Faster payment schemes are beginning to take root around the globe, and consumer payments are ready to embrace speed. Corporate payments? That’s another matter, as businesses are more reluctant to embrace change.
The deeper issue at hand, however, is that some corporate payers actually enjoy the delay from payment rails like paper checks, which enable businesses to hold onto cash just a little bit longer. That, of course, is bad news for suppliers, especially small businesses (SMBs) that struggle with delayed and late payments that interrupt a healthy cash flow.
This could be an area in which non-payment FinTechs play a vital role. Take eInvoicing, for instance: Faster payment rails won’t lead to faster supplier payments if those vendors can’t bill their customers more efficiently. That’s the idea behind Zervant, an eInvoicing company that targets small and micro-businesses.
The company, based in Finland, wants its clients to be prepared for the EU’s upcoming eInvoice mandate, scheduled for rollout by 2020. But aside from a government mandate, Mattias Hansson, CEO and co-founder of Zervant, told PYMNTS there are major factors behind encouraging entrepreneurs to invoice their clients electronically.
Two key motivations include speed and ease of use.
“For our users, speed is valuable as it means that they get paid quicker,” Hansson said, pointing to research Zervant conducted last year that found a 9 percent increase in the number of invoices that get paid on time when a company switches to electronic invoicing.
“The second part,” Hansson continued, “is quite an obvious one, but the easier something is to use and the more accessible it is, the more it will proliferate.”
For electronic invoicing to gain traction, it cannot create new challenges for small businesses. Hansson highlighted the security of eInvoicing, which also contributes to faster payment times, “as customers are more likely to accept and pay an invoice from a trusted source.”
It similarly cannot lead to new burdens for the payer either, the executive added, pointing to the cost of invoice processing in accounts receivable departments.
“The true adoption of electronic invoicing is heavily driven by cost savings on the buyer’s side,” he continued. “By requesting eInvoices from suppliers … they have significant invoice processing costs.”
What is important to note about Zervant, however, is that it does not touch the actual B2B payment process. Rather, Hansson explained, the company collaborates with third parties via its partner network. This enables small businesses and entrepreneurs to avoid restricting payment choice for their own customers, but it also raises an important topic of discussion surrounding SMB FinTech integrations and data sharing.
Electronic invoicing is part of the ongoing movement in Europe and elsewhere to enhance access and analysis of accurate, robust financial data for businesses.
“This is actually part of a wider trend, not one solely focused on eInvoicing,” Hansson noted. “Previously, pretty much everything was done on paper, so there was no centralized database where information was collected. What is important is how that data is used, and it needs to be something that ultimately provides value and insight to end users.”
Zervant is adamant about data security and vows never to share its customers’ data with third parties. That being said, Hansson acknowledged major regulatory shifts in the EU around data security, like PSD2 and GDPR.
These initiatives, he said, “provide clear structure and rules on when and how you can share information. It is essential to keep your users informed and to have their consent before doing anything with this data.”
The incoming mandate for electronic invoicing in Europe is sure to further open up businesses’ and financial service providers’ access to even more data that can be used in myriad ways. Similar regulatory moves are coming into play in other markets as well, like Australia and the U.S.
The U.S.’ requirements will apply to government suppliers and will impact hundreds of billions of dollars worth of government contracts. The Federal Reserve’s recent paper exploring the upcoming mandate said officials hope a B2G eInvoicing mandate will permeate into the B2B world as well.
“The argument is,” the Fed wrote, “if a private business supplier implements eInvoicing to address government requirements, they may well extend this implementation to other businesses they supply.”
In Australia, meanwhile, regulators are pushing for an eInvoicing mandate to standardize the presentation of data for the purpose of tax reporting.
Europe’s PSD2 rules have FinTechs eager to take advantage of financial data opening up at financial institutions, and players are widely applauding the measure as a way to enhance services for end users, including SMBs, by taking advantage of available data and sharing it across and within platforms. With an emphasis on data security and privacy, however, Zervant seems more cautious in its data sharing approach.
Still, said Hansson, the ability to collaborate with other players like payments companies to facilitate the payment of eInvoices, and the opportunity to integrate eInvoicing into existing small business systems, is “essential.”
“Otherwise, you would lose a lot of the benefits” of the eInvoicing tool, he said, adding that connecting the eInvoicing solution into areas like accounting is paramount to the effectiveness of both systems. “In the long term, I see this as a mandatory requirement. Accounting, as a profession, is yet to undergo a fully fledged digital revolution, but I believe it’s only a matter of time.”
“That said,” Hansson continued, “there are already countries where we see accounting as a fully automated process. Sweden, for example, already has very advanced solutions. The advent of AI [artificial intelligence] and banks opening APIs will accelerate this change worldwide, so we want to make sure we are leading the way.”