Focus: Mobile Banking

MOBILE BANKING: CUTTING THE TIES THAT BIND

By Denise Bedell

Mobile technology could forever change the way that companies manage their physical and financial supply chains.

After years in development, mobile technology may be finally closing the gap between companies’ physical and financial supply chains. While still in the midst of slowly integrating small pieces on each side, some of the world’s biggest transaction banks are beginning to develop solutions that use mobile technology to improve data integration, accelerate decision-making and enable crucial financial transactions to take place on the fly. The result is that some of the efficiencies that the more technologically advanced banks have been promising for years now—such as near-real-time integration of physical supply chain data and trade flows with transactional information, supply chain finance solutions, and payment channels—may become a reality. In fact, mobile technology could be a great enabler in this space. It could speed up supply chain processes and let firms eliminate the need to work at the speed at which paper flows in managing global trade before making transactional decisions.

As with any new technological advance in the corporate space, it will be several years before this becomes an everyday offering that is readily accepted and used by companies for global supply chain management. However, the possibilities are astounding—and a few first-mover banks are already working on solutions to the myriad problems that still must be overcome before this dream becomes a reality. Nancy Atkinson, a senior analyst at consultancy Aite Group, explains: “Mobile devices do provide a more realistic opportunity to bring the physical and financial supply chain closer together than we have seen in the past.”

Much work has been done over the past decade-and-a-half to improve visibility and automation in the physical supply chain—for example, with the use of barcode technology that enables companies to know where items are in the manufacturing and shipping process. What has lagged behind are advances in the financial supply chain. Proponents claim that mobile devices offer a shortcut that could dramatically streamline the procure-to-pay cycle. There are many points on both the physical and financial side where mobile devices could help speed things up.

For example, when an item arrives at a warehouse, a significant amount of time is required to get key information out of the warehouse and into the hands of the person who can sign off on it and advance the financial supply chain processes associated with that shipment. Atkinson points out one possible solution: “To the extent that there are mobile devices and an ability to send images, it could enable someone to more quickly acknowledge that they have received the item ordered. That would allow for quicker turnaround on payments and the opportunity to eliminate some lag times.”

Mobile payments will also change the way companies manage their supply chain on the distribution end, asserts Amol Gupte, managing director of Citi’s global transaction services: “In the corporate space, if you’re collecting from small … retail establishments in Brazil or in India, if you’re making deliveries of small-ticket [items], those kinds of flows will clearly move to the mobile channel.” Instant mobile payments by buyers of small-ticket items upon delivery could have a huge impact on corporate cash flows and purchase-to-pay cycle times.

Security Remains a Concern

Logan: Mobile payments can accelerate cash flows

The possibilities are huge, but according to Sanat Rao, president and head of worldwide business development at solutions vendor Finacle, companies are still addressing security concerns when it comes to mobile payments. He explains: “Particularly in corporate banking, given that the sums are likely to be large and often cross-border, there will be a multilevel authorization process within the hierarchy. Many companies are not comfortable allowing multilevel authorization through mobile devices.”

From a corporate perspective, any solution involving payments through a mobile device requires a trusted provider. This means that current developments in the consumer mobile payments space, such as mobile payment solutions offered by telephone service providers, will simply not pass muster in the corporate space. Dennis Sweeney, deputy treasurer at US-based conglomerate GE, emphasizes: “Banks have to be part of that process because there is the fiduciary trust issue. I don’t want all my payments tied up with my phone company.” Additionally, most markets have multiple mobile operators, which makes it unlikely that a single operator or vendor could provide a global solution.

Sweeney adds: “Banks need to find a role in that settlement process. Now they may not be the whole thing. They may be the technology provider in there. But at the end of the day, it’s the bank I want to trust.”

A number of big transactional banks are looking to fill that role. Jim Logan, director of product strategy and commercialization for global transaction banking at Deutsche Bank, explains his bank’s strategy: “We are currently working on an extension to our financial supply chain product suite that will allow us to present invoice-related data that customers can access not only through the Web but also through their mobile devices. This affords the ‘payer’ not only the added flexibility of viewing basic accounts-payable information but also the added convenience of effecting payment without being tethered to a desk.”

Another issue that has slowed interest and activity in mobile payments is that many solutions to date involve the use of an ACH debit for payment once it is authorized through a mobile device. This can take up to a day to clear, a lag that negates much of the potential speed advantage. But banks working in this space are starting to look at the possibility of using virtual commercial card programs—accessed through a mobile device—to eliminate this additional drag to the process. Such transactions can be linked to the unique invoice number of the transaction for automated information processing and speedy settlement.

Another piece of the puzzle in terms of enabling mobile technology across the disparate elements of the physical and financial supply chain is in supply chain finance. RBS, for example, is in the process of consolidating payments data and channels with trade flow information through a single, Web-based solution. It will provide integrated dashboards of the two data flows that should help businesses improve their decision-making. The system can also be linked to supply chain finance solutions at the bank. Prabhat Vira, head of global transaction services for the Americas at RBS, says: “With this we will bring out information from the physical supply chain and add onto that the ability to finance certain trade flows. At the time when they make a payment, clients with an arrangement will have the ability to choose between just making a payment or financing with us as a bank.” Once the Web solution goes live, mobile access to the information—and the ability to make payments through a mobile device based on that information—will be next in line for launch.

Deutsche Bank is already at work on enabling the mobile channel within the supply chain. Logan says: “On the receivables side, mobile payments and authorizations can accelerate cash flows as they replace checks and cash.” Deutsche Bank is also enabling mobile access for its dynamic discounting supply chain finance solution. One of Deutsche’s existing customers within the ocean freight industry that is already using its electronic invoice presentment and payment solution is soon to begin utilizing the bank’s supply chain finance service, and has agreed to run a pilot of the mobile channel when it is ready to launch.

The Waiting Game

Gupte: Small-ticket flows will clearly move to the mobile channel

It will be some time before companies are able to take advantage of such mobile solutions as are being developed. Atkinson says: “Businesses will be looking for more real-time information regardless of where they are, and they will want to be able to move transactions along whether the person who has the authority to do so is at their desk or on road,” she says. But to make it work smoothly, they will need to find ways to tie that data to other information that helps in decision-making around that transaction. For example, in a wire transfer authorization, executives will need enough information around the transaction to decide whether to release it or not. They’ll need enough peripheral data to see that it is the correct transaction, where it is going, and so on, and then they must be able to either release it or redirect it to the person who can.

As the market develops, not only will these security issues be worked out, but also mobile tools will start to emerge that more closely match the needs of corporates. Atkinson adds: “We are not just talking telephones, here. The iPad, for example, could become important for businesses in this space, and laptops are still something of a mobile device, although they will, I imagine, be replaced with smaller devices that can be left on all the time.”

Although many companies may not yet be comfortable with the idea of using a mobile device to manage payments and improve connectivity and information transfer efficiency through the physical and financial supply chains, the growing sophistication of the products—and their increasing ubiquity—will encourage them to take another look. New advances are being announced all the time, and big money is now being devoted to corporate mobile supply chain and payments management by vendors and cash management banks alike. If not the present, this is certainly the near future.