Published: October 01, 2010
As mobile devices are usually thought of in consumer terms, their ability to offer more complex services to corporate treasurers has yet to be fully exploited.
Mobile banking is by no means a new phenomenon. The retail banking sector has used the technology to reach large numbers of customers while simultaneously reducing deployment and servicing costs for some time now. Mobile banking for corporates is therefore the next logical step. There is little doubt that the mobile channel (as opposed to other financial service channels such as bank branches, POS terminals, ATMs or the internet) offers huge promise as a way of enabling treasurers to remotely carry out complex and important operations that they may otherwise only be able to do within limited environments.
Much of mobile technology’s promise is derived from the fact that, despite being a late market entrant compared with other telecommunication technologies, it has become equally ubiquitous across both the developed and the emerging world. As such, the future may see the mobile channel quite quickly emerge as the global channel of choice to meet certain control functions – allowing treasurers to manage liquidity more effectively and streamline their working capital cycles. And in the emerging markets, its effect on the financial service landscape may be monumental – eclipsing even that of the internet.
While the opportunities for mobile financial services for treasurers are conceptually endless, the key proposition is centred on alerting and payment functions that can be delivered in small ‘bites’. Primarily, mobile banking allows the consumption of time-critical information remotely and on demand – whether this is instantaneous access to balance information, status updates on the outcome of major financial transactions or alerts that enable decision-makers to affect corporate decisions. And secondly, mobile technology provides treasurers with the ability to approve financial transactions directly, such as foreign exchange trading or wires, including those requiring multiple signatories.
Quite clearly, it is the technology’s flexibility that is so appealing. Treasurers are often on the go – or simply away from their desks – at critical moments of the transaction cycle. Being able to carry out treasury functions on a mobile device is therefore a boon in terms of convenience.
But the potential impact of mobile banking may be even further-reaching: by providing a faster, lower risk way to collect payments from their customers, it can also help treasurers to make the most of their working capital. For businesses, the primary benefit is lower costs. Companies can streamline their collection processes and shorten the transaction lag-time, resulting in better management of working capital and greater visibility into provisioning for bad debt. Take the fast-moving consumer goods sector, for instance. Collections are often cash-based and in this industry the introduction of mobile collection could significantly accelerate the collection cycle and improve reconciliation, while also eliminating a significant element of risk.
Admittedly, the influence of mobile banking will not play out identically in all countries and all markets. The scale of its impact will depend heavily on the specific country’s current financial services infrastructure – particularly the percentage of people who hold bank accounts. In those countries which already have high levels of bank penetration, it is unlikely that the mobile phone will be truly transformational. Instead, it will primarily be a channel of increased convenience. But in emerging markets it may prove game changing – providing millions with access to financial services for the first time and moving the economy directly from a cash-based one to an electronic one.
Take Asia as a case in point. In the Philippines, there are around 2.2 people with mobile phones for every person with a bank account. In India and Indonesia, the ratios are yet higher, at 2.8:1 and 3.4:1 respectively, while in Vietnam there are as many as eight mobile phones for every bank account. The financial landscape in Africa is similar – in Tanzania, for instance, only 5% of the population has a bank account, and as little as 1% has access to the internet. Yet 40% of Tanzanians have a mobile phone. Given this, it is likely to be consumers – who increasingly want and need safe stores of value and efficient ways of making payments – rather than corporates, who will drive the adoption of mobile banking in the emerging markets. And this will ultimately be to the benefit of treasurers.
As a practical example, consider how mobile technology could accelerate receivables for large billers in Singapore, where bill payment is still frequently done at kerb-side kiosks. Here, consumers pay by scanning the barcode on their bills and then using their debit cards to make payment. Yet mobile banking could put the kiosk’s entire functionality in the consumer’s pocket. Furthermore, a mobile device would be able to deliver the invoice instantaneously. And even if this invoice delivery were to remain paper-based, the barcode could be scanned at the user’s convenience and a payment authorised directly from the mobile phone as soon as the bill is opened. Such simplicity could result in bills being paid when they are received, which will reduce collection time and drive significant value for a treasurer. [[[PAGE]]]
Corporate take-up of mobile banking – in both developed and emerging markets – has been slow, however, and there remain significant challenges ahead. As is often the case with new technology, many of these challenges are regulatory in nature. Undoubtedly, regulation of mobile banking is necessary and can help to secure trust in the new technology. Yet, at the same time, it can also constrain the success of a mobile banking deployment by limiting banks’ degrees of freedom in structuring the business model, devising the service proposition and setting up distribution channels.
So far, a lack of well-defined industry standards has been the key hindrance. In the past few years, governments and central banks have issued varied sets of guidelines concerning mobile financial services, and while some countries – such as India, Japan, and the Philippines – have issued detailed guidelines, countries in North America and western Europe have left considerable areas to wide interpretation. This lack of clarity has made corporates wary of diving in as ‘first-adopters’ of the technology.
But banks themselves must also shoulder some of the blame. Many banks continue to deploy mobile technology in product silos instead of as part of a process – making mobile authorisation available for cash transactions but not for trade, for example. This limits its applicability and hence only partly resolves treasurers’ need to authorise transactions on the go. By continuing this approach, banks are failing to hit treasurers with the full value proposition.
Treasurers require more than simply country-specific solutions – they need a single solution that can work across national boundaries.
Furthermore, given the global nature of most corporates, treasurers require more than simply country-specific solutions – they need a single solution that can work across national boundaries. While some banks have attempted to fulfill this need – Standard Chartered Bank released a mobile banking service across markets in Asia and the Middle East last year, for example – many are still struggling due to the lack of standards, differences in regulatory environments, and the plethora of technology platforms across national markets.
As such, most mobile ‘ecosystems’ (which identify the parties or stakeholders and their roles relating to initiating, processing and completing a mobile transaction) currently function as sub-national networks, lacking both efficient connections between one another and integration into larger banking infrastructures. To succeed, therefore, banks must embrace the promise of mobile banking and work alongside telecommunications companies, as well as other players in the ecosystems, to develop common solutions that meet the needs of treasurers within and across markets. SWIFT (Society for Worldwide Interbank Financial Telecommunication) can also play a positive role here in establishing standards and facilitating inter-operability across the various stakeholders.
If these partnerships can be forged, mobile phones can be expected to generate solutions that simultaneously deliver greater convenience to consumers and improve working capital efficiency for local and regional treasurers across the globe.
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