SEPA Boosting Electronic Invoicing towards millions of Internet Banking users Christian Luyten

SEPA

Boosting Electronic Invoicing towards millions of Internet Banking users

Christian Luyten

Sales Manager, Isabel NV/SA

© 2006 Copyright Isabel NV/SA – All rights reserved Slide 2

What business am I in ?

• Objectives of the Sender

I want to get paid !I know I have to send Invoices, make it easy for me

• Objectives of the Receiver

I know I will receive invoices and I know I have to payMake this easy for me


Today’s BTB Invoice & Payment process flow

Relies heavily upon human interactionSlow, resource consuming process Many risks for errorsEffort does not always justify the gainTroubles the relationship between customer and supplier

Draw up invoice Send

Solve issues

Manage disputes

Treasury impact

Scan ValidateMake

payment Archive Managedisputes

Inbound - Customer

Outbound - Supplier

ArchiveFollow-up

unpaid

Handling Process(key-in)

ReconcilePrepare


Cost of Outbound Invoice

€ 2

€ 4

€ 6

€ 8

0

Calculatio

n

Accountin

g

Print/S

end

Collecti

on

Archive

Reminders

Issues

Treasu

ry

losses

Source : Arthur D. Litlle

Average invoicing cost for a Supplier = € 8

€ 0.3

€ 1.2€ 0.5

€ 0.8

€ 0.8

€ 2.4

€ 2


Cost of Inbound Invoice

€ 3

€ 6

€ 9

€ 12

0

Handling

Accountin

g

Validatio

n

Payments

Archive

Reminders

Issues

€ 0.9

€ 1.4

€ 1.5

€ 1.8€ 15

€ 5.4

€ 2.8

Average invoice processing cost for a Customer = € 13.8

Source : Arthur D. Litlle


How did we get there ?

Paper Based Process

Electronic Process

Reconciliation Process


Proposals from EC and European Central Bank

“For corporate customers access to modern payment services are key. They need support for an automated end-to-end, straight-through processing of payment information, as well as support for electronic invoices.

Therefore, I would recommend the EPC to establish a process for defining SEPA standards for value-added services as well, such as e-invoicing in collaboration with customers.”

The Lisbon Agenda – what can banks contribute?

Speech by Gertrude Tumpel-Gugerell, Member of the Executive Board of the ECB

IFB seminar "The Future of Payment Systems in Europe“ Lisbon, 23 February 2006

“Due to capacity restrictions in paper-based and early electronic payment systems, the data content attached to payments was considerable restricted. Invoice data was transported separately between supplier and customer.

Today, storage and communication capacity costs have reached such low levels, that the invoice can be easily attached to the payment information and thereby completely new benefits can be achieved.”

Harry Leinonen, December 9 2005 in “SEPA incentives”

by European Commission, Internal Markets and Affairs DG.


The integrated approach

Integrate Invoice and Payment in Electronic Payment Channels : Internet Banking

N° Date Description Amount

011 29/08/2005 Transfer -500 EUR

From account 123-4567890-02

Communication: Invoice 8795236-2005

010 27/07/2005 Transfer +150 EUR


009 15/07/2005 Transfer +25 EUR


Communication: happy birthday

Document – Salary Month 2005


How will SEPA help to make this happen ?

• SEPA introduces changes- IBAN & BIC

- New DOM : New formats & new rules

• SEPA might reduce functionality- Will VCS-OGM (Overschrijving met Gestructureerde Mededeling – Virement

à Communication Structurée) still exist ?

SEPA is a Risk & and an OpportunityA Risk that Billers and Customers get confusedAn Opportunity to improve


The Doom Scenario

• IBAN & BIC- Banks & Billers have to changes all payment forms- Consumers get confused by new forms and by longer Bank Account Numbers and

additional BIC codes- Increase of late payments, wrong payments, incomplete payments, no payments- Negative impact on Treasury of Billers- Interruption of service to customers- Negative impact on customer–supplier relationships

• New DOM- Customers don’t take the time to close new agreements- Customers use systematically their 30-day right to refuse a payment- Negative impact on cash positions of Billers

• No more VCS-OGM- Reconciliation cost for Billers explode


Electronic Payment Initiation - ePI

• Standard defined by European Central Bank

• Is delivered directly in the Internet Banking application

• Customer can approve with a simple click

• ePI contains all the required references for automatic reconciliation by the Biller


Why customers will adopt

• Ease-of-use- No need to subscribe or enroll, nor to learn new tools or procedures- One-click Payment- One-click Direct Debit- Increased customer service by detailed invoice documentation- Companies can import data in their ccounting software or ERP system

• Convenience- One single environment for payment and invoice- ‘Look-and-feel’ of traditional paper-based invoice- 24/7 access to payment & invoice details

• Control- Customer still decides if, how and when- Eliminate risks caused by late payment (fines, service interruption)

• Trust - Guarantees concerning availability, security and confidentiality- Bank is being perceived as the best channel to handle financial transaction


Main Benefits for the Billers

• Reduced operational cost of sending invoices

- Save on printers, papers, envelopes, stamps, handle…

- Quality delivery : less duplicates, less reminders

• Improved Treasury

- Immediate delivery : Payment term starts sooner

- Quality payment including references : Better reconciliation

- Easy Direct Debit : Protect and extend Direct Debit usage

- Easy to Pay : Faster payment

- Control : Faster approvement

C O N C L U S I O N

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SEPA Boosting Electronic Invoicing towards millions of Internet Banking users Christian Luyten