Mobile banking poised for revolution

Consumers are now familiar with using their mobiles to pay each other, and for goods and services. With a click or two, it is possible to buy a book from Amazon, send money to a niece for her birthday or split a restaurant bill with friends. The key is the smoothness. Mobile payments mean there’s no need to input bank details for a transaction. The counterparty’s mobile number is all that is needed. Mobile wallets mean payment can be as quick as a single click.

Curiously, the corporate world is lagging behind. Business-to-business mobile payments haven’t yet become commonplace The technology exists, but has not yet been widely adopted by the business community on the scale seen in the consumer market. Some companies continue to pay and receive funds using decades-old methods such as paper invoices, banker’s drafts and paper cheques (sent through the post, then taking days to clear).

This will change fast. We are on the brink of a new era of business-to-business mobile payments, which will bring more than mere convenience. Mobile payments will mean the introduction of entirely new ways of doing business and generate vast quantities of valuable information about a company’s operations previously unavailable.

The revolution will be so profound 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 chief finance officers will allow firms to re-engineer their business models.

We are on the brink of a new era of business-to-business mobile payments, which will bring more than mere convenience

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 needing to order two more tons of sand and gravel will use a mobile to select the supplier, place the order and commit to pay – all without leaving the site. Or a small retailer may prefer to pay for restocking goods to their shop using a mobile wallet, as a direct mobile-to-mobile payment to the delivery driver.

But mobile business-to-business payments can have a particularly big impact on doing business internationally. Here’s an example: many British firms find trading with emerging-market buyers or suppliers risky and hard work. The complexity of processing payments in major overseas markets, such as South Africa, Brazil, China and Nigeria, is pretty challenging. Posting a cheque to Lagos is inefficient. It may get lost. The exchange rate could change during the lag time. The recipient may not have a bank branch within close proximity. Switch to mobile payments and everything changes.  A mobile-to-mobile payment between countries removes all this additional work.

With mobile payments, UK sales representatives working abroad can sell to businesses and consumers on the road without handling cash. 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. The money can be processed before the sales representative has returned to their office.

There is a long list of other advantages. Fraud is likely to be reduced when cash and paper forms are taken out of the payments loop. Vulnerability to crime is curtailed. By using mobile payments, sales representatives and their clients can avoid carrying cash around and eliminate the personal risk this can bring.

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 their ability to pay their own 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 is captured and retained. Finance directors can, at a glance, better gauge the financial position of their trading partners and contractors, making more informed buying decisions and extending credit with greater counterparty awareness.

I think we will see significant change in the next two years

Mobile payments will transform marketing. Clients can use sophisticated mobile apps which cross-sell, offer account information, and generate valuable data for marketers to use to identify the best leads for follow-up, and learn more about the preferences and nature of their client base.

Even trivial issues will be resolved by mobile. Need to pay for parking while travelling on business? Pay by mobile and then be notified when expiry time nears.

This is a concrete reflection of the way business is changing in dozens of countries. In Asia, Latin America and Africa, entire economies are leaping from cash and coins to mobile payments. The State of the Industry 2013 report by the mobile networks association GSMA reveals there are nine African nations where mobile bank accounts outnumber traditional bank accounts. Mobile banking is routine in Brazil, Indonesia and Vietnam, three very attractive export markets for British firms.

Business adoption of mobile payments will pave the way for possibly an even bigger disruptive change: the internet of things. This is the increasing trend of connecting machines and objects to the internet without any person needing to control them. It exists today with utility company smart meters or basic car park meters and, as all parts of global supply chains are 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 UK businesses and exporters, 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 cause 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 valuable insight from their competitors.

The most nimble organisations will thrive with this change, gaining at the expense of rivals who are slower to embrace mobile and all that it entails – mobile for business is both an enabler and a powerful force for change.



HSBC’s global head of digital Josh Bottomley answers a Q&A and forecasts an exciting future for business mobile payments

Q. What developments in mobile banking can we look forward to in the next few years?

A. We can expect to see a richer user experience that allows us to make increasingly sophisticated decisions about our finances in an informed and intuitive way. We can also look forward to improved security and access. There is a trade-off between security, which involves things like inputting codes, and simpler user experiences. We will see better solutions in that area and much faster feedback loops. If you use a mobile payment, you want to see confirmation of that transaction in your account as fast as possible. Speed is vital. And we can expect to see more joined-up experiences between things such as special offers, loyalty programmes and your bank accounts.

Q. Will people feel secure using mobile banking?

A. There are some great solutions, such as two-factor authentication and biometrics, which are being rolled out. There is also a lot of work we do in the background to counteract parties with less than benign intentions. And on the commercial side, there are permission levels which allow different users in different roles to access and control varying aspects of the accounts.

Q. How will the interface of mobile banking improve?

A. There will be a greater level of visual experiences. So using the technology will feel more engaging. We will also see an increase in convenience, such as forms for suppliers becoming more intuitive. They will pre-fill, only asking for additional information when it is needed.

Q. What time frame do you predict for mass adoption?

A. I think we will see significant change in the next two years. It is an S-curve. We are in the early-adopter phase for the next 18 months and then we will see a rapid shift. It will become a pervasive phenomenon.

Q. What do you say to businesses that are reluctant to act?

A. Managing finances is going to get easier with mobile banking. Some people don’t like using a desktop PC for analysis and filling in forms. For them using a tablet is preferable, as the experience is just so much smoother. I think users will really appreciate the control mobile banking gives them. They can gain confidence knowing where money has moved and which accounts have transferred which sums. It will get easier for retailers to engage your customers too. They will be interfacing with prospects and supporters. This will increase the pressure to adopt.

Q. How can HSBC help?

A. The key point about mobile banking is that it means different things to different businesses. For some it is all about generating revenue and customers. For others it is about cost and some care most about understanding their customer base. Our role is to help businesses find out what they want and help them deliver on it. We want to make sure our customers get the most from mobile payments.