Cash is Yesterday’s News: The Transformation of Payments
by Ron van Wezel, Global Head of Emerging Payment Streams, Global Transaction Banking, Deutsche Bank
The world of commerce is undergoing a digital transformation thanks to the emergence of new payments instruments. The march of so-called ’smart’ devices – be they phones or tablets – is revolutionising the way that enterprises and customers interact. Deutsche Bank’s Ron van Wezel discusses these developments, and why corporate treasurers are at the centre of this transformation.
Given society’s growing reliance on technology, particularly since the advent of smartphones and tablet computers – it is somewhat surprising that payment methods have largely failed to keep pace. While smart devices are fast becoming the platform of choice for online payments – spurred largely by the development of apps to further enhance the user-experience – paper-based payment methods continue to dominate offline.
However, there are signs the tide is beginning to turn in this respect with the development of more sophisticated payment methods.
In the consumer space, these new instruments are designed to merge the on- and off-line shopping experiences, enabling customers to pay either online at the touch of a button – or in-store without queuing or handing over a card or cash – and retailers can penetrate an increasingly tech-savvy customer base. This transformation has the potential to change the world into a virtual shopping centre, open 24-hours a day, seven days a week and providing unlimited choice.
Of course, developments in the consumer space do not take place in isolation. What gains traction in this arena also influences advances in the commercial realm – as proven by the effects the ease of use and customisability offered by social media tools have had on financial technology development.
With this in mind, it is likely that new payment options will lead to the adoption of new business models in both the business-to-consumer (B2C) and business-to-business (B2B) spaces. And in both instances, it will be corporate treasurers driving the changes, and finding ways to use these innovative payments options to enhance business process by lowering costs and improving risk-mitigation and operational efficiency.
From bricks to clicks
In the consumer space, the emerging payments’ development has been sparked by the speed at which the online commerce market is gaining ground. ’Clicks over bricks’ is seemingly becoming the order of the day, and it is a concept supported by sales statistics.
Take the British retailer John Lewis as an example. Over the recent festive period, online sales were reported to be 44% higher than the previous year, and Johnlewis.com was said to be the channel for £1 out of every £4 of the company’s takings. And rather than being a one-off example, this boom in online sales is indicative of a broader trend.
According to Ofcom’s latest International Communications Report, Britain leads the world in using the latest technology in everyday life – including for shopping. The survey reveals that Britain buys more online than any other country, with an average of £1,083 spent per capita on internet purchases.
With these findings in mind, it is hardly surprising that the online space is becoming a key area of focus for retailers, and considered a vital area of differentiation. As a result, retailers are seeking to offer more sophisticated payments options to make the buying process quicker and easier, as well as build their brands by tying them into customer loyalty schemes.
Such efforts are beneficial for customers and retailers alike. Customers can enjoy a more intuitive, speedy and secure payments service while retailers, for their part, can engage in more targeted marketing campaigns. They can also decrease credit risk, improve cash flow management and benefit from operational efficiency gains as a result of less paperwork.