For a number of years, when it came to mobile banking innovation, the focus of the banking industry was on retail customers. Many consumers are now familiar with using their mobile phones to pay for things, to send money to a friend or split a restaurant bill with a click or two. The process is smooth, seamless and above all else, intuitive. Mobile payments mean there’s no need to input bank details for every transaction. In some cases, the counterparty’s mobile number is all that is needed and with mobile wallets, payments can be made with a single click or tap.
In many ways, corporate banking is lagging behind when it comes to mobile innovation. B2B mobile payments have yet to become commonplace. The technology exists, but it has yet to be widely adopted by the business community on the scale seen in consumer banking. Some companies continue to pay and receive funds using decades-old methods such as paper invoices, banker’s drafts and paper cheques.
More than Just Convenience
This will change fast. We are on the brink of a new era of B2B mobile payments which will deliver more than just convenience. Mobile payments will introduce entirely new ways of doing business and will generate vast quantities of valuable information about a company’s operations that were previously unobtainable.
The revolution will be so profound that it will redefine the role of finance departments, freeing them from cash and cheque handling, transforming them into the creators and managers of valuable transaction data. The innovations adopted by CFOs will allow firms to re-engineer their business models.
The first application of mobile payments is to unlock purchasing and sales to the millions of executives who prefer to transact on their phones or tablets. So a construction site foreman, for example, ordering extra tons of sand and gravel will use a mobile device to select the supplier, place the order and commit to pay – all without leaving the site.
Removing Additional Work
Mobile B2B payments could also have a particularly big impact on doing business internationally. For example, many firms find trading with emerging market buyers/suppliers risky or hard work. Processing payments in major overseas markets can be challenging. Posting a cheque is inefficient – it may get lost, the exchange rate could change before it arrives and gets processed, and the recipient may not have a bank branch close by. Mobile-to-mobile payment between the two parties removes all this additional work.
With mobile payments, sales representatives can sell to businesses and consumers on the road without handling cash, at home and abroad. They can close a deal with a company in Jakarta, invoice electronically and take the first instalment payment moments after shaking hands on the deal.
There is a long list of other advantages. Fraud is likely to be reduced when cash and paper forms are taken out of the payment loop. Vulnerability to crime is curtailed; by using mobile payments, sales representatives and their customers can avoid carrying cash and eliminate the personal risk this can bring.
Improving Cash Flow and Liquidity
Moreover, mobile payments can improve the financial health of a business. Using traditional payment methods, weeks can go by without transactions being completed. Mobile payments mean there is instant reconciliation. Being paid faster improves a company’s liquidity and cash-flow performance, by extending its ability to pay creditors faster. Improving cash-flow performance enables opportunities to increase credit ratings, improve credit terms and elevate a company’s reputation; all of which enable growth.
Digitising payments also enhances visibility over the workings of a business, because much more comprehensive and accurate information about payments can be captured and retained. Finance directors can, at a glance, better gauge the financial position of their subsidiaries, trading partners and contractors, enabling them to make more informed buying decisions and extending credit with greater counterparty awareness.
Mobile payments will transform marketing. Companies can use sophisticated mobile apps that cross-sell, offer account information and generate valuable data for marketers to use to identify warm leads for follow-up, and learn more about the preferences and nature of their customer base.
In Asia, Latin America and Africa, entire economies are leaping from cash and coins to mobile payments. The State of the Industry 2014 report by Groupe Speciale Mobile Association (GSMA), the mobile networks representative body, reveals that there are 16 African nations where mobile bank accounts outnumber traditional bank accounts. Mobile banking is routine in Brazil, Indonesia and Vietnam, three attractive export markets.
The Internet of Things
Business adoption of mobile payments will pave the way for possibly an even bigger disruptive change – what’s called ‘the internet of things’. This is the increasing trend of connecting machines to the internet without any person needing to control them. It exists today with utility company smart metres and basic car park metres and, as all parts of global supply chains become linked to the internet, the impact on company logistics departments will be huge. Machines in warehouses will pay for deliveries and even goods aboard ships will communicate any defects en route. Vending machines at music festivals will process payments and report stock levels using mobile technologies.
The shift to mobile in the corporate world will complete the circle, establishing end-to-end digital ecosystems that combine manufacturing, international trade, distribution and finance with the activities and demands of individual consumers. This will unlock enormous potential for businesses, but will also be disruptive, creating a host of new hurdles for the corporate world to overcome and altering the nature of many firms, changing the roles of their workforce, eliminating some disciplines and creating entirely new ones.
Going mobile will also create an enormous increase in the amount of data and information that must be processed and managed, placing an additional load on critical payment infrastructures and control mechanisms. In addition, it will bring data security challenges, as firms demand increasingly sophisticated data protection services to guard these valuable insights from competitors.
In the mobile world, if you are a creative player and you can adapt quickly you will thrive, gaining at the expense of rivals who are slower to embrace mobile. Mobile for business is both an enabler and a powerful force for change.
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