22 Apr 2010 Electronic Invoices – Transaction Fees Passed Their Use By Date
I read with interest an item by Jean-Pierre Foehn (Opening the supplier can of worms: can you really charge suppliers a fee to do electronic transactions?) that expressed, not for the first time, some fairly frank questions about electronic invoicing and the justification for transaction fees. The questions he raises are not new but it is good to see them brought out into the open.
Historically, the notion of a transaction fee has come from the banks and the network providers. Electronic transaction (EDI) used to be passed mainly across proprietary networks. There was some value add provided by the networks and they charged for it (and still do of course in many industries). The banks have been used to charging for financial transaction and related value add services such as purchasing card data.
But this is the 21st century. There is ubiquitous access to a secure global network called the internet. What value is the electronic invoice network providing if it only changes the invoice format from paper to electronic. OK, it’s delivered in a standard format but so what?!
There is some value of course but that is all delivered on the buyer side. The business case for the buyer is compelling but it depends entirely on the supplier complying. Despite this the buyer charges the supplier. Why? Because they can? Or is it because the business model of the electronic invoice vendors emerged from the banks and days of proprietary networks?
In a world where paper is eliminated, suppliers are paid on time and mismatches and errors in the financial supply chain are minimized electronic invoices add value. But if the electronic invoice providers think that they can simply cream that value off for themselves they should think again.
The Electronic Invoice Value Add
For a charge to be justified, there needs to be a value add. There are value adds associated with electronic invoicing – but it is not in the electronic invoicing per se. It is what you do with it that adds the value. There are a range of imaginative applications of a streamlined and automated purchase to pay value chain – Dynamic Discounting for example – it is these areas that the software vendors should look to add value and earn their fees.