Banks moving in - but collective approach needed

Joy Macknight, Section Editor, gtnews - 01 Jul 2008
Over the past month, there has been a flurry of activity around electronic invoicing, or e-invoicing, as two global
financial institutions, Citi and The Royal Bank of Scotland (RBS), announced partnerships with e-invoicing
specialists Ariba and Fundtech's Accountis, respectively.
The incentive for banks to enter the e-invoicing space is two-fold, explained Duncan Jones, senior analyst at
Forrester and author of 'The Forrester Wave: AP-EIPP, Q2 2008', in an interview with gtnews. "The banks see
invoice processing as a way of expanding the services that they offer to their clients. If they are helping a corporate
pay its suppliers while giving them treasury and working capital advice, then the corporate thinks it is a good
service.
"The banks also see an opportunity for selling added services to more companies. If you are a bank like Citi and
you team up with Ariba, then Ariba gives you access to the network which has information about thousands of
invoices that are sent by suppliers to buyers, and also whether those buyers have accepted those invoices and
approved them for payment. Now the bank can go to those suppliers and offer to pay them the value of those
invoices right now and charge for the privilege, rather than having to wait 60 or 90 days to get paid," said Jones.
Citi's strategy is focused on expanding the network. Through the partnership, Citi's global transaction services unit
will integrate its electronic payment and supplier finance offerings, including a recently launched buyer-initiated
purchase card, with Ariba's invoice and payment solutions to enable end-to-end financial supply chain
management. The new solutions will be delivered via the Ariba supplier network, which has more than 160,000
registered suppliers in 115 countries.
RBS is looking to expand the services it offers to its corporate customers. The bank has entered into a multi-year
agreement with Accountis to provide an RBS branded e-invoicing solution and service. Ian Watkinson, head of einvoicing
for RBS, explained that RBS sees e-invoicing as a strategic addition to its existing product portfolio. "By
offering additional transaction services such as e-invoice delivery, we will gain greater visibility into our customer's
end-to-end, financial supply chain transactions," he explained. "This will help us to improve our understanding of
their business and strengthen our long-term relationship. It also places us in a better position to offer additional
services such as supplier finance provisions and other finance arrangements."
Jones at Forrester points out that interoperability is key for both parties and the way forward is not to try to lock a
corporate customer into one solution. "It is better for banks to offer some treasury management services
implemented with a product or two - for example, here are a couple of providers that can do that and we have
integrated their systems into ours. But banks should also be open and allow the customer to go out into the open
market and chose. I am rather worried by the idea that a bank will say that you have to use its software to do
invoices. It may be perfectly good software but deciding which bank you use is different from deciding which
software you use."
E-invoicing was also high on the agenda of European banks, technology vendors and corporates at EBAday 2008
in Helsinki last week. In a session titled 'E-SEPA - Unlocking the full potential', Bo Harald, chair of the European
Commission Expert Group on E-invoicing, stated that paper invoices have no future and laid out the solid business
case for e-invoicing, starting with the European Commission's statistic that e-invoicing could potentially save
€238bn in the business-to-business marketplace and €30-40bn in the business-to-consumer arena. He pointed out
that already e-invoicing is mandatory in five countries, with another 10 countries looking to move to "e-invoice or
no invoice".
While other participants questioned the role of financial institutions in this space, Harald explained how e-invoicing
creates new business and responsibility for banks. "Only banks can reach the 24 million European small and
medium enterprises (SMEs) and also connect the consumers. E-invoicing is a natural part of high-end cash
management because automated invoice finance increases income for corporates because they can handle their
cash flows better," he said. He added that in his opinion e-invoicing should have been done before the introduction
of the single euro payments area (SEPA) because it provides a strong business case incentive for SEPA
implementation.
Joy Macknight is Section Editor at gtnews. Contact her at joym@gtnews.com
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