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07 November 2014

EPC: Next steps to create the digital single market: e-invoicing continues to grow

This blog catalogues in brief a number of significant developments and patterns.

Spurred on by public policy and the accelerating dynamics of e-business, 2014 has been a further stellar and eventful year for electronic invoicing (e-invoicing) in Europe. 

Regulatory developments

The European Commission has continued to be a rallying point for e-invoicing adoption and in April 2014 the new ‘Directive 2014/55/EU on e-invoicing in public procurement’ was adopted by the European Parliament and the Council of the EU representing EU governments. By 2018 all public administrations in the EU will be expected to adopt a new e-invoicing standard, now under development, and accept e-invoices in this standard.
All public sector organisations from central government to health and educational administrations and municipalities will be required to support e-invoicing. It is not an exclusive mandate so that existing e-invoicing systems and standards will continue and paper invoicing will not disappear overnight – but it is a start in the right direction. Given that the public sector touches many private sector suppliers of all sizes, this development is intended to spread the e-invoicing habit and add to the energy in the same direction generated by many large enterprises towards their supply chains.
The new standard is the subject of a standardization request by the European Commission to the European Committee for Standardization (CEN), which represents the national standards bodies of the EU Member States and links to international organisations such as the International Organization for Standardization (ISO). The Commission’s request calls for a core invoice standard based on a semantic data model to contain the essential data elements for a general purpose invoice; it also requests syntax bindings for the new standard to be reflected in a number of commonly used syntaxes at the technical level.
The working group to develop this standard called CEN PC 434 has started work and is expected to have a draft available by the spring of 2015. The Commission is planning further support for these developments under its emerging Connecting Europe Facility programme.

Market developments

At the same time adoption of e-invoicing in the private sector continues apace. Large e-invoice receivers turn to service providers, who on-board suppliers and handle data mapping and delivery to the host accounting systems of their customers. 60 percent of accounts payable costs are typically saved from fully automated processes and it is quite feasible for the proportion of goods and services procured on the basis of an e-invoice to exceed 90 percent.
The European E-invoicing Service Providers Association (EESPA) reported in June 2014 that its reporting members delivered over 870 million e-invoices in 2013 representing a growth rate of 19 percent over the previous year. EESPA has around 60 members who at this stage carry at least 50 percent of e-invoices in Europe and are also increasingly inter-operating with each other to the benefit of their customer’s transactions. A number of banks and bank-owned organisations are active in this environment.
Beyond the business-to-business (B2B) and business-to-government (B2G) markets is a burgeoning e-billing world where invoices are made available to consumers of utilities and telephony. In this latter area many banks are active by offering presentment and payment services through electronic and mobile banking. In this context the invoice is seen as an important component in the protection and development of the payments franchise.

Global developments

Europe and North American markets are not alone in the development of e-invoicing. In many emerging markets, in particular in Latin America, e-invoicing is being mandated to support government measures to improve tax revenue collection. This means e-invoices are registered with the tax authority in near real-time thus improving transparency of economic transactions. Such systems are described as ‘clearance systems’ and can be compared with country systems where value-added tax (VAT) reporting is carried out on a ‘post-event’ basis. Some EU Member States are viewing the clearance model with interest and Portugal has already implemented such a system.

Some thoughts for banks

From the point of view of the banking and payments industry there is still a lot going on just ‘upstream’ of the payments franchise in the invoicing space: compulsory adoption for public procurement, integrated corporate supply chains, new models of supply chain finance, new tax collection models and a move towards standards. This remains an area where the banking industry is carefully evaluating potential opportunities such as: integration with payments, partnering to offer invoice finance, and offering on-line services for invoice delivery often in partnership with a service provider. Various industry forums continue to monitor these developments and the banking industry is represented in the European Multi-Stakeholder Forum on e-Invoicing set up by the European Commission, where many of these developments are reviewed and progressed.


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