E-invoicing: from market force to enticed adoption of SMEs

There seems to be a general feeling of satisfaction in the market with the current levels of e-invoicing growth in Europe. Growth rates of 40% are often mentioned, and at first sight, that seems promising.

However, the current market for e-invoicing has a key characteristic that inhibits sustainable growth: E-invoicing is a buyer driven market. Large buyers enforce their (often smaller) suppliers to move to e-invoicing. They partner with e-invoicing operators that often have a primary focus on the large buyers, as these parties have the biggest savings potential. Adoption of e-invoicing by SME's is often driven by market force.
With 24 million SME's in Europe it is clear that if we want to bring e-invoicing to a next level, a fundamental shift is required towards a more SME-friendly environment.

The big question is: who will step up and find the right business model for developing e-invoicing for SME's? There are a number of interesting developments in this area:

1. E-invoicing Service Providers: Traditional buyer centric e-invoicing service providers are moving towards a more SME-friendly model, where the service providers develop propositions for SME's which includes not only sending invoices, but also receiving and managing them. Also some new SME-friendly service providers are gaining momentum.
2. Banks: Given the fact that banks already have access to a large number of SME's, they could leverage their e-banking capabilities to develop SME friendly e-invoicing propositions as part of a broader set of SME services. However, apart from Scandinavian banks, many banks seem to have limited appetite or room to move in this direction.
3. E-financing and other 'Working Capital Management' service providers: there are a growing number of companies that provide platforms for SME's to manage their working capital. This includes services such as e-finance platforms and dynamic discounting. And these providers are now stepping up to offer e-invoicing services towards SME’s as an enabler for their main services.

Interestingly, there are some examples where we see a combination of 1 and 3: Big buyer centric service providers are starting to explore partnerships with SME focused e-financing platforms, to develop a compelling proposition towards SME’s. SME's can upload their invoices to such platforms and the platform will make the invoice available for financing towards a number of potential lenders.
These are early signs that the market is moving towards an SME-friendly environment, and this development is a pre-requisite for mass adoption of e-invoicing for SME's.

For banks, this means that if they do not respond appropriately, the E-financing and Working Capital Management platforms could do with Financing services, what Paypal did for Payments services.