Mastercard: Holistic Invoicing - Laurent Vreven




Research by Forrester has shown that each manually processed invoice can cost a company as much as €100. Yet the European Union’s drive to promote electronic invoice presentation and payment (EIPP) has not borne fruit. So what can be done to help EIPP take off? MasterCard’s Laurent Vreven has the answers.

FDE: How do you assess the EIPP market and what is your take on the reasons that it has failed so far to take off?

Laurent Vreven: Less than 5% of all invoices are currently exchanged electronically, yet e-invoicing has been around for over ten years. One main reason is that EIPP solutions are vendor-centric. So, every single vendor has its own EIPP solution.

In addition, there is no single format for e-invoicing and this adds to the problem of systems, none of which are totally interoperable. It is therefore only big suppliers and purchasers that have had the time and money to link into these systems. At the moment, small and medium enterprises (SMEs) simply cannot afford to go into the EIPP space.

So what is changing?

The changes are coming about through a combination of cost-cutting pressures and the corporate social responsibility (CSR) agenda. As recent Forrester research has shown, the cost of manual invoice processing, with the inevitable errors and omissions that it brings, is now insupportable.

The savings, not simply in terms of staffing costs but actually of paper and its movement to and within an organisation, are substantial. Add to these the reduction of the corporate carbon footprint and specifically the saving of trees, and the case for EIPP is clear.

If companies can link into a payment network and make invoice processing electronic, they can thereby create process efficiencies while reducing their costs and contributing to their CSR agenda, there is surely no contest.

And who is driving these changes?

Large corporates that are already dealing with each other are now looking to push EIPP further down their customer and supplier chain. In Europe, perhaps surprisingly, it is the public sector that has so far been a significant driver for change. Many local governments already using EIPP have commitments to work with local suppliers, often SMEs.

The software suppliers are, therefore, responding by coming up with ingenious scaleable EIPP solutions that are affordable and manageable to these companies. But there remains the question of systems interoperability.

In terms of the scalability in EIPP systems, until now smaller companies found it hard to make the business case to invest in software and see the payback. MasterCard is seeking to break down those barriers and find a way to SMEs that do not have the time and funds to set up EIPP.

We recognise that there is a vast commercial opportunity there in terms of harmonisation and the business that can be captured.

So where does MasterCard fit into EIPP?

We already have a sizeable position in the e-invoicing space, though this is not widely appreciated. We are seeking to marry the advantages of e-invoicing to the MasterCard payment mechanism.

Whether a company is using a physical or a virtual payment card, we are linking all elements together to produce a one-stop-shop solution for invoicing, payments and some of the peripherals services linked in to them. And we are no longer aiming purely at the top sector on the market, we are focusing on mid-market companies and will eventually be looking to SMEs as well.

If you take the UK for instance, MasterCard has some 10,000 enabled business-to-business purchasing card suppliers. We see that market expanding rapidly. MasterCard is in a position to become a hub between the various parties, so that we can facilitate e-invoicing between vendors, buyers and issuing banks.

By encouraging companies to increase their use of commercial cards, be they physical cards or payments processed by MasterCard, we are going to see the dematerialising of paperwork and a major boost for EIPP.

Is MasterCard providing the EIPP software to enable SMEs to benefit?

No we are not; we are working with third party suppliers of EIPP systems. Our job is to provide the global platform for transactions and the flow of data necessary to allow the EIPP systems to do their work, not least in Europe in the way they account for VAT to the different tax authorities, the requirements for which vary from jurisdiction to jurisdiction.

What is the new EIPP software coming to market and where will it sit with the systems already used by large organisations? Will it be plug-and-play?

So far, the focus of the software houses has been on the top companies that have helped pay for the development of EIPP systems. But now there is a movement towards systems designed for smaller businesses that may ultimately be plug-and-play.

But the key consideration for us at MasterCard is not so much the software but what it provides, which is the next step in the value chain. We are looking to build a holistic solution. E-invoicing by itself does not for instance do much for the vendor, because you still have issues like delinquency and receivables management to be addressed.

However, when you start adding the MasterCard payment mechanism and the guarantees that come with our authorised transactions, it immediately addresses the receivables management for a supplier.

So this is what you mean by MasterCard acting as a facilitator?

Yes, an EIPP system by itself is fine from a data collection, record-keeping point of view, but for the merchant, it does not bring any certainty about the payment. However with MasterCard, the merchant enjoys our payment guarantee. The transaction details are submitted instantly and the merchant can normally be paid within two or three days.

All transaction data flows are integrated within MasterCard and our global data warehouse so the reporting and invoicing go into our system and then into the merchandisers’ or purchasers’ EIPP.

We appreciate that there are currently various levels of interaction by different players in the marketplace but by routing transactions through MasterCard, where we are already at the forefront with a sizeable position in the EIPP space, we believe that businesses and organisations obtain new efficiencies in accounts payable and receivable, cut costs, boost cash flow and improve their carbon footprint into the bargain.

We have already built a global infrastructure to handle any transaction and we therefore believe that we have all the right assets to be able to position ourselves strongly in the EIPP market space.

Are these new developments applicable only to MasterCard purchasing cards or do they also cover traditional travel and entertainment [T&E] cards?

From our point of view we see no difference between the cards, so yes both these transactional cards are being handled. Let me put this in context. Companies buy and source goods and services and whatever is purchased and wherever the transaction, it is sourcing.

In the past T&E has been regarded as a separate indirect cost that is treated differently, but we do now see a fundamental change in this. One indication of the change is that you see travel managers in larger companies are now coming under the control of the strategic sourcing directors. This is an indication that companies are starting to see T&E as sourcing like any other service.

Laurent Vreven MasterCard’s Laurent Vreven.