Why banks will fail (With electronic invoicing) . If they don’t stop trying to control processes instead of collaborating in open ecosystems

Who am I?

31 years old, sociologist, geek, web 2.0 type, have done several start-ups, youngest Head of Division in Danish Government.

*

Lead the implementation of the worlds largest open-source invoice infrastructure “EasyTrade” * One of the initiators of the EC PEPPOL project for open procurement infrastructure, sat on the board until October 2009

*

Launched Tradeshift with Mikkel Hippe Brun because we were tired of hearing the same old stupid arguments about why, it was not possible to change the existing business models of invoicing

*

What is Tradeshift?

GOT IT? (It’s fairly easy, we offer the worlds first transaction free business to business infrastructure, which is hosted in the cloud, based on open standards and API’s, and offer an alternative way for the long tail of small business to connect to large suppliers, while getting real-time analytics on the content of transactions send to them)

So what is the problem really?

“This all naturally needs a new attitude from SME” - Bo Harald chair of EU E-invoicing expert group * “do not think that new services should be free - naturally ask around for the best prices - still it usually pays off to concentrate buying” - Bo Harald chair of EU E-invoicing expert group

*

“The sooner SMEs really embrace this digitalization ladder - and take the e-invoicing step on it - the sooner we can reach the paradigmatic platform” - Bo Harald chair of EU E-invoicing expert group

*

“A major market issue that is hampering e-Invoicing adoption is the lack of education among SMEs” - EU E-invoicing Expert group final report

*

SO, BLAME SMALL BUSINESS?

(Not the existing business model?)

A quick history e-invoicing:

It was mainly used between very large actors who were all convinced they had “special” requirements for the content of invoices

It started with the railroad industry implementing data interchange in the 60’s

But soon spread to a lot of different industries, such as cargo, airlines, shipping, and retail

Resulting in more than 5.000 different implementations of EDI, basically rendering it a non-standard

Creating a very lucrative “conversion” and “transaction” business for the operators

Together the banks and operators decides to attack the “SME problem”

At the same time banks decide e-services is the savior for shrinking transaction revenue

What is this “problem” worth?

Est. 64B € pr. year

The SME problem as seen from other actors?

Forced business model, we can charge what we want

Invoice is gateway message to banking services

We just want to connect small

suppliers, “educate” if necessary

EDI BANKS

BIG BUSINESS

The long tail of paper

80% of suppliers are paper-based

(23 million in Europe)

20% Are connected

using EDI or B2B providers

like OB10

Supply chain lock-in, top-down push = increased cost, low supplier satisfaction (but cost reduction, on paper…)

Result:

Procurement

WHY IS IT SO HARD TO SOLVE?

Payments

Technology

Invoice

Complex processes, Multi-domain, Has to be flexible, Long tail

High security, Trust, Costly

Fast, Innovation Low cost, disruptive, low security

So is this where e-SEPA is going?

ONLY PROBLEM… BANKS SUCK AT TECHNOLOGY

(Or rather the principles of technology innovation)

Banks had an ubiquitous identity platform 10 years before Facebook

*

But focused so hard on controlling all services on it, that they lost a strategic ecosystem

*

Transaction cost is good for revenue, but bad for software design *

The industry security requirements, make banks natural technology laggards and not leaders (in all tech areas except security)

*

Examples

The small suppliers loose, there is no offering that match their needs

*

The large enterprises loose, they can only connect to a small part of their supply chain

*

Software developers loose, there is no platform to innovate on (ERP systems are still islands in 2010)

*

The banks loose, having a hard time extending their business model… *

State of affairs:

CAN THIS PROBLEM BE SOLVED?

(With other means than force feeding bad solutions to small and medium sized business?)

SME’s using open e-invoicing in Denmark:

So maybe it’s not just about attitude or education, but introducing new open eco systems?

Salesforce customers

70.000 companies (25%) in 11 months

SO WHAT COULD THE FUTURE LOOK LIKE? (With other means than force feeding bad solutions to small and medium sized business?)

Not 2, 3 or 4 corner models, but any-to-any transactions (just like the Internet)

*

All-you-can eat subscription plans commoditizing basic messaging, making it about software and innovation

*

New generation of payment services like X.com winning because they create open ecosystems

*

Collaboration and social networks become the norm also for business to business transactions (business is social), real-time becomes king

*

The future

Business processes

Ecosystems?

Payments

Technology

Invoice

IS ALL HOPE LOST?

(No)

The long tail of paper

80% of suppliers are paper-based

(23 million in Europe)

20% Are connected

using EDI or B2B providers

like OB10

Bottom-up growth = viral, small business focused, open ecosystem (cost saving for real, loyalty building)

Want to learn more about partnering with Tradeshift: partner@tradeshift.com

web: www.tradeshift.com email: chl@tradeshift.com twitter: @tradeshift / @christianlanng

cell: +45 31189100