E-INVOICING SOLUTIONS RELATED TO RETAIL PAYMENTS

ERPB Secretariat

June 2015

ERPB/2015/007

E-INVOICING SOLUTIONS RELATED TO RETAIL PAYMENTS –

THE WAY FORWARD IN SEPA

1. Executive summary and next steps

To date in the EU the take-up of e-invoicing and the payment-related solutions is quite at an early stage.

Due to the directive 2014/55/EU on electronic e-invoicing in public procurement the general focus regards

to e-invoicing in Europe is mainly on governments and businesses. But for e-invoicing to become the

predominant method of invoicing by 2020 in Europe

, it is necessary to focus also on possibilities how the

benefits of e-invoicing could be maximised for consumers, SMEs and micro enterprises in the Single Euro

Payments Area, especially at the cross-border level. Therefore it is the right time to analyse the issues

and give guidance to the market participants to avoid developing non-interoperable national solutions and

services in SEPA.

The relevance of this dossier for the ERPB stems from the close links between invoicing and payment

processes. E-invoicing not only enables end-to-end straight through processing (STP) in pre- and post-

payment processes, it also influences how the payments are actually made. This has motivated the

emergence of innovative payment types – combining e-invoicing and payments into electronic invoice/bill

presentment & payment (EIPP/EBPP) solutions, which have taken off especially in the business to

consumer domain.

This note deals with e-invoicing and retail payments in the SEPA context and will serve as a good starting

point for the dedicated ERPB Working Group. The note also explains that the scope of ERPB’s future

work on this dossier should be on EIPP/EBPP solutions, focusing primarily on services which are

provided by PSPs and used by consumers, SMEs and micro enterprises to enable one-off and/or re-

current payments of the corresponding invoices in the SEPA context. With the vision to facilitate and

catalyse the market in delivering a harmonised e-invoice/bill presentment & payment service for payers;

and an e-invoicing/billing network for the payees to reach all consumers and businesses in Europe. The

matter how e-invoices are being processed and sent for payment in the Enterprise Resource Planning

(ERP) or accounting system of the businesses is left out of scope.

This note confirms that the European standard on e-invoicing (as required by directive 2014/55/EU) will

be, together with the SEPA payment instruments, one fundamental building block for enabling the

development of fully automatic e-invoicing and payment solutions, which are interoperable at the pan-

European level. In the note it is also clearly suggested that the semantic content used for EIPP/EBPP

solutions should be harmonised based on this European standard on e-invoicing. However, as no final

decisions have been made regards to the list of technical message formats accompanying the European

standard, the note supports the possible inclusion of the ISO 20022 Financial Invoice message standard.

Having the ISO 20022 Financial Invoice message standard as the underlining technical message format

(syntax) for EIPP/EBPP solutions would maximize the benefits of the fully fledged pan-European SEPA

A goal set by the European Commission in the Single Market Act II (COM/2012/573) and in EC communication COM/2010/712.

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infrastructures. For the European Committee for Standardisation (CEN) this could provide a positive

rationale in favour.

To provide momentum to the Working Group a number of barriers to the implementation of electronic

invoice/bill presentment & payment (EIPP/EBPP) solutions have already been identified. The following

outlines the most prominent barriers hindering:

(A) the general objective – the take-up of EIPP/EBPP solutions; and

1. Businesses and consumers have limited knowledge about the advantages and added value – not

enough motivation to initiate change.

2. SMEs and micro enterprises perceive e-invoicing/billing and the integrated presentment &

payment solutions as complex and expensive to implement.

3. Consumers lack access to comfortable and secure solutions for receiving and paying e-

invoices/bills.

4. The payers (and even the payees) might experience a lock-in effect because of diverge service

levels and complexity in switching.

(B) the core objective – EU integration EIPP/EBPP solutions

5. No EU-wide interconnected network for providing full reach.

6. Diverging standards and non-interoperable technical formats for e-invoicing/billing.

7. Diverging business rules and practices on top of the standards.

Altogether, in a two-sided market one side has to take the first step. This means that firstly the

businesses, as the biggest benefiters of the cost savings, should move towards e-invoicing, thereby

facilitating the awareness of their customers. It is acknowledged that many businesses have already

implemented supply chain & public procurement specific e-invoicing in the business-to-government (B2G)

or business-to-business (B2B) domain and use the dedicated networks for sending and receiving

invoices. But for enabling simple EIPP/EBPP services to all customers, cooperation is needed between e-

invoice service providers and PSPs. This way the supply side would be able to deliver a complete

package – a harmonised e-invoice/bill presentment & payment service for payers; and an e-

invoicing/billing network for the payees to reach all consumers and businesses in Europe – which would

for the interested stakeholders facilitate optimal level cash in opportunities on benefits of e-invoicing and

SEPA in business-to-consumer and B2B invoicing.

The ERPB is invited to:

- agree on the ERPB’s focus and vision on this dossier;

- agree to set up an ERPB Working Group and approve the mandate (see file “Mandate of

the Working Group on e-invoicing solutions related to retail payments”); and

- advise the ERPB Working Group to take into consideration the findings presented in the

Secretariat note.

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2. Background

Migration to SEPA payment instruments was only one piece in a jigsaw of measures and initiatives being

introduced with the aim of creating a more competitive Single Market in Europe. Also the adoption of

electronic invoicing (e-invoicing) is expected to create additional benefits in efficiency and cost savings

Therefore the European Commission wants to see e-invoicing become the predominant method of

invoicing by 2020 in Europe.

The EU legislators define an “electronic invoice” as an invoice that has been issued, transmitted and

received in a structured electronic format which allows for its automatic and electronic processing

(Directive 2014/55/EU on electronic invoicing in public procurement). Therefore only machine readable

invoices, which can be processed automatically and digitally by the recipient

, are considered (for

example, a scanned invoice sent by email is not an e-invoice as per this definition)

In Europe according to a research conducted by Billentis (2014: 12) the annual invoice volume is

estimated to reach 35 billion and the general estimated volume of e-invoices is totalling up to 7.5 billion in

2015. More precisely, approximately half of the volume is sent to consumers (B2C); the other half to

enterprises and the public sector (B2B/B2G/G2B). The biggest incentive for accelerating the general

uptake of e-invoicing is the potential cost saving. Based on some actual case studies, it is highlighted that

e-invoicing enables businesses to reduce per invoice processing costs up to 59% for invoice issuers and

64% for invoice receivers, depending on the size of the company and the number of processed invoices

(Ibid, 2014: 51–52). Needless to say that e-invoicing is more efficient, quicker, comfortable, and

environmentally friendly. It also opens additional possibilities which can be used in the context or real-

time-economy and making economic forecasts.

The European Commission believes that the Directive (2014/55/EU) on electronic invoicing in public

procurement will prevent the further fragmentation of the Internal Market and facilitate the general uptake

of e-invoicing. The directive makes e-invoicing in public procurement mandatory by 2016 and calls for a

European standard for the semantic data model of the core elements of an electronic invoice. With the

directive (2014/55/EU) the basic (core) elements of an e-invoice will be harmonised in all Member States.

The harmonisation of the core section of the e-invoice will enable cross-border interoperability and also

legal compliance.

Consequently, the general focus in Europe with the call for a European standard on e-invoicing is more

concretely on the domain between businesses and government. Approximately 45–65% of all companies

are suppliers for the public sector and 100% of all companies and households receive in one or the other

form invoices (requests to pay, e.g. land tax, public service charges etc.) from the public sector (Billentis,

2014). Therefore a greater uptake of e-invoicing solutions between businesses and government will

increase also the usage of e-invoicing towards the consumers, SMEs and micro enterprises. With the

European e-invoicing standard it is aimed that the standard and the defined list of possible technical

message formats (syntaxes) should make it possible to set up user-friendly electronic invoicing systems,

which also the businesses, especially SMEs could use. It will be developed by the European Committee

for Standardisation (CEN); publication in the Official Journal of the European Union is envisaged by May

2017. This standardisation initiative (which is limited to the content and exchange on e-invoices) will be,

together with the SEPA payment instruments, one fundamental building block for enabling the

development of fully automatic e-invoicing and payment solutions, which are interoperable at the pan-

European level.

Reaping the benefits of e-invoicing in Europe, European Commission, 2010 (link)

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From the retail payments perspective there are emerging different solutions and services which merge

electronic invoicing and payments from the payment service users’ (PSUs) perspective (see also annex

1). Meaning that the basic e-invoicing (out of scope for ERPB) can be combined with payment services in

a way which results in an innovative payment type, enabling the payer to flexibly manage and pay

invoices/bills – i.e. Electronic Invoice or Electronic Bill Presentment & Payment (hereinafter also

EIPP/EBPP)

solutions. The EIPP/EBPP solutions are facilitated either directly or indirectly via PSPs

and in practice they can be used in the business/government-to-consumer and business-to-business

domains. For consumers it makes handling invoice payments easier and for businesses it increases

efficiency throughout the payment as well as the reconciliation process. In some cases these services are

clearly perceived by PSUs even as alternative payment solutions on top of the SEPA payment

instruments. Unfortunately the market situation suggests that there is a need for further standardisation

and harmonisation in order to make these solutions and services interoperable at the pan-European level.

To date in the EU the take-up of e-invoicing and the payment-related solutions is quite at an early stage.

Therefore it is the right time to analyse the issues and give guidance to the market participants to avoid

developing non-interoperable national solutions and services, which would also affect the single euro

retail payments market.

3. Vision, focus and aim of the note

The vision is to facilitate and catalyse the market in delivering a harmonised e-invoice/bill presentment &

payment service for payers; and an e-invoicing/billing network for the payees to reach all consumers and

businesses in Europe.

The focus is on services which are provided by PSPs and used by consumers, SMEs and micro

enterprises to enable one-off and/or re-current payments of the corresponding invoices in the SEPA

context.

The aim is to outline the main findings of the research and analysis done by the ERPB Secretariat, with

the objective to support the take-up and EU-level integration of electronic invoice/bill presentment &

payment (EIPP/EBPP) solutions.

As the trend is towards electronic invoicing and also financial literacy is gaining ground in consumers’

everyday lives there is a need for simple solutions to manage and pay e-invoices in the entire Single

Market. Furthermore, due to limited IT skills and resources of SMEs and micro enterprises there is an

increasing demand for extremely easy-to-implement/use tools & services (provided e.g. by PSPs or third

parties) which enable the electronic sending, receiving and payment options of invoices/bills.

In the context of the note, e-invoicing solutions which are fully integrated into the Enterprise Resource

Planning (ERP) and/or accounting software and are already supporting straight-through-processing (STP)

– i.e. the payment orders are sent directly to the PSP via a SEPA compliant channel – are out of scope.

This note is also not concentrating on the deliverables of the directive 2014/55/EU, i.e. the European

standard for the semantic data model of the core elements of an e-invoice, because the latter focuses

concretely on e-invoicing in public procurement, supporting also complex supply chains, and thus has a

much richer content than needed for EIPP/EBPP.

4. General state of play in Europe

In Europe the e-invoicing market is growing, but the market penetration varies quite a lot. According to

Billentis the general estimated electronic proportion of electronic invoice/bill volume is predicted to reach

E-invoice (used in B2B/B2G) and e-bill (used in B2C) are synonyms, in this note the abbreviation – EIPP/EBPP – names both.

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16% for consumers and 27% for businesses and governments in 2015. The B2C electronic share of total

invoice/bill volume is above 15% in Finland, Sweden, France, Ireland, the Netherlands and the United

Kingdom; and exceeds 40% only in Denmark, Norway and Estonia. In general electronic invoicing/billing

is still more used in B2B/G2B/B2G, the respective share in the majority of Europe is 15-40% or above.

The Directive (2014/55/EU) on electronic invoicing in public procurement will facilitate the general uptake

of e-invoicing even more. This gives more ground for saying that in the coming years e-invoicing/billing

will become more available also to consumers, SMEs and micro enterprises.

In Europe there are over 620 e-invoicing service providers (operators), which are based either on three-

or four-corner e-invoicing models. They offer different web-based, Software as a Service (SaaS, e.g.

piece of software which connects to the ERP/accounting systems) and other solutions, which enable

payees to issue e-invoices and send/receive them directly or via a consolidator/aggregator. Regarding

distribution channels in B2B/B2G/G2B invoicing the ‘buyer/supplier direct’ and ‘consolidator models’ are

used more or less equally, if one considers only the presentment of the invoice. However, in the B2C

invoicing the supplier direct model is used the most. This is because most consumers prefer to receive

electronic invoices via e-mail. Therefore it is estimated that e-mailing could be the preferred delivery

channel for 2/3 of European consumers in the mid-term. Invoice presentment on the supplier portals and

via internet banking does not yet play a major role in most European countries. An exception build the

Nordic countries, where the exchanged e-invoice volume via online banking portals is almost as high as

the one distributed by other channels. (Billentis 2014 and 2015)

In the future, with stronger discipline regarding e-invoicing standards, as being applied e.g. in Finland, it

will be possible to launch piloting in respect of accounting based on statements of account and VAT

reporting. Such pilot projects will subsequently enable implementation of cash-flow forecast automation

and broader reporting automation. As more e-invoicing networks enable immediate processing, it might

be even possible to monitor the business cycle in real-time at a company as well as country level.

In 2014 the migration to SEPA credit transfers and direct debits reduced the complexity of implementing

e-invoicing solutions and enhanced the benefits of automated reconciliation – latest by February 2016 all

stakeholders are using ISO 20022 XML standards for initiating bulk payments and receiving reconciliation

messages. Therefore the harmonisation of the “payment leg” and the messaging channels between the

PSPs and PSUs has made it easier for the sellers and buyers to integrate e-invoicing into their

ERP/accounting systems. The migration has even motivated PSPs in some Nordic-Baltic Member States

to move more towards B2C/B2B e-invoicing/e-billing, by replacing legacy direct debits with EIPP/EBPP

solutions, i.e. combining e-invoicing and SEPA credit transfers to facilitate comfortable payment of one

time and regular invoices.

Finland, Estonia and Latvia

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In the Nordic-Baltic countries (i.e. Finland and Estonia) the impact on the uptake of B2C invoicing has

been remarkable, because the SEPA migration provided an incentive to make the invoicing and payment

procedures more efficient, resulting in the switch of legacy direct debits to e-invoices/bills which are being

comfortably paid with SCTs. As both countries use a national four-corner e-invoicing model, the payees

can make use of e-invoice sending and receiving possibilities offered directly by their PSPs or third party

e-invoicing service providers (SaaS or web-based), unfortunately this interoperability is possible only at

national level. Based on the practice of Finnish and Estonian PSPs the payers (consumers as well as

businesses) are comfortable with the EIPP/EBPP solution and according to the competent authorities and

consumer protection bodies there have been no complaints regards to the need for a refund recorded

during 2014.

The decision how the payers want to pay the incoming e-invoices/bills always depends on different

factors, e.g. the nature of the “business” transactions they are conducting; and also the financial situation

of the payer, which will also influence the payment decisions through the level of the payer’s financial

literacy. Based on these factors the payers are free at any time to choose whether they want to pay their

e-invoices using one-off or automatic (re-current) payment options, and change their decision at will. But

it can be said that the payers (especially consumers) tend to use the EIPP/EBPP service more for

automatically paying regular e-invoices/bills, at least in the on boarding phase.

5. Barriers to take-up and integration

E-invoicing is a network business and there is a concrete need to avoid fragmentation and interconnect

all service providers in order to achieve maximum reach to all businesses and consumers. Currently the

use of e-invoicing is not widespread throughout the European Union and the use of EIPP/EBPP solutions

is even less.

Regards to take-up, it is quite common that the migration to e-invoicing faces the well-known chicken-

and-egg dilemma. Meaning that some businesses might argue that they don’t need to start using e-

invoicing, because their customers (suppliers/consumers) don’t demand it. And vice versa the suppliers

and consumers are just incapable of demanding services related to e-invoicing if the companies are not

offering them.

Regards to EU integration, the work that is going to be done under the aegis of Directive 2014/55/EU is

addressing the general standardisation and interoperability issues of e-invoicing – by means of the

European standard on e-invoicing and the limited list of syntaxes with relevant guidelines on

interoperability at the transmission level. By law e-invoicing will be compulsory only in the procurement

process, between businesses and public authorities. However, as the migration to the European e-

invoicing standard is voluntary for private businesses (B2B and B2C invoicing) it affects also the

EIPP/EBPP services offered to SMEs, micro enterprises and consumers. The most important remaining

barriers are listed in the following table.

The following list of barriers is based on a Eurosystem analysis, the Billentis e-invoicing / e-billing report

(autumn, 2014) and the European Commission’s final report of the expert group on e-invoicing

(November, 2009), etc.

The 7 key barriers to be addressed

Influencing the general take-up and implementation of EIPP/EBPP solutions

1. Businesses and consumers have limited knowledge about the advantages and added value – not

enough motivation to initiate change.

2. SMEs and micro enterprises perceive e-invoicing/billing and the integrated presentment & payment

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solutions as complex and expensive to implement.

3. Consumers lack access to comfortable and secure solutions for receiving and paying e-invoices/bills.

4. The payers (and even the payees) might experience a lock-in effect because of diverge service

levels and complexity in switching.

Influencing EU integration of EIPP/EBPP solutions

5. No EU-wide interconnected network for providing full reach.

6. Diverging standards and non-interoperable technical formats for e-invoicing/billing.

7. Diverging business rules and practices on top of the standards.

6. Concluding considerations for the ERPB

As described before, the potential benefits (see also annex 2) of the adoption of e-invoicing in general

and EIPP/EBPP solutions more specifically are quite important not only for the stakeholders but also for

the whole economy. A central point for achieving migration to e-invoicing is that payees are convinced of

the added value (i.e. cost savings, speed, security and simplicity) of e-invoicing/billing and more

innovative EIPP/EBPP solutions which clearly involve also payees/payers with no technical capability of

automatizing its own payment processes.

Based on Eurostat 7.3% of all enterprises in EU28 are SMEs (10-249 employees) and 92.5% are micro

enterprises (less than 10 employees). For e-invoicing/billing to become predominant in Europe, the vast

majority of SMEs and micro enterprises must also be enabled to issue and pay e-invoices/bills in a simple

and cheap manner. In a two-sided market this would also ensure that consumers can fully benefit from e-

invoicing/billing, because it would give a greater incentive to PSPs, e-invoicing service providers and

larger payees for developing EIPP/EBPP services targeting directly consumers.

By addressing the “seven key barriers” identified in the previous chapter the following possibilities for

supporting the take-up and EU integration of EIPP/EBPP solutions are identified (as numbered before).

6.1. General objective – support the take-up of EIPP/EBPP solutions

For supporting the proliferation of the electronic invoice/bill presentment & payment solutions the

following conclusions should be considered by the ERPB.

1. Better communication of the potential benefits to the supply and demand side of the market

is needed already at country level.

a. A supporting role could be played by the relevant national fora and initiatives.

b. For highlighting the social and private benefits of automated e-invoice and payment

processes in the B2G/B2B/B2C and G2C domains, the relevant authorities could consider

including it also in the scope of cost studies on retail payments.

Based on the available reports analysing the barriers hindering the up-take of e-invoicing it is

obvious that one common issue is related to the knowledge of the business owners. Because even if

there are convenient and cost effective EIPP/EBPP solutions available, the business owners tend

not to know what are the real benefits for the company.

2. Businesses need easy-to-use and cheap-to-implement EIPP/EBPP solutions (e.g. web/portal-

based or Software as a Service), enabling them the possibility to reach any payer in the

European Union. [Developments could be made by ERP/accounting software providers; e-invoicing

service providers; and also PSPs.]

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a. The ERP/accounting software providers have a key role to play – many of their solutions

already enable e-invoicing, the question is how to easily send the invoice via a PSP or e-

invoicing service provider’s network to any payer in the EU.

In general, it is aimed that by 2020 e-invoicing becomes the predominant way of invoicing in the

European Union. The directive 2014/55/EU makes e-invoicing in public procurement mandatory by

2016. This will probably ensure the critical mass of adopters, because it is estimated that

approximately 45–65% of all companies are suppliers for the public sector (Billentis, 2014). For

increasing the take-up of EIPP/EBPP services, the businesses already using e-invoicing in the B2G

domain should be enabled to apply that also in their B2B and B2C business, e.g. by making

available necessary conversion facilities. In addition also the vast majority of SMEs and micro

enterprises should be able to issue e-invoices.

3. Consumers need that the stakeholders, enabling them to receive, manage and pay e-

invoices/bills in the B2C/G2C domain, establish easily accessible and secure service

environments, which can also be used remotely via mobile devices or even phone calls.

[Developments could be made by e-invoicing service providers; and PSPs.]

Consumers lack access to comfortable and secure solutions for receiving and paying e-invoices/bills.

Smartphones, tablets and mobile internet is becoming widespread and affordable to everybody. Also

banking and e-invoicing/billing is steadily moving into mobile channels/devices.

4. A harmonised description of the basic features/principles of the EIPP/EBPP service would

avoid complexity in changing service providers. [In cooperation of PSPs and e-invoice service

providers.]

a. It also ensures a level playing field for the relevant stakeholders in the cooperative space.

b. The service providers are free to develop additional added value offerings, bearing in mind

the EBA guidelines for security of internet payments (EBA/GL/2014/12).

From the consumers’ (and possibly many micro enterprises’) perspective it would be efficient and

convenient to receive, manage and pay all e-invoices in one easily accessible environment.

6.2. Core objective – support EU integration of EIPP/EBPP solutions

For increasing integration the ERPB should consider the following.

5. Leveraging the potential of SEPA payment infrastructures in cooperation with existing e-

invoicing infrastructures could result in a pan-European e-invoicing network enabling the

payees/payers to route or send all e-invoices/bills based on IBANs and/or payment card

details to any payer’s account in the European Union. The invoicing leg could operate in real-

time. For that cooperation is needed between PSPs, e-invoice service providers, SEPA

infrastructures and if needed also card payment processors in SEPA.

a. Also conversion facilities to ISO 20022 XML formats are needed for including the different e-

invoicing syntaxes.

b. This could be applied at least in the B2C and G2C domain and if applicable also for micro

enterprises and SMEs.

Despite the cooperation efforts between the existing e-invoice service providers, the general e-

invoicing network is still limited and doesn’t reach many SMEs and the majority of micro enterprises

and consumers in the EU. However, the PSPs’ network interconnects all payees and payers in the

EU, therefore the e-invoice envelope (and also e-receipt) could be sent to the payer using the SEPA

payments infrastructure.

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6. For benefiting of the fully fledged SEPA infrastructures the EIPP/EBPP solutions, which

enable consumers, SMEs and micro enterprises to initiate one-off/re-current payments of the

corresponding invoices, should ideally be based on the ISO 20022 Financial Invoice

messages (syntax). See rationale in annex 3. [In cooperation of PSPs and e-invoice service

providers.]

a. Harmonisation of the semantic content should be made based on the European standard on

e-invoicing. The European standard should be implemented at least to an extent necessary

for providing EIPP/EBPP services.

b. The ISO 20022 Financial Invoice syntax could also be mapped to enable technical

interoperability between all identified syntaxes for the European standard (i.e. by means of

conversion facilities); in particular the CEN could include it as one of its recommended

syntaxes.

Making use of the ISO 20022 Financial Invoice syntax enables the service providers and payees to

take advantage of the fully fledged SEPA infrastructures and the ISO 20022 XML compliant channels

between the payees and PSPs.

7. Harmonisation of business rules and practices and interoperability between different

EIPP/EBPP solution providers domestically and on the cross-border level is urgently needed.

In this respect, the possibility of creating a European scheme, i.e. a scheme for EIPP/EBPP services,

which makes better use of the existing payment schemes, could be explored. [In cooperation of

PSPs and e-invoice service providers]

a. The scheme should be open to all SEPA payment instruments, ensuring flexibility based on

the business needs of the involved parties; and

b. it should be based on the existing payment instruments, enabling the payer to flexibly

manage/initiate one-off and re-current payments at the service provider’s environment (incl.

authorisation of the automated payments of already received regular e-invoices and bills).

In principle and by drawing parallels from the definition

of a payment scheme, such a harmonisation

of rules, practices and/or implementation guidelines could lead to the development of a European

scheme for EIPP/EBPP solutions and services. On top of that a scheme ensures that the services

are provided on the same essential conditions and modalities throughout SEPA, and also that the

payees and payers have the possibility to use a single payment account irrespectively the Member

State for using the services. Such a scheme would facilitate the elimination of borders and make it

possible for consumers, SMEs and micro enterprises to use EIPP/EBPP solutions and services in

SEPA with the same level of simplicity and adequate security as within the national environment.

Ultimately a European scheme would also benefit the development of a healthy and competitive

market where the EIPP/EBPP solution and service providers can enjoy a level playing field.

6.3. Possible action points to the dedicated ERPB Working Group

In the following the above listed conclusions are transformed into more concrete action points for further

investigation.

• ISO 20022 Financial Invoice message standards v/s ISO 20022 Payment message standards.

The ERPB WG should initiate:

‘payment scheme’ means a single set of rules, practices, standards and/or implementation guidelines agreed between PSPs for

the execution of payment transactions across the Union and within Member States, and which is separated from any infrastructure

or payment system that supports its operation (Article 2, Regulation 260/2012/EU)

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- a feasibility assessment for leveraging the potential of the SEPA payment infrastructures – either

by (A) additionally supporting the transmission of ISO 20022 e-invoice envelopes, or (B) merging

both message standards – to support EIPP/EBPP services that reach every payer (identified by

an IBAN or card details) in the European Union (i.e. full reachability using the PSPs’ and the

automated clearing houses or the card processing infrastructures); and

- a query on how the EPC’s scheme rulebooks and the practice of PSPs might support or restrict

this.

•

Pan-European reachability: in relation to the feasibility assessment, specified above, the ERPB WG

should initiate an analysis for the development of a framework for the pan-European e-invoicing/billing

network, also taking into account the developments of e-invoicing networks in the B2G domain and

considering interoperability options.

•

Avoiding complexity in changing service providers: the ERPB WG could propose a harmonised

description of the basic features/principles of the EIPP/EBPP service, which could be included in a

European scheme for EIPP/EBPP services.

•

Harmonising the business rules, practices and implementation guidelines: for EIPP/EBPP

solutions (targeting SMEs, micro enterprises and consumers), the ERPB WG should describe a set of

“minimum criteria” for business interoperability that all service providers respect in providing the

respective services in the EU. The relevant market stakeholders should discuss and agree on the way

forward regards to the establishment of the European scheme for EIPP/EBPP services.

•

Facilitating different payment habits: from the payers’ perspective it is comfortable to manage the

payment option (one-off/automatic) of incoming one-off and regular e-invoices at the payer’s PSP (i.e.

authorise the automated payments of invoices after receiving the e-invoice). This might have the

potential to motivate the uptake of e-invoicing in the B2C and also B2B domain. The ERPB WG could

investigate whether the needs of all invoice issuers/payers in Europe could be supported by the

existing payment schemes and propose ways to address this if it is not the case.

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Annexes

Annex 1. Combining e-invoicing and retail payments

E-invoicing is the electronic transfer of invoicing information between business partners (seller and

buyer). It is an essential part of an efficient financial supply chain and it links the internal processes of

enterprises to their payment systems. However, the benefits of electronic invoicing are maximised when

the generation, sending, transmission, reception and processing of an invoice can be fully automated.

In general e-invoices can be routed and displayed to the payers (consumer, SME & micro enterprise) via

different channels. The payee has the possibility to:

• issue e-invoices directly to the payers (e.g. using a supplier/buyer direct model)

, if it has enough

resources to integrate e-invoicing into the ERP/accounting system; or if not

• use a service provider (a PSP or a 3

party), which can provide an easy-to-use solution for

compiling e-invoice envelopes, also enabling aggregation possibilities (consolidator model)

This enables to make the connection between the general e-invoicing and the automation of the

presentment and payment of the invoice (i.e. EIPP/EBPP) towards the payers. It also includes the after-

payment processes, enabling automated reconciliation

of outstanding e-invoices and payments

made/received.

The following figures show the involved parties and illustrate the possible e-invoice flows in case of 3-

corner and 4-corner models (non-exhaustive)

. It has to be noted that more and more e-invoicing

networks are processing information flows in real-time.

3-corner e-invoicing models

4-corner e-invoicing models

It is important to stress that all EIPP/EBPP solutions enable via the PSPs the buyer-side (payer) to initiate

an electronic payment either using a credit transfer, a direct debit, or a card payment (as described in the

following table). In addition the seller-side (payee) can enjoy automated reconciliation in its

ERP/accounting systems (or via an accounting service provider).

The seller direct model implies that the vendor possesses the EBPP system on which invoices are presented to customers (one-

to-many relationship). In the buyer direct model, the customer controls the EBPP application (many-to-one relationship). The

vendor either posts his invoices on the customer’s system or the customer creates the invoice himself from his own order.

The consolidator model promotes many-to-many relationships between payees and payers. A consolidator (e.g. a third

party/PSP) acts as an intermediary, collecting or aggregating invoices from multiple payees for multiple payers, eliminating the need

for point-to-point connections.

Within SEPA the automation of reconciliation can be achieved by using the ISO 20022 XML messages for Account Reports in the

payment service provider (PSP) to customer domain.

EBA e-invoicing initiative – Service Description & Rulebook – Version 2.0, published 2011 (see pages 85–86)

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Electronic Invoice or Electronic Bill Presentment & Payment

(EIPP/EBPP) solutions

1. PRESENTMENT

PSPs' Internet Banking websites;

3rd Party Service Providers' websites/secure

e-mails (non-PSPs);

acquiring the

payment option

via PSPs

Payees' websites.

2. PAYMENT

Credit Transfers, Direct Debits, or Card Payments

Recognizing that for EIPP/EBPP solutions the payees can use their own websites, it has to be stressed

that PSPs and non-PSP third party service providers (e.g. e-invoicing operators/service providers) are

better placed for proliferation of e-invoicing in Europe. The e-invoicing operators can provide easy-to-use

and simple-to-implement e-invoicing solutions for issuing invoices (which is their primary business), but

also address the payers’ needs by offering EIPP/EBPP services to consumers, SMEs and micro

enterprises.

The PSPs network provides strong authentication of the payees/payers as well as strong authorisation of

payments. The PSPs are also inter-connected via the SCT and SDD infrastructures into a pan-European

network, which reaches all stakeholders. Currently in the Single Euro Payments Area (SEPA) there are

three EU-wide payment schemes developed by the European Payment Council: one for credit transfers

(SEPA Credit Transfer Scheme) and two for direct debits (SEPA Direct Debit Core and B2B Scheme).

For making inter-bank payments the PSPs make use of relevant infrastructures and the corresponding

services for clearing and settlement of credit transfers and direct debits

The following table shows how it is possible to combine e-invoicing, different payment instruments and

related infrastructures to enable comfortable payment of an invoice.

EIPP/EBPP solutions

e-invoicing

standard/format

e-invoicing file/envelope

payment instrument

credit transfers direct debits card payments

and infrastructure SCT infrastructure SDD infrastructure processing infrastructure

At the service level

the payers are

enabled to make

- one-off payments (for one time or regular e-invoices); and/or

- re-current payments (for regular e-invoices)

As the table is generic, it is flexible towards the different needs and payment habits of the payment

service users in Europe. From the security perspective the EBA guidelines on the security of internet

payments are applicable to all combinations.

Annex 2. Benefits of using electronic invoicing

The implementation of e-invoicing brings benefits for the society as a whole – convenience for

consumers, efficiency and productivity for businesses as well as for public administrations. The

digitalization of business processes in general and e-invoicing in particular is a prime opportunity to

improve the competitiveness of European enterprises and raise productivity and customer satisfaction. In

addition to the reduction of private costs also the environmental benefits of e-invoicing must be

considered. E-invoicing helps to reduce paper consumption and energy costs of transportation,

generating significant carbon savings and reducing the ecological footprint of companies

Economically friendly electronic invoice, Federation of Finnish Financial Services, 2010

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The structured e-invoicing enables integration of processing in the ERP and accounting software and will

make it possible to fully automate buyer and seller business processes (i.e. starting from placing the

order, to the actual payment and reconciliation of the invoice). This leads to improved STP (straight-

through-processing) for payments and reconciliation of outstanding invoices. With faster invoice approval

times the payment delays will be shorter, and if needed the businesses will have also faster payments

and improved supply chain finance opportunities, enabling them to generate more value. The EIPP/EBPP

services offered by PSPs and e-invoicing operators make these benefits easily accessible to consumers,

SMEs and micro enterprises, enabling them to issue and pay e-invoices in a simple, secure and efficient

manner. So, with EIPP/EBPP services it is a win-win situation to businesses/consumers as well as to the

PSPs and e-invoicing service providers. By introducing new convenient services the PSPs and the e-

invoicing service providers are able to find new sources of income flows and thereby also to better

acquire new customers and satisfy/retain the current customer base.

In addition, general migration to e-invoicing benefits the “real-time economy” in the entire EU, i.e. will help

to create an environment where all transactions are digital, automatically generated and in real time

(Bank of Finland, 2015)

. For companies, public authorities and consumers this means that orders, order

confirmations, invoices and payments move from one system to another without delay. This will also

enable the uptake of electronic filing, electronic accounting and automated financial administration and

standardised, structured and automated reporting (towards relevant authorities). Full migration to e-

invoicing will enable governments to fight against grey economy and tax evasion; it will also make it

possible to accurately monitor the health of the economy as a whole.

In the following the most important benefits, categorised by stakeholder groups, are outlined

For businesses as sellers/payees and buyers/payers

Cost reduction

– e-invoicing creates substantial cost savings through a reduction in manual administrative

work, material and transport/postal costs. In particular a full integration of procurement/purchase

processes, invoicing and payments along the physical and financial supply chain is an essential driver for

enterprise cost savings. Straight through processing (STP) and semi/full automation of the invoice

presentment and payment makes the whole process more efficient (e.g. no mistakes in the payment

orders and less problems in reconciliation). Additional cost savings arise in fraud and loss prevention and

auditing costs for trading parties and tax authorities.

Faster processing and payment cycles – e-invoicing enables instant and secure delivery of multiple

invoices to the payers, i.e. ensuring also faster invoice routing and approval times. It also enables faster

payments, either initiated through the payer’s own automated ERP and accounting software (exporting

payment data to PSPs) or via EIPP/EBPP solutions enabling easier and more efficient payment

opportunities for SMEs, micro enterprises and consumers. By using the automated ISO 20022 XML

account reports messages in the ERP and accounting software, the businesses can make use of

enhanced account reconciliation. This enables also better monitoring of the days sales outstanding, i.e.

acknowledgement of invoice receipt and transparency of the payment status.

Faster business cycle – due to the faster approval and processing of e-invoices, businesses can increase

their working capital by making use of flexible supply chain financing, i.e. they have the opportunity to

borrow against approved receivables, thus increase the speed and productivity of their business cycle.

Payments in an increasingly digital economy, Payments Council Working Group 2, Bank of Finland, 2015

This part has benefited from different sources released by commercial and public sector entities. Including also the “Final report of

the expert group on e-invoicing”, published by the European Commission in November 2009. The benefits for the Public

Administrations are not described as they are out of the scope of this report.

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Improved cash management – for businesses the ability to optimise their working capital is essential. It

improves business agility and can minimise the need for external financing. By shrinking the order-to-pay

and order-to-cash cycles, e-invoicing allows businesses to receive payments in a timely manner and take

advantage of any trade discount schemes that may be available.

Improved compliance and security – businesses can take advantage of e-invoicing service providers

(PSPs or e-invoicing operators) whose solutions ensure security and regulatory compliance, i.e. VAT

compliance of invoices. For example: enabling e-invoices to be signed by a qualified electronic signature

and used/accepted as source documents in accounting, i.e. making the whole accounting process more

efficient.

For consumers as buyers/payers

Convenience and control of finances

– all purchases end with a paper or electronic invoice/receipt, with

EIPP/EBPP services consumers have simple and easy access to their invoices at the payees’ digital

environment, at the PSPs’ internet banking environment or 3

party service providers’ digital environment

(including notifications/monitoring via e-mail or SMS). With the latter two it is possible also to collect all

invoices into one place, which gives the consumer a good overview of expenditures, enabling to better

plan one’s finances. Including choosing when, where and how to pay. It makes also possible to access

archived invoices for warranty purposes, etc.

Better payment choices

– with EIPP/EBPP services the consumers are always in charge, i.e. having an

overview of outstanding invoices and choosing payment options best fitting their financial needs (e.g.

using one-off or re-current payments). As the invoices are presented to the payer well before the due

date, the payer can check the details and rightfully change also pre-authorised re-current payments. The

payers will enjoy all benefits of the SEPA payment instruments.

Increased security – with e-invoicing the payer cannot make any mistakes in the payment order, because

the latter is generated automatically from the e-invoicing envelope sent by the payee. This means that the

invoice is always paid correctly, i.e. with the right payer and recipient name, account and reference

number and other relevant remittance data. In addition with using EIPP/EBPP services the payer will

always receive the invoice, it won’t get lost in post.

Annex 3. Rationale of using ISO 20022 Financial Invoice messages for EIPP/EBPP

The EIPP/EBPP solution providers, which enable consumers, SMEs and micro enterprises to initiate one-

off/re-current payments of the corresponding invoices, should be incentivised, by the ERPB, to migrate to

the European e-invoicing standard and the ISO 20022 XML Financial Invoice messages as one of the

potential

interoperable syntax. As the European e-invoicing standard (i.e. the semantic data model of

the core elements of an e-invoice) provides more information than needed for providing EIPP/EBPP

services, it should be implemented at least to an extent necessary for providing the service to consumers,

micro enterprises and interested SMEs. In addition making use of the syntax based on the ISO 20022

methodology would enable the service providers and payees to take advantage of the fully fledged SEPA

infrastructures especially reaching consumers and businesses with simpler supply chains. See the

elaborated rationale in the following table.

It has to be noted that even if the ISO 20022 Financial Invoice would not be included in the final list of

syntaxes that will accompany the European standard on e-invoicing, there is a possibility to establish

interoperability based on other syntax (i.e. UN/CEFACT Cross Industry Invoice). This can be done by

means of conversion services which the EIPP/EBPP service providers could include in their value

Currently the assessment of the syntaxes that are to be included in the final list is on-going in the CEN/PC434.

Page 15 of 15

proposition to the payees/payers. In practise this would facilitate the businesses, which have

implemented some other syntaxes in the B2G domain, to send “requests to pay” to consumers, micro

enterprises and SMEs by making use of EIPP/EBPP services.

Rationale of using ISO 20022 Financial Invoice messages (syntax)

Strengths

It is a XML global message fully based on the

ISO20022 standard; it is based on the same

methodology as the payment messages used for SEPA

Credit Transfers and Direct Debits.

It is entirely based upon the CII Version 2.0 (Cross

Industry

Invoice) data model as the overall business

reference model for invoicing and fully maps to that

model.

- It provides an immensely useful and useable sub-set of

the UN/CEFACT CII data model by means of a

minimum core dataset. It will meet the majority of

com

mercial requirements for a general purpose

invoice, as well as being capable of extension to more

specialised requirements.

Weaknesses

It intentionally does not cover the features of entire

UN/CEFACT CII model, which reflects an enormous

range of speciali

sed requirements intended for the

needs of supply chain management, specific sectors

and functions, customs, and transport etc., but it does

provide the necessary flexibility for such requirements

to be added by selection from the CII data model.

- The UBL (Universal Business Language) e-invoice

message structure encompasses a wide range of e-

business messages (purchase to pay, order to cash,

pricelist, tender…). The ISO 20022 standard does not

yet encompass that variety of messages.

Opportunities

It does cover all currently identified financial

requirements for use in the financial environment, both

in terms of the invoice content itself, as well as the

integration to other financial messaging and business

requirements such as requests for payment initiation,

direct debits, card payments, electronic bill

presentment and payment, trade and invoice financing,

factoring, and supply chain finance.

It might enable the businesses, PSPs and

ERP/accounting software developers to exploit the

same ISO 20022

compatible channels, which were

developed in the course of the SEPA migration.

It might enable the usage of the SEPA payments

infrastructure, i.e. full reachability to all EU payers and

payees via the interconnected SEPA infrastructures.

Threats

- From a sy

ntax point of view it is based on a different

methodology from the commercial messages forming

part of ISO15000 and therefore will not be identical in

all respects to other syntactical representations of the

UN/CEFACT CII that may be developed (for example

as part of ISO15000).

The public sector has invested heavily in other

syntaxes and therefore might oppose stronger support

of ISO 20022.