Are PDF Invoices better or worse than old-fashioned paper invoices?

A recent study published by AIIM on progress towards the paperless office makes interesting reading as it relates to current billing practices. The study is worth taking note of because apart from AIIM being a credible non-profit research business which has been around for almost 70 years, as the chart below indicates it was a very large survey of companies of almost all sizes. In addition, the study went to companies in multiple sectors all over the world (although around 50% of the companies were in the US).

What the Study Showed
As we all know, the capability to exchange PDF files as e-mail attachments is said to have reduced the volume of paperwork traded between companies and small businesses considerably. However, this study says that the reduction is minimal at best, but quite possibly creates more paperwork than it saves.

In specific terms, the study revealed the following facts about PDF as invoices
• Over three-quarters of people surveyed say one of the first things they do with a PDF-based invoice… is print it out.
• From the 77% of the 395 respondents that print out their invoices, 16% scan the invoices right back into the system for use as……PDF attachments.
• 10% of people print out their PDF invoices multiple times.
• 10% of people say they print out at least one copy for archival purposes.

The chart relating to this data is shown below:

What is happening to Invoices?
Although many of the larger companies in the survey seem to be pressing to have all-electronic billing and payment systems, it seems that we are still a long way from this ideal (perhaps as few as 2-3% of companies have a fully digital system which includes no printing and only digital storage systems). However, many businesses are at least trying to save on postage and paper costs by sending invoices as PDF files, or as faxes. However, even here the invoices are often printed out as paper, sometimes at both ends, which almost completes defeats the object. Such practices obviously do not generally result in a reduction of paper within the receiving business in particular. As we saw from the statistics earlier in total, 77% of respondents are likely to print at least one copy of a PDF invoice, and 16% admit to printing it out and then scanning it in for capture, as do 31% receiving a faxed invoice.

Are new more “intelligent” PDF’s the answer?
Most respondents to the AIIM survey were referring to the basic PDF files generated by their Acrobat software, which are obviously less feature-rich than intelligent PDFs have become in recent years with functionality such as XML files being included with all the relevant invoices and embedded payment buttons and even digital signature capture systems. Although this is undoubtedly an improvement, the adoption of these more function-rich PDFs has been very slow and in most cases has had little impact on the rate at which companies of all sizes continue to print out and scan invoices. This is partly because, a PDF is still regarded as paper in real terms-it may be electronic but it is not easy to digitize in ways that are useful for data transfer and exchange. Full digitalization is therefore the goal of many organizations and this is why scanning remains popular. In this regard, when asked what the biggest drivers are for scanning, responses were mainly about data-exchange, availability and flexibility (as the chart below from the survey indicates).

So what are the implications?
PDF’s are very convenient as a way to send documents electronically but far less so when it is an invoice. The speed of the sending process is better than physical mailing but so many people are printing it out anyway, it is far short of being the “path to digitization” that companies of all sizes want or need. Fully digital invoices seem to be a much more attractive option and when an invoice can be presented in full in third-party cloud-based portals such as those such at PaySwyft, any company gets all of this immediately.

What is Likely to Occur in the Payments and Online Billing Landscape in the Next Few Years?

Although it is always extremely difficult to make predictions about an industry which changes as fast as online payments (including online bill presentment) there are always a few “clues, trends and patterns” around to draw upon. As a result and as it’s close to the start of a new year, in this article we will seek to make a few predictions about what is likely to happen in the near future. To do this we will use a number of key headings that are often seen to be important in this industry.

The general changes that we can expect
In broad terms, the payments landscape (which is still very paper or physical form-based in so many ways) will continue to switch inexorably to an online environment at many levels with “barcode type” paper to replace physical monetary exchange products like cheques and cash in the next few years and possibly even Card (debit, credit and pre-paid) in the more distant future. The market will increasingly use smart phone and PC tablet as a channel, although the infrastructure required to support this will take as long as 20 years to make the full transition.

Online person-to-person or P2P payments will increase using mobile devices or social network sites as the initiation point. In the early days of this transition, bank account details will need to be known but accessing and using cleared funds (as the way customers want to interact will each) will see more new players emerging outside of the traditional banking community.

While banks are competing with each other for market share, new players entirely are likely to be able to capture payment market share away from their base, by better satisfying the needs of market. PayPal, Google & Apple are good examples of this or it may be entirely new companies that are yet to become well-known.

The cultural shift to perform everyday functions on-line is still in its infancy. While on-line shopping is growing exponentially, other behaviour will move more towards online. For example, full digital bill presentment and payment services.

So, if that’s the general scene, let’s look at what might happen under a few specific headings

TIMELINESS & CHOICE
Customers want to choose when they pay, day or night, 24/7, 365 days of the year and whether to pay ‘just in time’ or in real time. Customers want very wide payment type options and the ability to choose which option best suits each payment activity.

In many cases, recipients of funds prefer real-time or same-day settlement. Surety of settlement in real time will be critical in most cases.

ACCESSIBILITY
Customers want to access the same payment options regardless of the channel by which they pay. For example, this may be the same payment choice regardless of whether they are in a store, at an on-line store or paying a bill.

Merchants will increasingly prefer to receive funds from the same payment options, regardless of channel, to reduce vendor management and improve internal efficiencies.

EASE OF USE
Customer like payment types that are easy to use and one they understand and trust. Mobile, PC tablet & social network usage is making the introduction of new payment processes easier to manage and educate the market, but present other challenges for the payment industry as a whole.

EASE OF INTEGRATION WITH OTHER PROCESSES
Online payments will grow steadily and will ultimately dominate the payment landscape. However, capability and capacity to integrate with internal computer systems will be a barrier that will need to be overcome. Seamless integration with Point-of-Sale systems, on-line store, ERP, inventory systems and billing engines will be a critical factor.

Cloud-based technology will assist in keeping capital outlay lower and at manageable levels while providing high speed access to the payment instruments and associated internal systems.

RELIABILITY
The new payment instruments and channels that arise will need to be ever more reliable. Traditional payment providers can still play a huge role in ensuring that high quality standards and suitable interoperability is maintained ensure the instrument can be trusted.

Convenience can sometimes trump reliability, but both having both is likely to be a winning combination.

PRICING
New payment instruments will have to be cost effective is all cases and this will start to happen slowly.

What is blurring the price aspect is merchants will try to demand low transactional costs even when real demonstrable value is being added. For example, instant bank transfer provides significantly more benefits to both a consumer and a merchant and yet the expectation would be that this should be priced the same as, or even lower than, the transactional cost to write a paper-based cheque.

Another example is that presenting an electronic invoice with a wide range of payment options would be significantly more cost effective than a biller managing their own bill collection, even though individual transaction pricing by payment type may be more expensive in that particular silo.

SECURITY AND ROBUSTNESS
Similar to the reliability heading, secure and robust payment instruments will be increasingly essential, although convenience and ease-of-use are considerations that will often dilute how secure and robust the new instrument has to be in practice.

INTEROPERABILITY
All online digital Payment systems will have a much higher degree of interoperability with other systems than they do now. This will apply to the movement of money (where necessary) and more particularly to data transmission. The intelligent design of this data transition process (nationally and internationally) will be done by at least one large player outside current financial services sector or by a new market entrant.

RISK MANAGEMENT
Much richer risk management tools will be available and these will have sophisticated algorithms that track all payment patterns and provide risk attenuation or control options at every level. This is likely to be a new software-based market entrant.

Summary
No-one has a “crystal-ball” to predict the future, but the online payments space is changing rapidly around us. It will be interesting to see whether, we are still heading in the general direction that this article suggests in 12 months time and whether some of the forecasts are starting to come true or not.