Brett King

Posts Tagged ‘Merchant’

Mobile Payments: More than P2P and NFC…

In Customer Experience, Mobile Payments on June 29, 2011 at 10:37

Today I’ve been in Beetsterzwaag, Opsterland, Netherlands, about 150 kilometers from Amsterdam at an offsite strategic retreat with the ICS (International Card Services) team. Initially part of Bank of America’s presence in the Netherlands, ICS today is an independent subsidiary of ABN Amro NV, but works in the provision of a range of card services around issuance, promotion, processing and so forth. ICS has around 3 million customers today, and the session we had was around the implications of mobile payments in the form of NFC, P2P and other initiatives such as cardless loyalty program implementations.

What emerged was a very interesting realization in respect to opportunities in the mobile payments ecosystem that hadn’t fully occurred to me until this planning session.

More than just a payment

While I’ve often discussed the contextuality of payments and the massive opportunities that companies like Google are trying to leverage in respect to messaging around payments (before, during and after the payment event), it is interesting to think about different payment executions. We need responsible partners in the ecosystem to start handling not just straight through payments, but multiple variations on a theme, understanding the various parties and implied contracts involved.

P2P Direct or Merchant one-off payment

The simplest payment journey to conceptualize is when you walk into a retail store and pay a merchant according to the cost of the purchase, or when you have a service event where you simply take your NFC phone and execute a live person-to-person payment. Today you can already use PayPal Bump to execute a live phone to phone or person-to-person payment, but in the future, I’ll just put my phone into send or receive mode for an NFC payment and the respective individual’s wallet will do the rest (discounting all the back-end complexities, of course).

PayPal is slated to do $3.1 Billion in Mobile Payments in 2011

This is a fairly simple execution – take a payment from one person, send to another via either NFC, bump or a wallet. We can use location services, authentication and NFC to simplify and secure the phone to phone interaction, or we can use an App like PayPal to transfer to a unique individual via their phone number, email address or similar. The ability to split payments amongst a number of individuals, such as paying for a bill at a restaurant would also fall into this category.

The value here is the simple execution of a person-to-person transfer without requiring adherence to the current bank-led wire transfer or ACH equivalent which requires a routing number, an account code, the bank address, etc, etc. The opportunity for NFC phone to an NFC POS or another NFC phone is also obvious.

The credit facility or installment plan

Another powerful in-store implementation will be the ability to offer a real-time credit facility to back a payment. It might be a line of credit, a personal loan facility or a 12-month, low-interest payment plan with regular monthly payments. The ability to offer you real-time finance options that are more competitive than using a competitors hefty credit card APR program is pretty compelling at the point-of-sale, and can steal you away at the most critical moment – when you are about to pay for a big ticket item.

Mobile offers payments providers this sort of contextual opportunity, which currently is too difficult or erroneous to do with a plastic card and traditional advertising offers. Give me an offer in-store and help me execute the line of credit in real-time. Powerful enough to get me to change payment partners right in the midst of a transaction.

The Contract Payment

In this scenario we may have an upfront payment, but the full transaction is only effected with completed, successful delivery of the required goods or services. In business we have constructs like an LOC (Letter of Credit) which facilitates such payment contracts, but in the individual merchant/service provider and consumer space, these sorts of payments contracts are implied and managed informally. However, there may be an opportunity for this to be managed in an semi-automated fashion through the payments ecosystem.

Whether it is time based for hurdle payments to occur as specific milestones are reached, when physical goods are delivered, or when a contracted service is rendered – there is an opportunity to simplify the payments journey by authorizing the subsequent payments via a mobile device or online.

Facilitating the platform

As we move increasingly to person-to-person electronic payments, the ability not only to execute an individual one-off payment, but also variations on a theme with either a payment agreement/plan or a underlying credit facility adds value to the P2P ecosystem.

Today we have the likes of PayPal working on P2P, individual merchants offering some payment facilities, but we don’t have an emerging player combining these different capabilities and relationships to create journeys supported by a range of more flexible, automated payment variations.

When you mix analytics, always on IP layer or the cloud, a mobile device, location and the ability to offer a variety of payment mechanisms, the future of payment journeys looks very, very interesting. Payment journeys offer massive opportunities for reinventing and simplifying the way we currently interact in this space.

Business Internet Banking – What does PFM for business look like?

In Business Banking, Customer Experience, Internet Banking, Offer Management on September 15, 2010 at 11:05

Have a look at your bank’s local website in respect to business internet banking and you’ll see lots of demos, and promotion of basic features like ‘instant balances’, ‘convenient transactions’ and ‘anytime access’. In 2001 that might have been world-class features but today that’s tired, boring and hardly a differentiator. So why haven’t we seen much improvement in business banking since 2001? Basically because most banks are out of touch with the day-to-day banking needs of their corporate customers.

The Three worlds of Business Internet Banking

There are effectively three worlds in Business Internet banking, there is the sole trader, the Small to Medium size Operator (SME) and the Large Corporate. In respect to platform, the challenges of the sole trader and SME are somewhat similar operationally. However, for a sole trader, they tend to run their bank account more like a personal facility, but with business transactions coming in and going out. They usually have a very small staff footprint, if any, but their primary banking activities are paying for goods and services, and chasing payments from customers/clients.

The SME has, by definition, fewer than 100 employees. They have the same concerns as a small trader, but incorporated in operational concerns are payroll and Human Resources functions, and the job of managing cash flow – increasingly tough in a challenging economy. The large Corporate has a much more complex environment from a payments and banking perspective. Managing complex suppliers and procurement relationships, group life, health and pension concerns, along with credit facilities, receivables management, etc. So what role can Business Internet Banking (BIB) 2.0 play in the corporate landscape today?

The Sole Trader

Collecting money is one of the biggest challenges for a small trader, as cash flow needs are often acute. Especially in the early phase of the business, a sole trader will often be operating hand-to-mouth, month-to-month. So the ability to collect payments is critical. However, as dealing with cheques and cash becomes increasingly erroneous, many sole traders turn to Merchant services either through POS capability or e-Commerce integration to solve the payments dilemma. But if you are a sole trader, good luck on getting a Merchant account.

Many banks require a minimum of US$100,000 a year in transaction throughput before you ‘qualify’ for a merchant account. Then the onboarding process for a merchant account is extremely complex. You need to sign contracts with the bank, with each of the card issuers (Mastercard, Visa, Diners, American Express, Union Pay, etc), and you typically need to set up a completely new ‘merchant’ account. This process is not simple, and in many cases small businesses just don’t qualify. Additionally, ask a sole trader when they were ever proactively offered a merchant account…

This is one of the reasons we see a host of workarounds for accepting bank payments today. Jack Dorsey, one of the founders of Twitter has started up Square, a cheap and fast alternative to traditional merchant onboarding. Square has had some recent competition in Europe (UK and Germany to start with) from iCharge. There are also a bunch of online virtual merchant and e-commerce payment options from the likes of Shopify, Yahoo! Merchant Solutions, then you have Amazon and Google Checkout, many, many more. However, the future looks bright for sole traders. With Visa announcing trials of NFC mobile payments this year, with Orange and Barclaycard doing the same in the UK, and Apple hiring some big names in NFC for their next iPhone – we’ll all soon have the ability to accept contactless payments with ease as our phones become POS terminals of a sort.

With payments sorted, the remaining issue is cash-flow and financial management. As I already posted back in June, there are huge possibilities in the area of Accounting, Cash Flow Modeling and Credit services in the cloud. But don’t think cloud as in outsourced from a banking perspective, think that the bank is the ‘cloud’ and the Business Internet Banking platform is the services layer that provides the key functionality to customers. Already the sole trader today probably has most of his transactions going through one account – so his bank statement is effectively his general ledger. Be smart banks … formalize this. Recognize that the sole trader’s internet banking system – is also his day-to-day accounting function. Enable that, and you have something really helpful for the small business owner.

Small to Medium Enterprise

Small-to-medium size businesses face their biggest challenges oddly enough when they are dealing with rapid growth. Small businesses don’t have a huge pool of resources to draw upon, so when business steps up a notch the hiring lag can often be a problem, as can be hiring ahead of the receivables. Take a medium size company of 20-30 employees, and throw a $3-4m contract at a company of that size – life changing yeah? Maybe, but if your total revenue last year was $4m and you are going to double that, you need to hire another 15-20 staff today. Problem is, the cash isn’t going to come in until the end of Q1 next year? So how can you afford to ramp up? This is the type of scenario where banks are supposed to help, but are too risk adverse these days to assist.

SME's often face their toughest challenges in times of rapid growth

By getting closer to SMEs and understanding their business better, there are real opportunities here. But don’t stress about the investment in direct banking resources, just offer SMEs a platform where they can upload their accounting data and get free cash flow analysis, along with suggestions about how to deal with cash issues. The system then can act to provide better triggers for SME relationship managers to talk to their clients. Right now banks do a lot of waiting for clients to come to then, and they the first thing we ask is to provide the last 3 years of accounts. I’m proposing a reversal of that. Get the accounts by allowing SMEs to upload them to their Internet Banking platform, offer free financial analysis and on the basis of smart analysis, provide the services customers need as they need them, not only when they ask for them.

Conclusion

Business Internet Banking can become the platform for so much more leverage with Business clients, but today it is a very basic transactional platform for the bulk of customers. We need to shift it to become the PFM of business banking – a toolset that enables the bank to help your business when you need the help, not only when you ask for it.

I’ll discuss Business Internet Banking for the large corporate on my next blog.