Innovations in global distribution and information services dramatically accelerated the speed with which goods are procured, shipped, and distributed. Yet the financial component has remained an anachronism, a cumbersome and costly process dominated by manual, paper-based systems.

The physical parts of the supply chain can be managed electronically. But once the purchase is made and the bill of lading cut, however, the electronic model usually ends. Invoicing and payment, as well as the authorization of ancillary financial services, are usually accomplished by relying on traditional manual systems.

The dearth of B2B electronic payment methods can be a heavy drag on commerce. For example, under conventional payment methods, a company shipping goods C.O.D. can expect to wait anywhere from eight to 16 days to get paid. That time frame applies to transactions in the US market; one can only imagine the wait to get paid for goods that are shipped halfway around the world and where billing and remittance are made in two different currencies.

But the long lead times for payment is just one problem. According to our estimates, a biller spends US$3.45 to manually cut an invoice. It costs a bill payer US$0.60 to manually process and pay that same invoice. In the B2B world, 95% of all bills are paid repetitively, so it is frustrating that automated solutions haven’t been introduced on a widespread scale to standardize and streamline such a routine operation.

The good news is that the emergence of the modern-day supply chain model, one built on lightning-fast transaction speeds, will render traditional billing and payment systems obsolete. The model will demand that on-line payment capabilities be integrated into the global movement of goods and the information about those goods, and that it all be tightly woven around a web-enabled platform. The three core channels of commerce—goods, information, and funds—will coalesce into one inseparable flow.

According to Killen Research, three-fourths of all bill payments will be made electronically within five years. If that forecast is accurate, companies of every size and description either must develop internet-based payment and receivables capabilities, or have a third-party do it for them.

E-finance’s effect will likely be felt most in international commerce. Less-developed countries have quickly adapted to internet technology because it serves as a fast and cost-effective solution to their relative lack of infrastructure, and it brings them to parity with larger, more established trading partners. The web will also bring order to an often-chaotic global settlements network with its amalgam of conflicting currencies, uneven technologies, and disparate payment systems. Most on-line transactions in the United States are conducted by credit card; yet there are many B2B transactions where plastic is not the answer. In some Latin American countries, credit cards cannot be used for any cross-border transactions, and that includes on-line transactions.

We envision the internet as the great leveler. In fact, we see the establishment of a giant global trading network where web-enabled applications will be used to settle transactions in real time, regardless of currency.

It is an accepted fact that e-business is driving quantum leaps in product and data velocity. But the web’s effect on the velocity of money is just now being understood. We know two things: That the speed in which a company is paid mirrors its ability to stay competitive, and that as global supply chains are de-layered, the walls separating biller and payer—just as those separating buyer and seller—will come down.

UPS has been in business for 93 years, but our embrace of the synergies in the movement of goods, information and funds is a relatively recent event. UPS Capital constructed its model with several basic precepts in mind. First, that payment isn’t made until the product is delivered, and that our core competency is the worldwide delivery of more than 13 million shipments each day. Second, we collect data on more than 80% of the shipments that move across our global system. Third, package delivery accounts for only 6% of the typical large company’s supply-chain spending, so there was plenty of opportunity to add value by serving additional links in the chain. Fourth, we seemed to be the only player on the field; although there are many transportation and financial service companies, the tying together of the two disciplines wasn’t on anyone’s radar screen.

We set about to create a seamless infrastructure that would enable us to infuse capital to the seller at the point of sale and provide financing options to the buyer at the point of purchase through to settlement. And the catalyst would be the digital signature at destination confirming the receipt of goods we have delivered.

This is not a fantasy.

It will be routine for a payment to be authorized for a manufacturer in Chicago at the precise moment his goods are delivered and signed for in Amsterdam.

It will be routine for the digital signature to trigger a real-time transfer of funds into the shipper’s pre-selected bank account.

It will be routine for the consignee to have at its disposal a wide range of financing alternatives such as equipment leasing, credit insurance, or asset-based lending, all of which will be immediately activated by that same digital signature.

It will be routine for shipper (biller) and consignee (bill payer) to resolve payment disputes before any money changes hands.

It will be routine for a company shipping C.O.D. to be paid in two days after delivery instead of 16.

And it will all be done at dramatically reduced costs—for the biller, an 80% reduction in the cost of invoicing; for the bill payer, a decline in payment-processing costs to zero. wt