The commercial cards industry has grown strongly in recent years. Traditionally this growth has been based around the issuing of more cards and competition for clients within the market. However, in what is undoubtedly a recurrent theme within the commercial banking sector, this particular sector is rapidly changing. Developments in technology and an increasingly sophisticated client base mean that corporates now have a greater range of choice than ever. The rise of the mobile channel is one of the biggest drivers of change.
Arguably, the most prominent shift being experienced is that corporates are keen to move away from the physical aspect of a card to something that both reduces costs and improves efficiency of processes. It is for this reason that card payments are so important and complementary to the corporate agenda; they are able to remove the antiquated processes involved in invoicing to more automated and data-rich processes. These processes are set to become synergised across mobile banking in the future, taking commercial card payment use to another level in terms of both practicality and importance. We often hear how mobile technology in banking will enable banks to present an increasingly bespoke product to their clients, and it is crucial to realise that card payments will be an important part of this proposition.
Card-based networks offer the most detailed transaction-by-transaction data compared to any other payment form. Clearly this is an important benefit for corporates and well-ordered card payment use can considerably ease the processing burden. As noted invoice accounting is remarkably archaic given the advanced technology that companies now have access to, and there is no doubt that the benefits offered by card payments make them an important part of any companies’ processes. Another clear advantage is that all transactions are pre-authorised, enabling the supplier to have security in the knowledge that the payment is good as soon as an order is taken.
Mobile technology is opening up the possibilities for transactions that are not processed through traditional merchants, with improved options for data collections and receipt management. The key is to help companies understand how these efficiencies can help; often they have not been previously considered.
Clearly innovation within the corporate aspect of card use moves more slowly than in the consumer sphere. There are more decision-makers and the process is much more complicated. However as the mobile and online proposition continues to develop, it is likely that payment streams will follow the path being laid out. As corporates move to online and mobile banking, card payments will have an important role, and they will be far more than just a piece of plastic.
Corporates wake up to mobile
Mobile is set to be a key growth area and we can already see strong trends where services are extending onto mobile, primarily by facilitating account management through mobile devices. As highlighted, the growth in mobile is most rapid in the consumer sector and corporates will be slower to adopt new technology, as is traditionally the case. It will be small businesses that will embrace new technologies fastest, and clearly the flexibility, convenience and efficiency offered will be of great value to the small to medium-sized enterprises (SME) sector.
Mobile devices are a long way down the road to becoming payment acceptance devices. This means that small businesses, for which it doesn’t currently make sense to take card payments, will effectively be able to turn mobile devices such as smartphones into a payment terminal. This development also opens up the possibility of enhancing and customising transactions on an individual basis, such as for specific customers or locations. For example a retailer can flash an alert on a loyal customer’s phone when they are in proximity to the store with a personalised offer; a coffee shop can ask if the customer wants their favourite drink and he or she merely has to pick it up with payment made seamlessly via the mobile phone.
It is important for there to be a strong education programme around new innovations, such as online payments. Banks must ensure that they clearly communicate the benefits and how innovations fit in with clients’ existing card programmes. This is perhaps more important in regions outside of the Greater London area, where some anticipate a degree of resistance.
Banks are also working hard with suppliers to ensure that they fully understand the value of the proposition on offer, with the use of cards enabling them to take out considerable funding costs as well as reducing payment delays. Again card payment can create valuable efficiency’s within the supply chain and working capital.
Despite the increasing costs the rise in regulation demonstrates that the importance of payments is being recognised. This is primarily driven out of concern for the consumer, but ultimately will impact the entire industry. We are seeing interest in the payment industry from the EU Commission, the Office of Fair Trading (OFT), the Treasury, and both the government and the Chancellor, so clearly it is a ‘hot’ topic. This makes it vital that banks work closely with their customers, so they understand the impact that new rules may have on their business.
Today commercial card payments offer business a wide range of crucial benefits and are playing an ever more important role in helping reduce costs, maximising the efficiency of processes and managing data. In addition they play a critical role in the supply chain, giving suppliers added security and aiding risk profiles. Central to the growing role that cards are set to play is their integration with mobile technology which is enabling banks to offer new, exciting opportunities for corporate clients.
The interconnectedness of mobile, allowing account management on the move, combined with the data infrastructure of card payment networks is a powerful tool. While this progress may not be as rapid as we’ll see in the consumer space it is nonetheless already visible, with businesses already able to turn mobile devices into payment acceptance devices, target specific customers and enjoy far more flexible and bespoke account management. Mobile technology is here to stay and will play a crucial role for the future of commercial card payments.
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Europe’s opening banking regulation is finally here. After months of preparation across the continent, the Revised Payment Services Directive comes into effect on January 13.
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