Minneapolis, MN-based financial services industry market research firm Barlow Research Associates, Inc. reported in January 2014 that two of the three large banking institutions that had been offering e-invoicing services have now retired those programs.
Indeed, you won’t find mention of them anywhere on their small business online banking websites.
According to Donna Arce, a Barlow Research client executive, both Chase and Wells Fargo dropped e-invoicing in 2013, making Bank of America the only one of the nation’s 14 top banks still offering this service. (Existing e-invoicing customers at Chase remain grandfathered in … for now.)
Reportedly, the reason behind the elimination of e-invoicing services was low usage.
But was this usage a function of low demand … or was it actually the result of limited market availability?
After all, Arce reports that overall invoice volumes are notable. For the typical small business enterprise, approximately 75 paper invoices and 10 electronic invoices are generated in any given month.
In the middle market segment, the volume of invoices is quite a bit higher: Those companies average just over 1,250 paper invoices and more than 250 electronic invoices in the average month.
For answers to the question about inherent e-invoicing demand, we can look to PayPal, one of several non-bank providers of e-invoicing services.
According to Chris Morse, a PayPal spokesperson, “millions of users” have accessed company’s online invoicing services – particularly since 2011 when the product was redesigned with more robust functionality and features.
For an analyst’s column she wrote on the topic, Barlow Research’s Donna Arce reported on remarks made by René Lacerte, founder and CEO of invoice management firm Bill.com, on the elements that are essential for making sure that e-invoicing is a viable solution for business owners.
- “Working in an entirely online environment is not realistic for many businesses, [which] need a receivables solution that will track and manage both paper-based and electronic invoices and payments in one system.
- “Integration with accounting software is key to businesses adopting any financial management tool, including e-invoicing. Without integration, businesses must re-key data from one system to another, which is both time-consuming and can be fraught with errors.
- “Issuing the invoicing and accepting payment are just part of the overall receivables process … The ability to collaborate with customers via a portal where invoices can be referenced, documents shared and notes exchanged, dramatically reduces the time businesses spend managing these inquiries.”
The PayPal approach is quite flexible in terms of the payment options for the recipient of the invoice. Choices include its own PayPal bill payment option, along with credit and debit card payments as alternatives.
Contrast this with Bank of America, which requires the recipient to log on to a payment center, agree to terms, and then upload account information to make a payment – debit and credit cards not accepted.
Contrasting PayPal and the approach of the commercial banks, is it any wonder that the one is experiencing growth … while the others have seen low usage?
Of course, there’s also the issue of fees charged for e-invoicing services. PayPal’s fee structure is different than how the commercial banks have charged for services, in that a portion of PayPal’s fee is based on a percentage of the transaction value (currently around 3%). Depending on each company’s individual characteristics, that pricing model may or may not be the most lucrative for users.
Bottom-line, it’s clear that e-invoicing isn’t a dying service. But how flexibly it’s presented – and the degree to which it can actually reduce inherently labor-intensive in-house administrative activities – spells the difference between its success or failure as a business service.
In other words … the difference between PayPal and the giant commercial banks.