Let us go back to the time when there were no card schemes in place: in 1950 Diners Club issued its card together with a booklet saying which restaurants accept its card.

Later larger banks started issuing their own cards, each with a merchant network, which resulted in overlapping merchant networks: merchants had to deal with many banks, while banks did not accept each other cards. This resulted in isolated payment networks, which were inefficient and not attractive enough to consumers.

That was the time when card associations emerged: in 1966, BankAmericard issued by Bank of America went national to become the US’s first licensed general-purpose credit card: a decade later it was renamed Visa. In the same year, a group of Californian banks formed the Interbank Card Association (ITC), which later became MasterCard.[1]

[1] Source: The history of credit cards (https://www.creditcards.com/credit-card-news/history-of-credit-cards/)

Card schemes created the opportunity to send and receive payments among many banks and merchants globally by expanding their network by defining and building a globally interoperable payment infrastructure.

The same is happening today with e-invoicing: there are unconnected invoicing software products generating invoices and isolated e-invoicing networks, where invoices cannot be sent and received/processed without additional IT development or manual intervention.

E-invoicing interoperability means the automatic and seamless exchange of e-invoices (together with structured invoice data), where the invoice document’s processing happens on a data basis, and manual intervention happens when the sender or receiver explicitly wants to have a manual action in their business processes (e.g., approval of the invoice).
The advantages of interoperability can be demonstrated with the comparison of the two figures below. Currently, invoice processing happens on many channels, both in a paper-based way and digitally. This adds complexity to processes, which are reflected in costs, and the probability of errors increases. This is demonstrated on Figure 1[2] below:

[2] Source: Overview of an e-Invoice Interoperability Framework Prepared by the Business Payments Coalition e-Invoice Work Group (https://businesspaymentscoalition.org/wp-content/uploads/20191031-bpc-overview.pdf)

Figure 1: Overview of invoice management processes

With e-invoicing and pure digital invoice management, the process becomes much simpler, which decreases cost significantly, by 60-80%, compared to paper-based invoice management processes.

Figure 2: Overview of electronic invoice management processes

As a consequence of e-invoicing interoperability, digital invoice data will be accessible in standard formats, very similar to the payment standards, which will enable providing digital-only payment and financing services.

Why is there momentum now?

In e-invoicing we are in the moment when the first banks founded the card associations: There are global and local standardization initiatives and local tax regulations are coming to place from country to country, but these must be implemented by each player providing/doing invoicing. In these implementation efforts, banks can assist enterprises: both in the corporate and the SME segment. The bank can add value to the enterprise in each segment differently.

Why e-invoicing and e-invoice data is important for banks?

For banks providing beyond banking services such as e-invoicing will be a competitive factor:

  1. The bank can help sort out a significant problem for SME customers (Read more).
  2. It will have access to digital invoice data, which ensures that the bank can provide a seamless customer experience.

E-invoicing interoperability will enable enterprises to digitally process their invoices as invoice data is accessible. From a bank’s perspective, invoice data is interesting, because it has all data that can support digital banking processes, such as payments and financing. The figure below summarizes what data is required during the conclusion of the purchase-to-pay process. As you can see in the figure below, invoice data contains the widest structured data throughout the purchase-to-pay/order-to-cash process: both payments and financing can be concluded using invoice data. For financing, the contract is also necessary to verify that the invoice has been issued on terms explicitly agreed by the supplier and customer.

From the aspect of banks even not looking to provide beyond banking services, invoice data should be treated as a data source for payments and financing, which are the core banking services.