U.S. versus Europe - Leaders, Laggards and Automative Adoption
Have you noticed that the U.S. is a nation of contradictions? This country came up with electricity, the silicon chip, the personal computer, Amazon.com, the iPod, Google, and reality TV (OK, so that’s a bad example). We have very active capital markets. We launch businesses and have active venture capital to fund them. We have entrepreneurs everywhere.
And yet when it comes to financial transactions, we are in the dark ages. Take, for example, the use of debit cards. They are just starting to be prominent in the U.S. But I’ve spent a fair amount of time in Europe, and the dominance of debit cards and “smart cards” that keep account details on the card and ensure authentication - they’re everywhere! In fact, they were everywhere 5 years ago.
For B2B transactions, well, the situation is even worse than with B2C transactions. Depending on what numbers you believe, there are something like 70% to 80% of both the invoices and checks sent using paper through the postal mail in the U.S. today. Almost all of these invoices are being generated from a computer program and being sent to another business that re-types them into another computer program, which then leads accounts payables teams through a matching and approval process. From there, paper checks are generated, which again are manually entered into the vendor’s originating accounting system. Obviously, this cycle is ugly and expensive.
Let’s contrast this with Europe: in preparing for the launch of the Euro, the banks and the Enterprise Resource Planning (ERP) system vendors got together and said “let’s agree on some sample file formats to exchange invoices and payments.” Guess what - it works. Something like 70%+ of invoices in Europe go electronic - either as data or at least by email with a PDF attachment. Also, most invoices in Europe contain payment details, so the buyer can pay an invoice with the equivalent of an ACH payment. And unlike the U.S. banks, European banks can carry remittance data with the payment, to the vendor can apply the electronic cash.
There are many firms trying to fix this problem, including the company I co-founded, Transcepta (www.transcepta.com). Part of the burden is on companies like ours to help make it easier for U.S. businesses to come into the modern age with regard to A/R and A/P processes. But it’s also important that those businesses out there, most of which are both vendors and suppliers, get behind a go-electronic initiative. It makes business sense. It saves trees. And it’s the right thing to do!
Editor’s Note: For more insight, see PayStream’s recently published European Accounts Payables Automation Whitepaper
Written by Mitch Baxter - Visit Website
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October 29th, 2007 at 11:49 am
As analysts, we see some good news on the paperless horizon here.
1) Corporate Controllers are starting to move the conversation from one about paper conversion to paper elimination.
2) Web Invoicing and Electronic Invoice Management is converging with the AP Imaging & Workflow. Saavy manager realize they need to have a strategy for both — OCR and Approval workflow don’t “cut it” anymore.
3) Medium and Large suppliers are waking up to EIPP again. At a recent conference we facilitated, nearly 60% of the suppliers were working anew on electronic invoice presentment applications.
I beleive the US is actually leading Europe in electronic invoice adoption — largely on the backs of the biggest payer/buyer companies today. We’re seeing this trickle down tier as the financial benefits become more understood and published.
For instance, we know of one Large Pharmaceutical Organization which is 98% paperless in AP and another large utility that is 75% paperless. We have another client in the healthcare industry that has over 70%.
While the Europeans have great electronic payments, eInvoicing has been slow to catch due to language and the same inertia barrier we face in North America. Now that general adoption for large corporates is over 20%, we see a definate push to do more.
These folks have seen the light and are now moving to solve the last peice of their invoice/vendor adoption.
Clearly Transcepta and others who are providing tools to reduce invoice friction that exists today are a big part of this.
Here’s one bright spot… Bottomline’s www.bottomline.com Legal Exchange (LeX) platform is hugely succesful in the Insurance industry for managing defense cases’ between insurers and their legal representation, BT has developed Business Exchange (BBX) as a follow on to create another buyer seller network as Ariba, JPM Xign, Harbor Payments and OB10.
Collectively, we believe these organizations have already garnered over 200,000 suppliers to participate in one or more of these invoice swapping networks.
We can’t predict how fast the other 2 million medium and large suppliers will come on board — but we’re comforted knowing that they generally want to.