Consumers are increasingly embracing smart devices to make and receive payments. In some markets, people can already use their mobile phones to buy train tickets, use vending machines, or deposit checks.
But enterprises can also make use of mobile capabilities in payments to create value, and CIOs should expect to hear from their CFOs and treasurers soon about the need to develop mobile capabilities that can help to optimize key internal and external finance activities.
The 2011 World Payments Report (WPR) recently published by Capgemini and RBS revealed 260 billion non-cash payments were transacted using direct debits, credit transfers, cards and cheques in 2009, up from 5 per cent in 2008.
Usage expanded at a sustained 6.8 per cent a year in 2001-09, despite the effects of the financial crisis in latter years. Non-cash transaction volumes are likely to grow noticeably in emerging markets than in hard-hit developed ones, however.
Still, these findings confirm what corporate CFOs already know: Corporations today must handle more and more payments to and from emerging and other markets, in more currencies, and across more global cash management systems than ever before.
These imperatives are what will drive mobile-payments capabilities onto the CIO agenda—if they are not there already. The economic environment is likely to make these demands even more urgent.
The global financial crisis has had both operational and regulatory repercussions for banks and corporations, and one clear outcome has been the trend toward greater cash holdings by corporations.
Corporations not only have more cash, they are aggressively seeking to optimize its use, and many will need to upgrade their treasury technologies and banking partnerships to do so.
CIOs Need to Understand the Imperative Facing CFOs and Treasurers
Today, CFOs and Treasurers need finance systems to support broad and complex corporate initiatives to manage risk more closely, deliver transparency, ensure compliance, and manage liquidity and cash effectively and efficiently.
Mobile capabilities could play a key role in efforts to upgrade finance systems, and provide much-needed networked connections to facilitate information-sharing and transactions execution.
Consider, for example, the myAnnonces cash-transaction reporting service from French financial-services firm Natixis.
This type of real-time data is critical for CFOs and treasurers, who are charged with ensuring that corporate cash is in the right place at the right time.
A failure to achieve this strategic objective can directly undermine a corporation’s commercial activities and can jeopardize the very viability of a company.
CIOs who truly understand the imperative to increase the visibility and mobility of cash will be in a better position to identify the potential of mobile applications and interfaces, and to provide the most robust technical solutions for global and often decentralized corporate organizations.
Banks Are Keenly Aware that Mobile Applications Have Promise
It is fair to say the high-profile mobile developments are occurring in the consumer arena, and the 2011 WPR shows the world’s largest banks are actively investing in new mobile-payments offerings, as are mobile operators themselves.
Adjunct players like Google, Apple and non-bank players like PayPal are arguably at the forefront of exploring some of the most innovative possibilities, for consumer users at least.
Partnerships have already emerged between banks and producers of cell phones and providers of smartphone operating systems.
And all participants are looking to find business models that serve customers well, while providing sustainable revenue-sharing arrangements for providers.
It seems there will no shortage of demand: Overall, the number of mobile-payments transactions is expected to grow 48.8 per cent per year through 2013 to $5.3 billion, from $4.6 billion in 2010.
In fact, if mobile payments sustain today’s growth rates, in ten years time, mobile payments transactions could equal or exceed card transactions.
Banks, however, must identify ways to create value from mobile payments. The WPR argues most will target one of three value spaces:
1) Execute Mobile Payments.
Players that opt for this proposition, will need to provide, at a minimum, the ability for customers to make mobile payments. The increased availability of technologies like near-field communications (NFC)-enabled phones and contactless and mobile points of sale will increase the opportunity.
2) Enable Project Frameworks.
In this space, players will seek opportunities to provide enhanced services and circumvent barriers to adoption. These could take the form of pilots for specific offerings targeting the customer base of a given bank, such as Bank of America and RIM piloting microSDs as a bridge to NFC to overcome handset barriers. Similarly, RBS has launched a mobile service on Research In Motion’s (RIM) new Blackberry tablet to provide information on fixed income, currencies and commodities.
3) Explore the Opportunities.
In this space, players could iterate their propositions in any number of ways, e.g., around technology or revenue-sharing, and some players will need to engage and brainstorm with like-minded partners to succeed. Google Wallet, for example, is the first virtual wallet app in the U.S. using NFC inside a smartphone. Google partnered for the app with VeriFone, MasterCard, Citi, Sprint, and First Data.
The debate is likely to rage over the viability and potential adoption rates for emerging consumer mobile-payments solutions.
In the meantime, corporate CIOs need to remember that innovative CFOs and Treasurers may well be pushing very soon to deploy mobile applications for a critical reason: to help the enterprise gain end-to-end visibility over its cash flows, and ensure more effective funding and investment operations that can ultimately bolster sustained performance.
Andre Cichowlas is VP head of technology development and integration at Capgemini FSGBU