Digital banks support digital business

I talk a lot about how the digitisation of banking is changing the customer relationship, and this is as true for the corporate customer as the retail consumer.

Examples are appearing everywhere of real-time access to cash netting and pooling, and immediate payments across borders and continents, but there are nuances to the beat of the digital drum in the corporate world that we do not see as clearly as in the consumer space.

Take Barclays Pingit for example. 

An app launched for P2P payments two years ago that stole a march on the competition by enabling Barclays and non-Barclays customers to make payments directly to each other through their mobile smartphone.  Barclays claim that 14 percent of new account openings, where customers are switching from other banks, are made on the basis of the Pingit app.

But the P2P piece of Pingit is not that interesting.  You can do that with PayPal and thanks to the launch of Zapp this spring, you will be able to do it with pretty much any mainstream bank.

No, the interesting part of Pingit is what it has been doing in the corporate space with QR codes and checkout.  Barclays launched a Pingit QR code facility in the autumn of 2012 and I immediately saw it as a game-changer as it allows corporates to send out billing information to clients with all the payments information in the QR code.  The QR code embeds the amount due, the customer account details, the beneficiary’s account details and nay other relevant information such as Purchase Order and Invoice number details.  As a result, corporates can track the complete procure-to-pay cycle with integrated physical paper and digital detail for tracking.  That means you could use embedded QR codes, or NFC of course, in all documentation across the supply chain, and never have to wonder what happened between Chennai, Dubai and Mumbai again (or London to Pratt’s Bottom if you prefer).

In 2013, Barclays extended the app into other areas, so that you can place the Pingit widget into any checkout process – like Amazon checkout – as well as other functionality.

This is just the tip of the iceberg however, as we get into the next wave of digitisation with the internet of things and wearable computing.  Think of all stock items communicating their whereabouts and pricing all the time.  Think of store thieves being tracked as they not only remove items from the store, but being traced to where they live.  Think of the ships, containers, items within the container and component of items within the container all shouting “I’m here, and my name, rank and serial number are Samsung Galaxy 5 SNE4-1X98-20H1”.

Obviously, that is the technology piece, but the financial app inside the items will also be a key part of the process.  This container contains $5,256,174.75 cents worth of goods, and we know that because we can track the 19,714,142 components inside, their values and serial numbers.

Even more profound will be the impact of 3D printing, as one banker recently pointed out to me.  When you no longer need to source goods from China but can just cheaply print them in the production line on a produce-as-needed basis, you really see things change.

Perhaps this is why it is so critical that banks keep up with corporates, and corporates keep up with consumers. 

By way of example, I presented at a conference in Asia shortly after the iPad was released and put forward the view that just as consumers were all now using Android and Apple smartphones, corporate treasury staff would soon all be using iPad apps to manage their cashflows and forecasting.

The audience laughed and gave me a low vote on the score feedback sheets and yet, just eighteen months later, banks such as JP Morgan and Bank of America were rolling out a variety of functional apps for accessing corporate accounts and moving money around the world.

And that is the point: we are not moving money around the world anymore.  We are moving data.

The digitisation of money and the secure movement of data between counterparties is where the banking system is at today.

This is the core of the message pointed out in the book Digital Bank.

The digitisation of everything is possible today, and it means we are no longer living in a world of channels, omni- or otherwise, but living in a world of integrated digitisation around us.

It is why companies are all seeking to investigate the possibilities of augmented marketing and service, where the consumer or component can be tracked in real-time and proactively engaged.  It is also why the pressure for change is bubbling more and more from the consumer world over to the corporate environment, and from the corporate environment across to the bank.

This world is not a simple one.  As one bank colleague explained to me the other day when debating counterparty risk.  The bank network exists to ensure that value is exchanged securely between known and unknown entities around the world.  Often a transaction will pass through multiple banks to reach its final destination, and this is why Know Your Customer (KYC) has become such a hot topic.

Nevertheless, if everything can be tracked and traced, monitored and located, requested and communicated with in real-time, all the time, then the world does become a different world.

So, for all the talk of Digital Banks, the discussion of the digital world and its impact upon creating digital  business is just as key.