Tungsten’s rationalisation of supplier fees – why stop there?

Tungsten’s rationalisation of supplier fees – why stop there?

A few weeks ago, Tungsten, the e-invoicing people, announced a ‘simplification’ of their tariff structure for suppliers using their network. The change follows a successful pilot in the UK during which one major buyer reported that supplier adoption of Tungsten e-Invoicing increased from 55% to 64% in three months as a result of this new pricing model. That’s quite an impressive increase – which begs the question – why stop there?

Purchasing Insight logoThe new tariff structure is intended to remove any perceived barriers to adoption.  Once all users are on the new tariff, Tungsten expects that more than 80% of suppliers will no longer need to pay transaction fees to send an e-Invoice over the Tungsten Network.

The tariff includes an increased annual fee for those larger suppliers who have an automated connection to the Tungsten Network, in return for which Tungsten gives them 520 free transactions.  All suppliers, whether they use Tungsten’s online Web Form tool or its integrated solution, receive an initial number of free transactions, which are replenished annually.

This is good news for suppliers who will pay less in transaction fees, good news for buyers who will see more invoices sent electronically and good news for e-invoicing generally as the move helps to simplify and rationalise the use of e-invoicing.

The press release accompanying this change doesn’t exactly quantify the changes. The transaction fees will reduce it seems but that is offset by an increase in the annual fee that many suppliers pay. Whether or not this will result in a reduction in overall cost is not clear. However it does make it clear that the “the new tariff structure is intended to remove any perceived barriers to adoption” which plays to the question I posed earlier. Why stop there? 

If transaction costs are a barrier – and Tungsten’s pilot seems to prove that it is – why have transaction costs at all? An e-invoicing project is invariably buyer-led. If one of it’s key objectives is to receive as many invoices electronically as possible then why have transaction fees at all? It is interesting that the reduction in transaction fees led to an increase from a fairly modest 55% to a less modest 65% adoption. If we extrapolate, isn’t a zero fee approach going to increase this further?

It’s not a new idea of course. Taulia and Tradeshift make a big play of free to supplier e-invoicing, but this is, to my knowledge, the first piece of empirical data that confirms the gut feeling of many that free to supplier makes sense – certainly if the primary objective is to increase supplier adoption.

Pete Loughlin can be found on twitter @peteloughlin

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