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.

Banks - how about focusing on new value?

Banks - especially Investment banks - are now being squeezed from all sides - revaluation of securitized papers to unrealistically low market price levels, losses from credit books as economies nosedive, new costs from all sorts of more or less needed regulation, restructuring costs etc - all also leading to higher funding costs.

On the other hand there is clear evidence that customers are prepared to pay for reliable house banking relationship (only to forget it again when times get better..) - in good times you can manage with bad bankers but in bad times you cannot manage without good ones (I have been through a couple of downturns in 30 years as a commercial banker - and dare to say that we managed to keep virtually all enterprises afloat that were worth the effort). The normal behavior also then was that higher risks called for higher margins, more securities and stricter covenants and as long as the owners chipped in their part,  financing was reorganized and even increased to bridge over the troubled waters.

Despite most bankers having done a proper job then and now - media at large was and is again resorting to lynching mentality - "a banker cannot be good - hang them all..". With nobody questioning this, it is to expected that elections will be won with this kind of slogans (even if media credibility is systematically being eroded - by media itself). Then it has to be said, that the case of stupid extravaganzas in a few instances - after having had to resort ot taxpayers' support - makes it easy for the populists.

But what should banks do now to start to rebuild their scattered images? Back to profitability and basics is for sure one route - simple robust real services - less marketeer driven gimmicks and "products" nobody really understand. But more than that, there is a big area where banks are now needed more than ever before. This is the what we call extended payments services. All the way from potentially doubling the payment volumes by moving into networked sourcing, routing and presenting e-invoices, e-orders, e-confirmations, e-salaries, e-pensions etc to e-id, e-signatures and real time payments - services needed in the networked and increasingly real-time economy. Only banks have the possibility to handle this in a cost-efficient way for the largest sector - the SMEs and the consumers. As the investment needs are minimal and the sales force is there anyway it should not be difficult to reach profitability as soon as the transaction volume tipping point is achieved. The downside is in any case minimal.

Lowering of costs > better productivity > stronger competitive position in a global economy is now badly needed in the entire corporate customer base. Will banks take their responsibility? 

Citibank supporting payments-integrated e-invoicing.http://www.gtnews.com/article/6957.cfm

Very much in line with our experience and vision for the future. A common standard for the SME-to-large-enterprise, SME-to-SME and SME-to-consumer market should (and will) be created as described in the EEI report - but it will take time and it will not dominate from day 1 when it is ready.

That is why banks and other service providers need to offer multiformat services.

Banks just have to

Technorati Tags: e-invoicing

start offering e-invoicing as a part of payments. A few simple reasons:

1. it is a huge value for enterprises - highest savings estimate in EU 243bn€ per year (EACT) - only in b2b and only in processing efficiency - many more similar categories waiting

2. only banks have the ready infrastructure (payment systems, e-banks, security)

3. only banks have the necessary wide sales force and economy of scope as this adds an extension to existing payment and cash management products

4. only banks can use this to make "ipod"-like invoice financing and foreign exchange risk cover available

5. all invoices should lead to payment - automation of this and later account reconciliation are central elements in the total savings

6. banks' legislated role as defense against money laundering is needed here as well - less fraud risk in invoicing saves considerably - both time and money

7. ECB and EU more or less want to force banks into this - also to make SEPA a business case for them

8. this is true customer value - earning money from "good-for-society-at-large" is quite different from earning money from junk-mortgages and junk-bonds

9. and it only one step - but the broadest possible - that enables the next step - for the corporate mass market to use the same tool for e-orders and e-confirmations

10. the staircase leads to the Real Time Economy - real time transfer of invoice information, real time payments and real time accounting and less store&forward based costly IT-processing in the background.

SIBOS in Boston - next week is good place for this discussion - anybody still in doubt - and if not - how to get there fast.
I will be there.

EBRF 2007

Useful and interesting material. My own presentation focused on the practical steps to get to a real time economy (real time invoicing, real time payments, real time accounting etc) - will be added later.

Bank of America creating new value

Small-Business Banking: The Value Proposition for Banks to Offer Small-Business EIPP

Aite Group estimates that 25% of small businesses will adopt Electronic Invoice Presentment and Payment (EIPP) over the next few years. By year-end 2010, this service could generate more than US$705 million in additional fee-based revenues for banks...

Boston, MA, December 11, 2006 – In a new report, Small-Business Banking: The Value Proposition for Banks to Offer Small-Business EIPP, Aite Group evaluates the size of the EIPP opportunity for U.S. banks and builds a case for banks to offer the service. EIPP has the potential to help banks in their pursuit to deepen small-business relationships, generate fee-based revenues, differentiate themselves, and acquire new customers. The report is based, in part, on the results of Aite Group's omnibus survey of 278 U.S. small businesses, in which 67% of respondents expressed some level of interest in the service.

Banks have not traditionally offered EIPP to this customer segment. In fact, Bank of America was the first U.S. bank to offer such a service in June 2006. Other banks are likely to follow, however, as winning the wallets of small-business customers has become a top priority for most U.S. banks. Offering the service will create a paradigm shift for the industry; those banks that do not offer it risk losing not only additional revenues, but also market share to non-financial entities that are increasingly offering bank-like products.

"Banks need to set aside their previous misperceptions about small businesses and begin to view these customers as important potential revenue generators," notes Christine Barry, Research Director with Aite Group and author of the report. "Small businesses already spend approximately US$353 billion on financial products. By cross-selling additional services like EIPP, banks will not only increase that spend, but they will better meet the needs of this important customer segment."

At the EXPP conference in London today we here from Bruno Koch that e-invoicing is the only business growing at 75% per annum - only other business ever achieving this was mobile phone.

Currently is 1bn business already but only 2% penetration.

Something for banks to be interested in? Real value added to payment services - easy to get going - same service for consumers and enterprises.

Big responsibility and big business.

Time for a big hand?

Most of us think that regulation is bad and should be avoided - even at some cost. With the benefit of hindsight it is easy to say that some more of it could have been good for us.

Looking at digitalization from the financial transaction angle it is interesting to start summing up cost saving potential:

1. Handling cash is said to cost a total of 50 billion € in EU. Who is paying this? Of course the consumer in EU - via the prices he pays in shops. If it would be more transparent he might use his digital tool - the card keeps money in digital form.

2. Slow payments and inefficient reconciliation costs tens and tens of billions (according to a study commissioned by EU a 10% improvement in automation here could improve GDP with 0,5%..). Who are paying these costs? The consumer of course - not the shareholders (who of course are the same consumers via their pension schemes..)

3. Paper based invoicing is estimated by EACT to cost 243bn€ a year for enterprises in the business to business area only. Consumer invoicing is saving less as the time spent by bill payers is not calculated as a cost. Still the cost is massive. And again it is the end-user of the products and services who pays the bill.

4. Not to talk about cheques...

Hundreds of billions - every year. Money that the EU citizens could use for real value. The dilemma is on the one hand the lack of awareness and on the other hand that cost savings are spread among so many enterprises that there may not be enough incentives to take the step. That is why even regulative-like steps must be considered.

Technorati Tags: e-invoicing

Finally e-invoicing roadmap

It took us only some 6 months to arrive at this report - a joint vision how e-invoicing can be kickstarted in EU....

Final report

To Real Time Economy with e-invoicing

Teemu Arina was kind enough to record my presentation. May make more sense once I get the presentation enclosed - pls ask for it in the meantime.

You can find the recording here.

Nordic focus - appeared in Financial i June 2007 issue

My name is Guy. Same Guy and I make digitalisation happen. Where does my name come from? From the fact that there is an urgent need to remind all sorts of service providers that they serve the same customer for his many needs and in different roles and that there are important opportunities to speed up digitalization if this is realized.

Why is this urgent? Because digitalization is so important for corporate and public sector productivity, because digital services are so central to corporate competitiveness in an open global economy and because the context end-users are living in is continuing to become overcrowded with information, alternatives and activities. As there is less time for any one thing it is imperative to, by all available means, lower the threshold for taking new services into use. We have seen good examples of how this can be done by making things clinically simple – but that is not enough any more. Further digitalization of services should be mandatory – and at least when tax payers money is involved – build on what the end user already is used to and trusts. This is where banks have a big role to play – and a big responsibility.

What can banks do to speed up digitalization in society at large? Naturally, they should offer all their own services in a digital format, thus feeding the massive ‘e-habit’ only large volume financial transactions can create. Secondly, they should develop new streams of income from valuable services and cut their costs (banks in Finland have halved their total costs with the help of digital services). Then these tools need to be embedded in e-business and e-public sector services. One such example is the use of e-banking log-in tools for identification of people in public sector services and for e-signatures on documents between third parties. The alternative – to have to equip people with a separate public sector smart card and readers could easily cost EUR 40 upfront (there are 460 million citizens in the EU). Experience also shows that public sector smart cards are seldom used, as most people prefer to use already familiar, in this case bank tools.

From a corporate productivity and competitive service viewpoint, more significant development is taking place in the area of e-invoicing. E-invoicing is of course nothing new – it has been around for decades – mostly in vertical environments using proprietary, expensive and inflexible technology – resulting in further costs when trying to make disparate formats interoperable via re-formatting. This has lead to a situation where the SME sector (17 million enterprises in the EU representing the highest potential for digitalization) have not had the tools to join digital value chains or have been forced to use different applications or portals with different suppliers and customers.

The solution to this dilemma has been found – it is to make invoice transportation use the payment network, payment file technology and netbanks for inputting and outputting – just like sending and receiving payments – using the payment address for a corporate or private e-invoice receiver. When launched by banks in Finland in 2004 it was a surprise to everyone that so many enterprises signed up right away. The European Commission and the European Central Bank have taken an active role in encouraging banks to create a common standard and launch this concept as a part of SEPA. Estimates from the corporate sector indicate that annual processing cost savings could be in the region of EUR 200 billion. Banks are now moving and this will also improve volumes for traditional e-invoicing service providers. But as the savings are divided into so many small parts, big hands are needed to steer the mass market. Eventually this will be connecting every bank account globally also for e-invoicing and other documents like e-orders.

Again it has been vital to start from the end-user and realize that there are no corporate customers – only human customers – Mr Same Guy in different roles. When it is possible to offer the same tool to the end-user for their needs in private, citizen and employee roles – for the same purpose in different environments or new purposes - significant cost savings can be made, and above all the time to market is shorter.

Bo Harald is head of Executive Advisors, TietoEnator, Helsinki
http://boharald.blogspot.com

Writing this on the plane back from the International Workshop of Electronic Payment and E-commerce in China - held in Chengdu - the multimillion capital of Sechuan. As always amazed by the speed of progress in China and the hospitality and puzzled by the challenge to the environment that the economic growth there and everywhere else pose.

My presentation was dealing with e-business- and e-public- sector-embedded e-banking - much focusing on e-commerce payments and e-invoicing as stressed also in this blog earlier.

Took to re-reading one of my favorites: David Weinberger's Small Pieces Loosely Joined - one iconic book for sure. Picked up the following:

Space
The real-world treats it as measurable distances indifferent to human needs.
The web as links among pages representing a spring of human interest.

Time
Real-world: ticking clocks and the relentless schedules they enable.
The Web: time runs as intertwining threads and stories

Perfection
Real-world: an ideal we humans always disappoint
The Web: perfection just gets in the way

Social groups
Real-world: becomes more impersonal as they grow
The Web: individuals retain their faces no matter how large the group becomes

Matter
Real-world: stuff that exists independent of us
The Web: pages that we have built full of intention and meaning

Moral
Real-world: we follow a set of principles
The Web: authenticity, emphaty and enthusiasm guide our interactions

And much more that should be realized by all sorts of management today.

Productivity in EU
Spent a long weekend in Sicily and had time to read some interesting stuff. Some quotes:

On European growth
" The pace of expansion is set to fall back this year and next to little over 2 percent - too modest to prevent a further widening of the gap in GDP per head between the EU and the United States."
Simon Tilford
Center of European Reform

My comment: too many doing low value (low pay) work

" Our growth rate is now mostly limited by our human resources capability"
Klaus Kleinfeld
CEO, Siemens

My comment: too many tied down with routine tasks

Kickstarting e-invoicing is of course only one step - but as we know not demanding large investments and possible to launch fast with the right will and skill. The target should be to get one common standard at least for the corporate mass market - the part of e-invoicing that can benefit from ready e-banking and payments infrastructure. This is well in keeping with global trends:

"We genuinly believe that radical sharing is a win-win for everyone. Expanding markets create new opportunities."
Tim Bray

"Standards is another area where openness is gaining momentum. In today´s complex and fast-moving economy the economic deficiences and liabilities caused by lack of standardization surface faster and they are more jarring and consequential than in the past."
Don Tapscott

Helsinki Manifesto for EU

Anybody happy with productivity development in Europe? Hardly. For those who think we need some real action NOW the Helsinki Manifesto is pointing to some very central issues. Pan-European e-invoicing - implemented country-by-country but with common SEPA-standards is the fastest, easiest and biggest one. It is of course the enterprises and taxpayers who gain most (EACT estimate in excess of 200bn€) so now when this is manifested they should demand this service from those who can supply it - for 17 million micro and small enterprises it is the banks..

http://www.tietoyhteiskuntaohjelma.fi/ajankohtaista/events/en_GB/1147177824150/

100 billion reasons

When looking for opportunities to improve productivity and improve service digitalization is the key. Large enterprises have already achieved quite a lot - albeit with expensive, inflexible and proprietory EDI solutions - but small enterprises and the public sector are still largely un-automated.

Digitalization progress can be made in layers - and the next one is payments-integrated e-invoicing - ie the tool for even the smallest enterprise to send and receive e-invoices in their netbanks - just like payments. They do not need to invest or install anything and the XML-format produced coupled with the ECBS standard for payment initiation (ePI) makes automation easy. This has already been introduced with great success in Finland.

EU has estimated that the savings in processing can reach 100bn€ per year. A recent estimate from the European Association for Corporate Treasurers arrived at well over 200bn€.. No reason for sitting on hands if we want to improve productivity in Europe.

99% of enterprices are small (<50 employees)


And 93% belong to the microsegment and together with small they produce 33% of the turnover and at least the same number of invoices, orders, order confirmations and the like. To get the economy moving towards the real time mode fast these need a tool for sending and receiving these documents that does not call for investments or applications installation. The answer is a template in the netbank for input and the payment network for transport. This has already been rolled out in Finland - it is a proven fact that it is needed and easy to accomplish.

The two paths towards a real time economy

There are two parallel main roads leading to the endgoal - real time economy. The first one has been dealt with here already to some extent - the end user centric and networking approach to digital services - leading to fast real uptake of self services at lowest cost.

The other road is automation - machine to maching initiated transactions. This is best served by finding widely used standards. The Single European Payment Area is a very suitable opportunity to go for standards both in remitting payment order files to banks or when using same tools for remitting invoice material.

What should be done early on is to establish the benchmarking - what service in what company or what country has the highest (i) selfservicedegree - % of all, (ii)machine2machine degree - % of all and finally highest degree of real time completion - % of all.

work1. Remember to network - examples from e-banking

Starting to go deeper into the list below, I recall the earliest networking experience from e-banking - dating back to 1984 (private e-banking was launched in 1982 - corporate in 1979 in Union Bank of Finland - now Nordea Bank). In those days PCs were not that widely in use at home and modems even less common. So the bank agreed with employers that it is in everybody's interest (time saved) when employees who use PCs at work (usually linked to external telenetworks) could use them also for their private e-banking. This networking led to a very much faster uptake and customer value than would otherwise have been possible and created an early e-habit and e-trust platform that now is the base for a worldleading position for example in the public sector (reuse of e-banking tools).

The next networking example from the e-banking history came 1992 when customers could log in to the bank and continue to all major insurance companies - big savings for them as they did not need to build own strong identification. This meant that banking became embedded in insurance services and vice versa.

This reuse of bank e-id (also for signing third party contracts as is the case with loan agreements in the banks' services) took a big step forward when the Finnish Ministry of Finance in 2002 recommended the use or bank-id for the public sector as an equally strong method as the state issued PKI smart card (which has failed to gain usage). Estonia in 2005 is an even more striking example of what citizens prefer: 363 000 Estonians used e-banking id (800 000 have them) when filing tax return - 904 used the state issued smart card (1 000 000 distributed). This use of bank-id has probably taken Estonia's tax service and public sector at large to a global lead position.

Accenture's High Performance in Government report (p35 figure7) shows the results of the co-operation with the banking sector - Finnish citizens are very clear global leaders in eGovernment use and eGovernment enthusiasm. Of course it is easy to understand - what could be more conveniant than reuse of bank-id which is so often used and familiar (one-time codes since 1982)? True economy of repetition for the citizen, economy of reuse for the government (massive investment if all citizens would have to be equipped with smart cards and card readers - and a waste as single sector tools will not be used - and ties to one PC, does not work on mobiles etc) and economy of scope and scale for all. Accenture did not quite pick this up but cited some for me unknown anonymous press coverage that would have questioned the role of banks - ie questioning networking..

I could list a good number of similar networking examples from e-banking - payments-integrated e-invoicing is the most recent example - the cost saving potential from e-invoicing for EU has been estimated (by EU) to exceed 100bn€ per year - something REAL for Lisbon.

The leading theme is of course to understand how the citizen's practice of handling all aspects of banking can so very naturally become an essential part of his practice in using for example public sector services. Responsible civil servants are of course taking every opportunity to save tax payers' money - but also to make it possible for them to benefit early from e-services without any need to invest in or learn to use new devices. This service of practices is very much connecting to what Oskar states in his Practice Design blog. "This helps companies to bec0me less fragmented in the operations. Customers are very different, whereas practices can in many cases be universal." In this particular case cross-organisations and both for the citizen's private and employee role in a world-leading private-public partnership.

More examples later.