Electronic Bill Presentment and Payment (EBPP) - Frank Wendt, KPMG

Despite a lot of attention EBPP has not been widely adopted by firms. Newly emerging biller consolidator services might change this as they tackle with some key inhibitors, writes Frank Wendt, director in KPMG's financial supply chain practice.

Electronic Bill Presentment and Payment (EBPP) has been widely discussed in the Supply Chain and Finance Community but so far has not been adopted by firms as one might have expected. The key inhibitors were the relative high investment for billers as well as the legal requirements with regard to electronic signatures and the associated costs.

Recent studies show that the cost per invoice of a biller with regard to physical invoice creation, printing, enveloping and mailing lies in the range of €0.5 – €4.00. The buyer on the other side of the commercial transaction, incurs costs per invoice in the range of €2.00 to €30.00 with regard to the activities invoice receipt, scanning (in the best case), manual corrections and account posting. Electronic invoice processing promises up to 87% in cost savings per invoice (according to a study of the Frankfurt Gothe University).

However, to achieve these economic benefits the traditional EBPP models had to establish many 1:1 connections between billers and buyers which had to be managed and maintained separately. This has entailed significant connectivity and maintenance costs which could only be justified for biller / buyer relationships with appropriate invoice volumes.

EBPP CONSOLIDATOR SERVICES

A new model entails a third party service provider (the 'consolidator') that sits centrally between the biller and buyer. This allows the biller and buyer to only have to connect once with the consolidator in order to exchange invoice documents with several business partners.

This results in significant lower implementation and maintenance costs and also allows for coverage of smaller invoice volumes. As on average approximately 75% of invoices relate to 98% of the top 1000 billers (on average 24 invoices per year) the business case for EBPP changes dramatically to the upside.

ELECTRONIC SIGNATURES

Another major inhibitor for EBPP has been the cost and effort to obtain legally recognised electronic signatures from trust centres (mostly certified by pubic institutions). The costs for such electronic signatures has been quite high and have contributed to further undermine the economic rational for EBPP.

Through consolidator services these costs become negligible as many service providers can issue electronic signatures themselves and can reap cost degression. In addition the verification process and other legal requirements are dealt with for all facilitated connections between biller and buyer.

In practice, the biller provides electronic files that contain the required invoicing information to the service provider in a format of his choice. The consolidator takes this data and checks the customer information (buyer information) as well as converts the data into the format required by the buyer. This data conversion is one of the key services provided by the consolidator.

The second important service is the generation and verification of the electronic signature that has to be attached to the electronic invoice. The consolidator frequently offers to present the invoice to the buyer via the web and / or makes it available electronically for further processing by the buyer’s ERP systems.

Another service of the consolidator entails the provision of electronic data to the biller and buyer for archiving purposes and document retention.

The electronic provision of invoice information allows the buyer to fully automate the accounts payable process until payment approval (straight through processing) although some exception handling can mostly not be avoided. These leads to major savings on the buyer side which makes this solution especially attractive. Henceforth, the biller can see the EBPP as an additional service offering to its customer base.

GROWTH OF CONSOLIDATOR SERVICES

Consolidator services have recently sprung up in Europe. Among the service providers are banks, postal services as well as data processing service providers. This allows the selection of the appropriate services and also has ensured competitive pricing.

However, some service providers offer their services only on a regional basis due to differing legal requirements but it is only a question of time until these services will be extended. Firms should investigate whether EBPP Biller Consolidator Services could be an option to connect clients and therefore reduce operational costs and increase customer loyalty.