Mobile banking technology is closing the gap between emerging and developed markets, in some cases allowing new markets in Asia and Latin America to evolve beyond the traditional banking infrastructure seen in the west. While the frenzied pace of mobile adoption in emerging markets (EM) has underscored the allure of this technology, banks have often cautioned that inertia, lack of end-user demand and security fears would temper corporate adoption. However, change is afoot, analysts say.
“Corporate treasurers are embracing mobile treasury and demand is already surpassing expectations,” says Marcus Treacher, head of e-commerce for global payments and cash management at HSBC.
The bank has 9,000 to 10,000 senior treasury staff authorizing payments worth more than $13 billion via handheld devices, he says, including transactions of up to $400 million. According to a survey of transaction-banking executives conducted by Celent, the financial research firm, almost half (46%) of respondents had an annual technology budget of more than $10 million in 2012. What's more, Aite Group reckons 40% of the 100 largest US banks were likely to have unveiled corporate mobile banking platforms by the end of 2012.
These shifts point to the possibility of a future where banks compete on the basis of their mobile platform. “Customers don’t seem to be switching provider based on mobile account access, but it could become a factor,” says Jonathan Bye, senior consultant at RBS. “We get a lot more questions about what our mobile offering is, which shows a level of interest.”
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| Karin Flinspach, of Citi Transaction Services |
The counterpoint comes from Karin Flinspach, head of payments and receivables at Citi Transaction Services, who reckons any comparative advantage would eventually even out. “I don’t see banks competing on mobile technology in the long term,” she says, adding that it is more likely to be a steady evolution towards the technology allowing mobile devices to do what desktops can do. In the short term, however, the competition is under way. Deutsche Bank has stolen a march on its rivals with its Autobahn App Market. Offering clients access to specific bank services via 150 apps, it ensures clients can access what they need, without cluttering their view with functionality they won’t use.
Banks are now starting to compete on convenience of client access and ease of use, says Arthur Brieske, global head of commercialization and Americas regional head of product management for GTB at Deutsche Bank.
“In an intuitive, simpler and seamless way, clients can access the entire Deutsche Bank franchise via the bank’s Autobahn App Market,” he says.
Banks are finding that new technologies are shaping corporate demand but there are security challenges over adoption in both developed and emerging markets. “Banks have to consider that mobile devices may not be secure, and we cannot control the mobile network these services are provided on,” says Bye at RBS.
Authorizing the release of a pending transaction is therefore considerably less problematic from a security perspective than creating a new payment mandate. “Risk management is key and we need to ensure systems are secure, while being easy to use,” he says.
However, it is hard to imagine these security concerns doing anything more than briefly delaying the rollout of extensive banking services via mobile technology. Advances are already occurring in managing the trade supply chain, e-invoicing and signing off trade shipments.
And if the west is, in some aspects, playing catch up with EM, corporate banking is definitely playing catch up with retail banking. “The impact has been less obvious on our corporate clients,” says Bye, adding that the number of corporates offering mobile access to the finances is still relatively small, and what access there is tends to be basic.
Partly this is because it is much quicker to take personal decisions for a retail account than the group decisions required for a corporate account. “Some corporate treasurers are still in the process of deciding how they want to use this service," says Bye.
However, with mobile banking making rapid advances in retail, it seems likely the corporate side will follow, as retail customers pressure businesses to offer the same service at work they enjoy for their personal accounts.
A whole generation of payment infrastructure arose in the west in the 1970s that never took root in many EM, such as the card network or a direct debit system. However, this infrastructure is gradually being overtaken by a new generation of technology, including mobile banking systems, which is enjoying much greater uptake in EM, including among corporates.
For example, the Brazilian banking infrastructure has built real-time clearing and settlement capabilities more advanced than many of the commercially available payment models found in Europe, says Brieske at Deutsche Bank.
“Emerging markets have the advantage of not having to bridge the gap from legacy banking infrastructure,” says Brieske. “In the developed world, the legacy banking infrastructure is efficient so it is difficult to build a business case to make new investments in the new emerging technology space.”