Introduction: An Inevitable Result of the Global Wave of Tax Digitalization
Digital technology is deeply integrated into the fabric of business. E-invoicing, as a key document connecting orders, payments, and taxation, is becoming a vital component of the global business infrastructure. Behind this trend lies the firm determination of governments worldwide to improve collection efficiency and plug tax loopholes.
Since the OECD released “Tax Administration 3.0: The Digital Transformation of Tax Administration” in 2021, E-Invoicing, as the most effective digital management tool, has been rapidly adopted by various governments. Preliminary research from the 2022 FTA confirmed that e-invoicing systems can significantly reduce tax leakage. Consequently, starting in 2023, many governments have listed the promotion of e-invoicing as a key task for tax digitalization in the next five years. For example:
Malaysia launched its MyInvois system in August 2024 and plans to achieve fully mandatory use by 2026
Indonesia also launched its new-generation core tax system, Coretax, integrating with e-invoicing functions in January 2025, based on OECD guidelines
In this government-led global transformation, a key market role—the e-invoice service provider—has rised and emerged, creating a vast commercial blue ocean. This article will provide a clear roadmap by diving into the business model and market size of e-invoice service providers.
Market Foundation: Why are Both Governments and Enterprises Dependent on Service Providers?
The operation of tax e-invoicing relies on digital infrastructure, and its use requires a certain level of IT knowledge, which is fundamentally different from traditional paper invoices or commercial invoices. Experience from pioneering countries like China, Brazil, and Italy shows that e-invoice service providers are a critical link ensuring the smooth operation of the system.
However, taxpayers face high compliance costs while abeying tax authorities’ e-invoicing requirements, which can be particularly burdensome for small and micro-enterprises (SMEs):
Challenges for Small Business Owners:
Surge in Explicit Costs:
Learning Costs: Need to learn how to operate new software and adapt to new financial reconciliation processes
Time Costs: Data entry, information exchange, and compliance checks consume significant additional man-hours
Risk Costs: Potential for tax penalties due to incorrect invoicing stemming from unfamiliarity with the new standards
Significant Implicit Concerns:
Security Concerns: Fear that sensitive business data could be leaked to competitors during transmission or storage
Fairness Concerns: Worry that fully complying and incurring higher costs will put them at a competitive disadvantage against non-compliant businesses
Challenges for Tax Authorities:
Tax authorities, as the regulators, dedicate most of their resources and budgets to building and maintaining the core e-invoicing infrastructure. They often lack the capacity to provide extensive technical support and customer service to the vast number of taxpayers. This lack of service, in turn, becomes an excuse for businesses failing to comply successfully.
Therefore, a huge gap exists between the compliance needs of taxpayers and the service capabilities of tax authorities. This is the core value proposition of e-invoice service providers. They bridge this critical gap by leveraging professional product design and cutting-edge IT technology, effectively reducing the compliance burden for businesses. They act as the “lubricant” and “facilitator” for policy implementation.
Market Size: A High-Growth, Billion-Dollar Market
The global mandatory push brings deterministic, explosive market growth for e-invoice service providers.
Market Projections (2024-2028):
By 2028: Projected annual volume of 184 billion e-invoices
Transaction Volume: Global number of e-invoices expected to grow at a 19.6% CAGR
Market Revenue: Global e-invoicing market size expected to grow at a 27.9% CAGR
By 2028: Projected market size of €22 billion (approximately RMB 160 billion）
This data clearly indicates that the e-invoicing service market is not only large but also in a golden period of rapid expansion, offering ample growth space for new entrants.
Business Model of E-Invoice Service Providers
The core of the e-invoice service provider business model lies in establishing a sustainable, multi-layered service architecture. Typically, profitability is achieved not through a single service line but through a strategic combination of service offerings and ecosystem development.
1. Establishing User Foundation and Entry Points
Service providers initially focus on delivering fundamental services that meet basic tax compliance requirements. These essential services ensure the proper issuance, transmission, and storage of e-invoices while simultaneously serving as the primary connection point between providers and their clients. By offering these necessary services, providers can efficiently reach and accumulate a broad customer base while maintaining relatively low customer acquisition costs, thereby establishing stable and scalable business channels.
2. Developing Value-Added Services and Revenue Streams
With a solid user foundation in place, service providers shift their focus toward addressing more sophisticated, personalized customer needs. These advanced requirements typically center around operational efficiency enhancement, internal process optimization, and business capability expansion. The established trust and existing business relationships developed through foundational services create natural pathways for introducing these premium offerings. This strategic approach results in lower marginal costs for deploying value-added services while generating substantial economic returns.
This strategic progression from foundational to value-added services enables providers to effectively monetize their user base, creating sustainable revenue streams and establishing significant barriers to competition within their business framework.
Conclusion
In summary, the global adoption of e-invoicing is an irreversible trend. In this process, e-invoice service providers play the role of a “critical intermediary,” solving pain points for both sides and thereby creating a huge market.
Their business model is ingenious: acquire users with foundation services and generate profits with value-added services.
