How are low economic growth and near-zero interest rates driving electronic invoicing and supply chain financing globally—particularly in Europe and LATAM?
Low economic growth in many countries has resulted in cost pressure and tax evasion. Because of this, governments are pursuing opportunities to optimize tax and VAT collection mechanisms. Europe, Italy, Spain, and Portugal, to name a few, have recently introduced mandatory electronic processes for tax declaration in the business-to-government (B2G) space—an extension of what some Nordic countries had already implemented. Similarly, numerous Latin American (LATAM) countries have been adopting electronic best practices to control and monitor tax payments more efficiently. Such governments and tax authorities want to leverage new technology to effectively speed up, control, and regulate VAT and tax payments. In LATAM, Mexico and Brazil were regional leaders (followed by several countries including Argentina, Chile, and Peru) in aiming for full mandatory e-Invoicing for all business segments by 2016 and 2017 respectively.
Additionally, near-zero interest rates have resulted in investment challenges for large, cash-rich corporations; these corporations have now realized the benefits of generating returns by offering early payment discounts as opposed to making short-term investments. And while banks have experienced flat or limited growth in traditional supply chain financing products in 2015, innovative FinTech companies have seen an increase in their results for such products due to lower technology costs, improved buyer/supplier onboarding processes, efficient real-time software as a service (SaaS), and enhanced reporting.
While the e-Invoicing Directive 2010/45 continues to drive change and influence transformation, the uptake in some markets has been two-fold. Recent research by Billentis found that many businesses still feel unsure regarding legal requirements of electronic invoices. According to a survey conducted by ibi research, 48% of businesses feel that they have sufficient information about digital invoices and archiving; 69% of businesses still print e-Invoices for internal workflows; and just 26% process them completely digitally. This indicates that while B2G processes are completely dematerialized in some countries, a great number of businesses still rely on paper for either internal workflows or supplier-to-buyer interactions. Having said that, e-Invoicing continues to evolve as Germany and France have decided to further collaborate in promoting e-Invoicing under the remit of the European Digital Single Market agenda, supported by the European Commission—this should bring additional economic benefits to Europe.
In the next few years, further consolidation is expected in Europe, and the emergence of more centralized and clearance-driven tax regimes is expected in Latin America and possibly Asia. Government mandated schemes would be the best practice, with trading parties and service providers focusing on increasing their market share and redefining new services to meet such emerging regulatory regimes and market demands.
In Europe, consideration of simplified electronic invoices and other tax documents, similar to the U.S., is required. Further evolution of e-Invoicing and B2B network platforms is expected towards the creation of more sophisticated global electronic marketplaces and risk averse business process automation platforms. Governments will select e-Invoicing service providers according to product capability and risk control features. Conceivably, some of the ambiguities associated with issuing legal electronic invoices in the EU will be clarified. Also highly anticipated is the creation of an industry body to establish an effective ecosystem in which service providers could interact, compete, and collaborate more effectively.