With near failures and mega-mergers around almost every corner, the banking industry is experiencing unprecedented change. With much of their focus on achieving cost efficiencies and effective resource utilization, banks may be losing sight of a key issue - finding ways to build and retain customers to remain profitable. One way to achieve this balance is to deliver new services that enable banks to simultaneously develop new revenue streams while deepening the relationship with the customer.One of the greatest opportunities for new channel growth in the banking industry is through value-added services such as electronic invoicing (e-invoicing). E-invoicing-the sending, receipt and storage of invoices in electronic format without the use of paper-based invoices as tax originals-can help corporate clients improve operational efficiencies, contain costs and, most importantly, mitigate risks associated with global compliance regulations.
By offering e-invoicing services, banks can gain direct revenue from document processing and indirect revenue from trade finance, intermediation in related trade guarantees, such as letters of credit, and intermediation in shipping insurance. Offering an e-invoicing service also presents a clear market advantage for banks in deepening their relationships with customers. They can obtain accurate and immediate visibility into customers' business operations, and provide business development opportunities through improved real-time knowledge of those operations. This information can provide banks with a baseline to incrementally integrate additional supply-chain services in later phases, therefore continually bringing added value to their customers' commercial operations.
So, how do you convince your corporate customers that this service is right for them? First, appeal to their bottom line. Converting from paper-based to electronic invoice flows is an efficient way for corporate clients to cut costs and enhance integration with their supply chain partners. Savings from implementing e-invoicing solutions can result in a 65 percent reduction of per-invoice costs, which can range anywhere from $2.00 to $200 per invoice (Sterling Commerce Inc. white paper on e-invoicing, ©2008). Considering a manufacturer with 1,000 suppliers can process anywhere from 65,000 to 80,000 invoices a year, the savings can be significant.
Second, appeal to their need to limit exposure to risk. Handling cash transactions and invoices is not a core competency for most corporate clients, and it shouldn't be. It is, however, a process in which corporate clients are already engaged with banks, and they have the expertise to handle these processes efficiently. Rules for e-invoicing compliance are notoriously complex and diverse. Doing business in the global economy means that you must deal with the tax laws in each country, which can vary greatly and are often confusing. Penalties for non-compliance include fines, risk of criminal investigation and prosecution for fraud, and expanded company audit based on value-added tax (VAT) audit results.
Third, appeal to their environmental conscience. By eliminating the use of paper, e-invoicing not only reduces processing costs, it also conserves natural resources and limits the impact their business has on the environment. "Going green" is not a fad-people today are genuinely concerned about environmental issues, and how corporations are proactively addressing those issues can positively affect their corporate image.
By managing the e-invoicing process on behalf of corporate customers, banks can reduce their risk and alleviate big headaches. And, as mentioned before, banks can gain both financially and from customer loyalty. But, before you begin, make sure your e-invoicing service can deliver what your customers need without "breaking your bank." To take on this process cost effectively, banks should leverage tools that take a holistic approach to e-invoicing. In this way, banks can simplify and maintain business process efficiencies and address individual country requirements or regulation through one solution. By creating one overarching platform, banks can cost-effectively allow each customer to exchange data safely and securely across multiple geographies and systems, leveraging industry standards.
Banks should look for a solution that incorporates a service-oriented architecture (SOA) to enable them to flexibly adjust to frequently changing technical, regulatory and tax compliance regulations across multiple geographies and technological ecosystems. Take VAT taxes, which were mentioned above, as an example. These are taxes applied to the value added to goods or services at each step of the economic chain. To track this tax, most countries require multiple invoices that meet those countries' unique regulatory requirements-and they can change at any time. This can add layers of complexity in the e-invoicing process that can introduce costs and risks.
The operational complexities of compliant e-invoice processing are a real challenge for corporate clients, but banks can help. By adding a complete e-invoicing solution to their service portfolio, banks can create new revenue opportunities by solving the e-invoicing challenge for their entire multi-national corporate customer base while strengthening and broadening relationships with those customers, which reinforces loyalty.
Jim Gahagan is the global industry executive for financial services at Columbus, Ohio-based Sterling Commerce, providers of multienterprise collaboration software and services.