Electronic Invoicing Set to Grow to $25 billion by 2027. Are the Forecasts Correct?

We’re solidly into March of this year (time sure flies) and we’ve seen several forecasts about the growth of the electronic invoicing market over the next five to seven years. Several online publications (including this one and this one) have highlighted research reports indicating that by the middle of this decade, the market will have reached anywhere between $20 – $25 billion in value. This typically includes estimates of a compound annual growth rate (CAGR) between 18% to 21%. Other estimates often refer to volume growth, putting e-Invoicing transactions north of 50 billion annually by that time.

I am a believer in, and supporter of, true electronic Invoicing. I’m not referring to other methods of submitting invoices “electronically” to customers that isn’t true e-Invoicing, such as straight email, scanning and the like – although they have their merits. I’m referring to e-Invoicing as defined by the Business Payments Coalition, and supported by Receivable Savvy:

An invoice that has been issued by the seller, transmitted and received by the buyer in a structured digital format which allows for automated processing.

Per this definition, there is no manual intervention. Humans don’t touch the invoice in order to move it through the approval process, unless there is an error that needs to be resolved. E-Invoicing can help mitigate a variety of cashflow-related issues, including invoicing errors, manual intervention and payment delays, just to name a few. The issue I have regarding some of these forecasts is that they are overly optimistic while making several assumptions about the e-Invoicing market, including:

  • There will be steady e-Invoicing adoption in its present form
  • The CAGR will continue, unabated
  • Distributed ledger technology will play no meaningful part in e-Invoicing.

Steady Increase in e-Invoicing adoption

It’s true that there has been a steady increase in e-Invoicing adoption over the last 20 years, but it’s nowhere near the growth rate these reports claim. Comparing the size of the global e-Invoicing market in 2010, in 2015 and in 2020, the increase has been steady. The forecasts made during those previous 10 years estimated that the global e-Invoicing market would be valued between $20 and $25 billion by now. What we see happening is an annual recalibration, where the significant growth spurt continues to be put off for another 5 years or so. The reality is that the growth rate is more sluggish than the industry would like. There continues to be resistance to pure e-Invoicing, especially when alternative, third-party Accounts Receivable solutions abound.

The CAGR is incorrect

Depending on who you speak to, the CAGR (somewhere 18% and 20%) could easily place us in the neighborhood of an industry valued at between $20 and $25 billion. The challenge with this thinking is that a) the CAGR is completely incorrect. If the global e-Invoicing market were to grow from about $5 billion today to between $20 and $25 billion in 6 to 7 years, that CAGR would need to be at least 25%. Furthermore, it does not take into account the fact that the United States, the world’s largest economy, has yet to mandate electronic invoicing in the private sector. While the federal government has made e-Invoicing a requirement in the public sector, the same does not apply to the commercial side. Interestingly, there are two sides to this issue. There are those who desire an e-Invoicing mandate on the commercial side (for a variety of reasons) and those who desire to build an environment where e-Invoicing is easy, painless and ultra-affordable. Often, it’s the difficulty in delivering the trifecta of easy, painless and ultra-affordable that is the real contributor to the slower adoption rate. There is also the issue of interoperability. In its truest form, it does not exist. Don’t get me wrong, there are ways suppliers can seamlessly submit invoices with a single interface when using several different providers, but it requires some additional implementation.

Distributed ledger technology has no place

One of the biggest challenges (or opportunities) to the current e-Invoicing industry is distributed ledger technology. Blockchain, and perhaps even Hashgraph, technology continues to create true believers across multiple industries because of its security against fraud, speed, cross border capability and fantastic archiving ability. Take Ripple, for example. While you may read articles lamenting the cryptocurrency’s stagnant price, the real value is its ability to facilitate instant payments, especially across borders. Transferring money, in many ways, is still archaic. It’s great that NACHA has made significant strides in speeding payment with Same Day ACH and its multiple processing windows each day. Cross border payments remain a holy grail for many in the financial community. With this in mind, can distributed ledger technology be applied to invoicing? I believe it depends on several factors. Different companies have committed millions to develop their proprietary networks. Whether or not distributed ledger technology can be leveraged by those networks remains to be seen.

Is the forecasted growth of the e-Invoicing industry over the next several years realistic? In the industry’s present stated, I’m not sure that it is. It’s possible that other technologies may disrupt what the current e-Invoicing solution providers have already built. It’s also possible that the current e-Invoicing players can streamline adoption and leverage new technologies in order to make that $25 billion-dollar market a reality.

Ernie Martin is Founder and Managing Director of Receivable Savvy. He brings over 25 years of experience in financial supply chain management, marketing and communications and draws upon his extensive experience to share knowledge and best practices with AR professionals. He previously chaired the Vendor Forum of the Federal Reserve Bank of Minneapolis and his resume includes time at several well-known brands and companies such as Tungsten Network, Delta Airlines, CIGNA Healthcare and Georgia Pacific, as well as a number of years as an independent consultant.

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