Person-to-person (P2P) mobile payment networks, such as M-Pesa and DoCoMo, are capturing the media’s attention with their rapid growth and their disruptive impact on the incumbent banking industry. At the same time, there has been an increase of treasury and corporate banking service initiatives being extended into new channels, such as the mobile handset, that are progressing without capturing the limelight.
The mobile channel is typically associated with retail, as its ubiquity makes it a perfect channel to reach large number of customers while reducing the cost of deployments and servicing – but what about the corporate banking world and the more complex service requirements of corporate treasury? There is little doubt that the mobile channel has the potential to be useful in the delivery of treasury services, as it can offer an extension of availability of functionalities that would be otherwise accessible only within limited environments.
Aside from emerging economies, in which microenterprise and small and medium-sized enterprise (SME) banking is sometimes delivered exclusively through mobile due to lack of a widespread physical banking infrastructure, mobile treasury services would only be an additional channel and a factor of differentiation for corporate banking value propositions in established economies.
The key areas of value addition of the mobile channel are increased reach and responsiveness. It allows the extension of services that would otherwise be available only in front of a computer screen. Hence it can be instrumental in increasing the ability of key employees to respond while on the move, improving the overall responsiveness of the treasury function. This becomes especially important when time and responsiveness are critical for performance optimisation. This broadly corresponds to the ability to manage financial transactions in a faster, easier, more transparent and secure fashion. However, the problem of mobile phones, including the most advanced smartphones, being constrained by the size of their screen is expected to persist.
It is not just the speed of execution that is valuable but also the increased control that can be applied to fraud prevention, accounts payable (A/P)/accounts receivable (A/R) management, corporate cards, cash and liquidity management. One of the most commonly known treasury applications of the mobile channel is virtual commercial and purchasing cards, which a ‘single use account’ is dedicated for a specific transaction delivered to a mobile. However, other treasury applications also exist, including single use account pre-paid solutions such as benefits/incentives cards to mobile and mobile pay-roll accounts (used to pay salaries and wages in ‘high employee churn’ or ‘high rate unbanked employee’ scenarios such as in the construction industry) where mobile is a viable alternative to a current account.
Many treasury activities take place, or are supported by, electronic tools whose reach can be potentially extended by a mobile interface. Two-factor authentication, digital signature and tokens on mobile can add further value to a treasury business wherever secure but remote action is required. It is evident that the investment required for the delivery of this type of functionality is not insignificant, particularly when the treasury business is managed through standalone and non-integrated tools. For this reason, with the exception of large corporates that have the scale and budget to support such types of development, the mobile channel presents an attractive opportunity for banks and treasury application providers to enrich their treasury value propositions.
Overall, the functionalities that a mobile channel can offer to corporate treasurers can be classified in two categories:
- Informational: the ability to channel and deliver selected information to corporate treasurers such as confirmation of incoming and out-going payments, as well as cash positions across multiple accounts.
- Executional: the ability to execute financial transactions directly, either through a mobile-initiated payment or by the delivery of the necessary remote authorisation.
To our knowledge, there are at least seven large banks offering treasury services with mobile features throughout Europe. Industry brand names are announcing similar services in the US. In other countries, such as the United Arab Emirates (UAE), there are a number of government and central bank-driven initiatives leveraging this channel for corporate payments. This is particularly the case in countries with a large unbanked population or where there are particular efforts to limit payments between businesses and employee, as well as businesses and government.
Are we on the verge of a corporate banking mobile-driven revolution? It is unlikely due to a number of factors:
- Innovation within the payments and corporate banking industry typically happens at a slow pace. Mobile is a perfect example of a channel with noticeable potential that started being leveraged mostly around the dotcom boom as a channel of delivery for financial services. We are observing acceleration in the pace of mobile initiatives being developed but despite this it still remains a channel with much unexploited potential for the financial services industry.
- The mobile business case is perceived to be stronger in the retail space where the potential revenue pool is more attractive, due to a large number of potential users and a greater level of suitability to specific value propositions (e.g. cross-border remittances). It is unlikely that some mobile-based treasury services (e.g. information) will ever reach the large numbers of users that a retail banking proposition can reach, although corporate clients have different fee sensitivities compared to consumers.
- Similarly to retail banking, geographical characteristics at country and corporate size level determine the potential of the channel. This can vary significantly.
Besides the ‘single-use’ account, we believe that the potential of the mobile channel is in the enrichment of services that are otherwise available through other technology platforms. The number of potential users is nowhere close to that of mobile banking services for the retail market but the potential ‘value to clients’ of the service is much higher, particularly within established economies. As a result, even though the revenue increase in the treasury services context may not be very large, the potential for positioning, differentiating and increasing the value of existing services to corporate treasurers can be significant.
Overall, within a treasury services context, the mobile potential is to be seen with a framework of convergence and complementarities of platforms where mobile brings the added benefit of mobility and extension of reach that would not be possible otherwise.
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