By Simon Shorthose, Managing Director, Readsoft UK
Building societies and small banks are reporting a rise in new customer applications and politicians are now calling for big banks to sell off branches in order to boost competition. The Big Four banks now hold 74% of all personal accounts, which after a sudden dip has remained a relatively stable market share since 2007. It is outside of these top 4 banks however, that more significant change can be seen, with some of the smaller banks steadily increasing their market share.
As the future of banking is set to change, the Big Four will rely even more on their corporate accounts. The challenge for the banks is how to add value to their offering and continue to evolve their corporate banking services. There is a continued risk of stagnation in this area, where each organisation offers the same products at the same or similar prices. Businesses constantly seeking to improve their efficiency look to corporate banking services for confidence in their financial management, legal compliance and audit trails.
E-invoicing is an extremely useful service that is missing from most corporate banking offerings. Manual invoice processing has a number of disadvantages, even for smaller businesses. It is a time consuming, slow and unclear system that lacks the ability to control and track each current invoice locally. Problems can occur when outstanding liabilities go unnoticed and there is always a risk of administrative errors. Still, e-invoicing has had a slow uptake in the UK SME market. E-invoices can come through specific portals in networks, but more often than not, they are received in many other formats. Receiving invoices via email, PDF and even Excel spreadsheets is very common and an overwhelming number of companies struggle through traditional processing in spite of the fact that well-proven process automation has been available for more than a decade.
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The European Association of Corporate Treasurers (EACT) has been advocating the potential benefits of widespread e-invoicing for a while, leading directly to the European Commission adopting the 2010 VAT Invoicing Directive, specifically aimed to increase the uptake of e-invoicing across the EU. Following the implementation of this Directive in January last year there are now fewer obstacles to the use of electronic invoices, as individual member states can no longer impose conditions in relation to the use of electronic invoices. The requirement to use specific technologies such as electronic signatures and Electronic Data Interchange (EDI) as a means of securing the authenticity of origin and integrity of content is now an individual business consideration, with the only requirement being that each party must agree. Despite this, many SMEs and even some large organisations do not have the capability to automate invoice processing. In the modern internet business landscape efficiency is paramount as even small business can trade over great distances, international boarders and in real time. These changes should encourage the use of e-invoicing, so that more businesses can benefit from the advantages process automation brings in terms of increasing visibility and reducing cost and administrative burdens.
Banks are in a prime position to take the opportunity to facilitate implementing these innovations. As well as being able to aid the development, due to the sheer number of SMEs that currently use their corporate services, banks are also in a position generate considerable revenue from the process. Their unique ability to link e-invoicing to companies’ current treasury and cash management services would provide a seamless extension to the financial connections already established with clients. There may also be an underlying attraction for banks already offering factoring and invoice discounting services to further automate these processes for their clients. It does, however, make little sense for banks to replicate what already exists, which may be the overriding reason many have, as yet, refrained from doing so. Out of the Big Four, RBS is the only bank offering a real, bespoke in-house solution to both corporate clients and local government authorities.
The best way for banks to incorporate these services would be through partnerships with companies that provide Software as a Service (SaaS). Banks incorporating different software platforms as value added services within their offering could build a complete e-invoicing feature. Adding these services to corporate bank accounts using this method would require no initial investment at all, as the SaaS method can be priced per invoice or by blocks of credits that can be used and distributed between customers as required by the bank. Offering these services would not only foster the uptake of e-invoicing throughout the business landscape, but it would act as a key value added service in a corporate banking offering. This would be a solution to banks facing competition and struggling to add value to their corporate accounts. It then becomes less about the technology and more about using SaaS as a sales tool to attract and retain corporate accounts.
Services like ReadSoft Online would be an ideal solution for top banks that are looking for ease of use and compatibility with existing account features. ReadSoft Online is used by individual SMEs and also organisations that provide a facility to process invoices for payment on behalf of a group of customers. It would even be a solution for smaller banks that are looking to grow their corporate customer base. The software provides a shared service opportunity that could help banks increase the adoption of e-invoicing by UK SMEs. With no initial investment, ReadSoft Online would provide a white label platform for banks so that they can provide an in-house accounts payable automation service that would automatically capture and interpret the information on supplier invoices and process them for payment in the most popular accounting software programmes used by SMEs, including Sage, Xero, IRIS, Netsuite and Microsoft Dynamics.
This would give banks’ corporate clients the ability to access this function from any internet enabled device, with automatic cloud back-up and no investment in hardware. Auditing and financial reporting would be significantly simplified giving clients further confidence in their banks’ services, increasing loyalty and solidifying relationships. If banks could successfully incorporate platforms like ReadSoft Online into a SaaS model, they could build a complete e-invoicing solution, which would dramatically increase the adoption of e-invoicing by the UK SME market, saving everybody time and money.