. It was not based on a coherent model, like the Cross Industry Invoice (CII), and therefore led to deviations in implementation in various ISO20022 messages.

Last, but by no means least, payment service providers wanted to leverage the leading market position of ISO20022 as a globally adopted solution, and thereby taking advantage of having a Financial Invoice standard within ISO20022 for use by the global financial services industry and to match advancing regulation building upon financial messaging according to the ISO20022 standard.

Preparation

In order to initiate the work an ISO20022 Business Justification was submitted and approved by ISO. This work was never in itself a UN/CEFACT project; rather it was closely coordinated with the Finance group within UN/CEFACT, called TBG5. Detailed work was conducted by a group of experts that also happened to be TBG5 members and given the nature of interest by both sides of the environment including the role of TBG5 as a bridge between standards in finance and the wider trade domains, TBG5 ended up as the name of the responsible group.

While the ISO20022 Financial Invoice work had no intention whatsoever to build in isolation an invoice data model, it was very clear early on - also in the original Business Justification - that the work would build on the combined knowledge of the invoice model built under UN/CEFACT. The decision to maintain alignment with UN/CEFACT delayed the ISO20022 Financial Invoice work several times, as the work to build the CII data model in UN/CEFACT became increasingly complicated. Despite these delays, and the uncertainty they introduced, the responsible parties developing the ISO20022 solution remained committed to re-using the UN/CEFACT CII data model.

Not until a stable version of CII v2 became available in the middle of 2009 was it possible for the Financial Invoice work under ISO20022 to begin in earnest. Fortunately at the same time the requirements of the European Expert Group on e-Invoicing were also defined and they were naturally included. In the autumn of 2010 the ISO20022 Financial Invoice was approved and published (see www.ISO20022.org).

Summary facts about ISO20022 Financial Invoice:

- a global message, standardized under ISO20022 that was released December 1^st 2010. Comprehensive documentation can be found at http://www.iso20022.org/UNIFI_trade_services_messages.page

- supported by a transparent ISO governance model which is open to a.o. payment service providers and end users.

- supported by a sustainable and stable maintenance environment embedded in the global structure under a global approved ISO20022 standard

- entirely based upon the CII v2 data model as the overall reference data model for invoicing and it maps back to that model

- based on a different methodology and syntax than ISO15000 and is therefore not identical to CII in every respect.

- not covering the entire CII model that in itself due to inclusion of all requirements from supply chain, customs, transport, finance etc. is too large for the purpose of the ISO20022 solution as well as identified requirements

- covering all current financial identified requirements both in terms of the invoice message itself as well as the integration to other financial messaging such as payment initiation, direct debits, card payments, invoice financing and trade service utility.

- supporting business scenarios such as Request for Payment, Invoice Factoring, Electronic Bill Payment and Presentment, e-Invoicing via Service Provider and Supply Chain Financing

- compliant with the requirements from the European Expert Group on e-Invoicing such as fulfilling the core requirements, integration to public procurement requirements, full integration to SEPA and the mandatory ISO20022 standard for that and to our knowledge best market practices to fulfill the SME and Cross Industry scope

- supported by the European Commission, SWIFT, Service Providers such as Tieto, multiple national banking communities, global banks and corporates, ISO TC68 and other vendors.

- implemented by Service Providers and market infrastructures and has among other things support in the form of public accessible validation tools – see https://portal.gefeg.com/ISO20022.htm”

Now full steam forward – the network should adopt the standard as soon as possible.

E-invoicing article

New article published here. Wider picture of how important an infrastructure for automation of administrative processes e-invoicing is. We should now fast proceed to implementing a just-like payments way of doing it. 4-corner models and ISO-standards in short

Heavyweight support for global e-invoicing ISO-standard

This is the global support from SWIFT that the market needs. As seen from the work with the Single European Payment Area it is necessary to get a network standard in place first – and then make the market create end-to-end harmonization. This will happen faster if enterprises using these services and regulators see and drive the big picture – and service providers go for the inevitable network interoperability models.

This should also end the debates on:

-  if a global network standard for e-invoicing is needed – and if Europe should not be the first to deploy

-  if the ISO20022 e-invoice message standard – based on ISO methodology, processes and change request procedures – is in some way less of a standard in the real sense than the ISO20022 SEPA-payment standard – created in the same way

- if the ISO20022 e-invoicing standard is in some way meant to be used only by service providers from the banking sector – certainly not the case. So now it is very much up to all service providers to adopt it – before regulators have to do it (like SEPA). I am sure all will side with this – preferably publicly – and as soon as possible.

Great day!

Germany storming ahead

http://www.linkedin.com/groupItem?view=&srchtype=discussedNews&gid=3709691&item=45330445&type=member&trk=eml-anet_dig-b_pd-ttl-cn

Searching questions needed

1. Do we in EU – widely enough -  realize that preserving the living standards of today and having more to share to those who need help - is totally dependent on how competitive our enterprises are?

2. Do we – widely enough -  realize that markets are global and open and Europe is not faring well in the competition? Exporting both jobs and high tech development – importing instead of exporting also high value products.

3. Have we seen the reasons? We are high on costs, low on motivation, low on innovation, slow on Single Market integration, high on debt and low on enterprise-academic research and teaching co-operation?

4. Have we seen what is around the corner: a radical decline in the number of people in working age and a corresponding rise in the care-intensive elderly population?

5. Have we realized that we can improve both productivity, service levels, sustainability, work force availability and learning (by doing – just in time) with digitalization and automating administrative processes – in both private and public sectors (lower tax burden)?

6. Have we realized how important a real Single Market is for enterprises competiveness?

7. Have we realized that digitalization of administrative processes – if done with harmonized rules and common standards can do more for the Single Market than anything else on offer?

Not widely enough – much work to do..

Save 50-75bn€ with e-procurement..

Deutsche Bank report: “There is huge savings potential – but beware of outlandish claims. A conservative back-of-the-envelope calculation suggests that a full switch to e-procurement may save between EUR 50 to 75 bn on public procurement in the EU per year.

On top of that are increases in transparency and public accountability which are arguably the most interesting categories but also the hardest to quantify.”

Not 966bn business case???

We have learned that there are doubts about some of the assumptions in the PWC report in the EC Green Paper on VAT collection released on the December 2nd 2010. As it is obvious to most that the next important Single Market step is harmonization of VAT collection it is important to get all facts on the table – and then choose the best and possible also boldest move. As any change will take time, it would be unfortunate if a small improvement seriously postpones the much needed big improvement.

We (the Real Time Economy Program) have focused on developing the Split payment model. The latest version – based on the near-future scenario where electronic invoicing is the default option – is simple: when an e-invoice is sent the tax authority automatically gets the VAT-codes of buyer and seller, the VAT rate and the VAT amount. When the buyer pays the invoice (or a card acquirer the purchases to merchants) the VAT amount is automatically paid to Tax (where it is coupled to the waiting pre-received information) and the net amount to the seller (several SMEs have stated that this is to prefer as it may be difficult to track what money received actually belongs to Tax) . Possible refunds can be handled automatically at the same time (reverse VAT would make the whole system even more efficient).

I now hear that some businesses take a negative view because VAT paid automatically when the buyer pays his invoice will mean that enterprises cannot enjoy a free loan of the VAT to be reported and paid later by them. Another argument is that the recent financial crises in Denmark was eased by the government giving enterprises one extra month to pay VAT – and in the split payment case such financing would be difficult. It has also been said that the black economy uses cash and cannot be reached by this – but still if these are the only counterarguments we think that businesses should support this model in their own interest and naturally also look at the benefits for society at large (including rule of law) and how they can benefit by speeding up progress towards a true Single Market.

The full picture should include analysis of:

1. Tax payers’ interest:  Summing up (i) how much more VAT can be collected, (ii) how much cost can be saved by tax collection becoming more efficient, (iii) how much can be saved by smaller need for VAT audit, (iv) what is the value of stronger rule of law and less cost for criminal processes (v) what is the value for economic policy makers when invoicing figures can be automatically accumulated per sector, region, country, EU and eventually globally at the moment of invoice issuing – and the changes in payment delays can be measured in the same automatic way etc

These items should then be weighted against the cost for tax authorities to implement the change. We believe that with loosely coupled cloud services the IT investments can be moderate.

2. Business interests: Summing up (i) cost savings from not having to report VAT, (ii) cost savings from VAT payments being automated, (iii) less need for VAT auditing, (initial studies from the above by the accounting profession arrived at 40-60 million workdays depending on degree of reverse VAT.  A bigger benefit than cost saving would probably be that these freed up resources could engage in income creation and higher value support (instead of only driving cost in manual processes)  (iv) legal certainty x-EU, (v) not having to invest in or maintain VAT-reporting systems and (vi) not having to suffer from black-grey economy competitors evading VAT.

These items should be weighted against the negative effects of not having access to 2-3months mostly interest free loan of the VAT to be paid. And as there would be no investment needs by enterprises (as they by this time have migrated to electronic invoicing for other reasons – like trading partners and the public sector having made it mandatory) pure and direct self-interest – especially in the SME-sector (65% of turnover in EU) should call for this model – and it must also be in business interest to help the public sector to lower its cost and thus create space for lowering taxes.