Electronic invoicing: The first step towards digital B2B payment modernisation

Abstract

US payments systems are in the midst of vital modernisation to meet the changing dynamics and demands of digital and global commerce. While social media and consumer payments have blossomed with internet connectivity, the underlying payments infrastructure in support of business-to-business (B2B) payment digitization and connectivity lags behind. Payment modernisation for B2B payments requires establishment of an infrastructure that enables end-to-end automated processing of electronic payments through the digitisation and exchange of supporting remittance information to effectively connect payments to invoices. There are four essential facets to B2B payment modernisation— 1) sending structured electronic invoices that can be automatically processed by the buyer; 2) paying the supplier electronically; 3) sending sufficient payment remittance information electronically to link the payment back to the original invoice; and 4) facilitating greater connectivity and interoperability between businesses to enable the previous three facets. Solving all four is necessary to complete the modernisation and digitisation of B2B payments and reduce unnecessary payment processing complexity, costs and inefficiency and to enable value-added service innovation opportunities for financial institutions, payment processors and corporations. This paper discusses the benefits, challenges and possible solutions to achieving the first step in the process, sending structured electronic invoices that can be automatically processed by the buyer, based on work performed by the Business Payments Coalition which was originally formed and coordinated by the U.S. Federal Reserve. The Business Payments Coalition is a group of payment industry volunteers working together to advocate for industry innovation to solve B2B payment inefficiencies and achieve straight-through processing of electronic payments.