While the U.S. continues to struggle with paper invoices in accounts receivable (AR) and paper checks in accounts payable (AP), its neighbor to the south has emerged as the world leader in eInvoicing adoption.
Mexico's eInvoicing requirements began back in 2004, when its tax authority, the SAT, first developed its eInvoicing legal framework. Since then, the mandate has been expanded, and today, all invoices, including those in B2B transactions, must be electronic.
While the requirement aims to combat tax evasion and fraud, eInvoicing can also be greatly beneficial to AR departments that are able to more efficiently digitize transaction data for reporting, analytics and tracking purposes.
Yet eInvoicing and its related AR efficiencies don't necessarily result in gained efficiencies on the payment and AP side. Indeed, traditionally, the invoice acceptance and payment processes have been disparate in AP departments, said Fairfax Software CEO and President Steve Chahal in a recent interview with PYMNTS.
The company recently announced a collaboration with Mexico-based Indicium in a deal that sees Fairfax connecting its Quick Payments software within Indicium's eInvoicing solution eFactura, allowing recipients of eInvoices in the country to click a link and pay the bill straight from the invoice itself.
"It solves a convenience problem," Chahal explained, noting that integrating payments and invoicing addresses friction on both the AP and AR side.
AR teams are better able to track payments and lower barriers to getting paid, while AP teams no longer have to toggle between an invoicing platform and their bank portals to facilitate a transaction.
"For accounts receivable, when the link is right there to pay the invoice, nothing falls through the cracks,” he said. “For accounts payable, it's a one-stop-shop to make a payment.”
Mexico's Payments Challenges
Its eInvoicing traction isn't the only way the Mexican market differentiates itself from the U.S. While paper checks may be common in U.S. AP departments, Chahal explained that checks are rarely ever used, unless to facilitate a large transaction between banks or large corporates.
Adoption of electronic payments isn't as mature in other parts of the world, however.
"Nobody will take your money unless it's cash or secured by a bank-to-bank transaction," he said, adding that for many payers, "cash is still king."
For Fairfax, the opportunity to integrate with Indicium meant the opportunity to expand into the Mexican market, but it's not without its challenges. At present, the integration supports card payments on invoices sent via the eFactura portal, although Chahal emphasized the importance of supporting bank transfers in Mexico as well.
In Mexico, the Interbank Electronic Payment System, also known as SPEI, is used to facilitate high-value bank-to-bank transfers and is therefore a key component to B2B payments solutions. It's not necessarily easy for FinTechs and other technology players to loop into the rail, however.
"It's controlled by [Mexico's central bank] Banco de Mexico," explained Chahal. "It's similar to ACH but it's not as accessible to everyone. It's tightly held by the bank."
Fairfax is currently working to secure clearance to process SPEI payments to enhance its invoice payment capabilities in the country with Indicium, he said. While commercial cards, and credit card products overall, are gradually gaining popularity, bank transfers remain essential to entities looking to avoid the fees associated with card payments and processing.
Multitasking And Fighting Friction
The jury is still out over whether invoice digitization correlates to digitization or acceleration of payments. But what the B2B payments landscape can be sure of, regardless of market, is that in order to reduce as much friction as possible, the experiences of both the AR and AP ends of a transaction must be taken into account.
In Mexico, while paper checks are scarce, integrating payment functionality on the invoice itself could help migrate more businesses, particularly smaller ones, away from cash, which can create workflow inefficiencies and even security concerns.
Lifting as many barriers as possible for the recipient of an invoice to actually settle the bill means less friction for the payer and accelerated AR cycles for the vendor, a trend especially important during today's market of volatile cash flows.
And while the market presents its challenges, Mexico's standing as the globe's leader in eInvoicing could position the country as a leader in B2B payments efficiency.
"Mexico's advantage is that they have had 15 years of building upon a legacy of electronic invoicing," said Chahal.