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For creditors in the B2B arena, electronic presentment of invoices and e-payments appear poised for explosive growth. What are the benefits, as well as the barriers, to widespread adoption?
Electronic invoice presentment and payment, a system for conducting paperless business-to-business transactions, is not as well-known or as widely used as its business-to-consumer counterpart, electronic bill presentment and payment. But EIPP is beginning to pick up steam.
The National Automated Clearing House Association, Herndon, Va., was one of the first organizations to identify the potential value of EIPP technology, when it published a paper in January 2001, entitled "Business-to-Business EIPP: Presentment Models and Payment Options."
The traditional Automated Clearing House system, which utilizes Electronic Data Interchange, or EDI, technology, allows customers to transfer funds automatically from their banks to creditors' banks, with creditors paying a 2% discount for the service. One drawback to the system: It is not designed to collect and transmit payments and payment information at the same time. Information on a payment shows up later than the deposit, making it difficult for sellers to determine what a customer paid and did not pay.
With EIPP, however, customers can make electronic payments that also include invoice and payment details. With EIPP a company sends an electronic invoice to a customer that includes a purchase order number, shipment detail, pricing and terms. The customer's system receives the invoice, matches it to the purchase order, and reviews the receiving detail. If there is a match, the customer pays the invoice electronically, usually via a credit card, purchasing card or ACH or wire transaction. If there is a discrepancy, the customer notifies the supplier via e-mail. In the future, industry observers say, EIPP payments and remittance advice will be transmitted through banks, once the banking system has adopted a standardized set of processes.
Because there are no uniform standards yet in place, EIPP transactions currently take place in three different ways:
* In the Seller-Direct Model, a seller creates an EIPP system and asks or requires customers to participate.
* In the Buyer-Direct Model, a buyer creates an EIPP system and asks or requires suppliers to participate.
* In the Consolidator Model, a seller or buyer arranges for a third-party to handle the transactions.
Which...