Einvoicing Hesitation by the Banks

PxshM1ef-320Banks are rapidly starting to recognize the link between e-invoicing and supply chain finance (especially reverse factoring), which the large banks offer.  This function is tending to find a home in the Trade Finance teams or the Invoice Financing teams. Tungsten and others who are combining finance and e-invoicing are helping to push banks to invest in their own platforms.

Bottomline Technologies is an interesting vendor to watch in this space. Bottomline runs the Paymode einvoicing suite which was purchased from Bank of America back in 2009.  BAML let Bottomline take over its PayMode business-to-business electronic-transaction network and pays Bottomline for managing the network for its own customers.  RBS North America and RBS Citizens are now offering this invoicing and settlement network to their corporate customers as well.  Whilst the platform is mainly used for US domestic transactions, it does now have multi-currency cross-border payment capabilities, where volumes are growing.

With the exception of Finland, where the banking system offers a multi-bank invoicing solution domestically (not so for cross-border trade), banks, many banks struggle to enable e-invoice origination via their e-banking solutions.  JPM recently divested its Xign business for example.

I believe there are several reasons why this is the case

  1. First, in the USA, the Federal Reserve has forced banks to take a look at the various businesses they offer and also the various Service Providers they use for outsourcing relationships.
  2. Second, einvoicing is not a business, but an enabler to help banks finance invoices. Where does it belong? Commercial Finance?  Asset based Lending? Factoring?  You can see this can get complicated in terms of who is driving it, paying for it, etc.
  1. Third, einvoicng typically involves some form of ERP integration and banks do not want to go behind the firewalls and handle SAP or Oracle requirements.  ERP integration is a barrier for banks, both for e-invoicing and payments. They just want to take an extract out of the ERP so they can make payments or enable finance.
  2. Fourth, Banks cannot outsource Know Your Customer – Vendors do not have same compliance issues.  The Federal Reserve recently came down with more guidelines here.

This list is not meant to be comprehensive, but so far, the einvoicng story at banks has a way to go.

The banks cannot surrender this territory, as it threatens core working capital lending. The market does need common standards, terminology and rules, like most new markets.

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