The paper was also covered by Wall Street Journal’s Market Watch.
Mobile Payments Cut Costs for Some, if Customers Play Along
Consultancy calls for mobile payments
Mobile payments help to reduce costs in businesses worldwide. CFOs should therefore consider the range of possibilities that they offer for managing payment processes, a consultancy argues in a recent white paper. However, moving to mobile payments might seem daunting in the first place.
Mobile payments can help reduce costs.
Collecting and distributing cash is a major overhead for many companies. It can be as high as 20%, depending on the market, a recent white paper published by services provider Mobile Money Consulting claims. The authors of the paper argue that introducing mobile services will reduce these costs.
One of the main advantages of mobile collection and disbursement is the reduction in costs associated with handling cash. Particularly for companies specialising in consumer goods, cash brings inefficiencies into the payments supply chain, the white paper says. “If we take FMCG companies, cash can amount to 75-90% of receivables in emerging markets and up to 30% in developed markets,” Killian Clifford, director at Mobile Money Consulting, says.
Cash triggers costs
Mobile collection and disbursement key to reduce costs associated with handling cash?
Although cash in the supply chain may seem benign to financial executives, it causes massive costs through invoice delays, collection, transportation, securing, insuring and manual reconciliation, according to Clifford. In total, this can add up to between 5% and 20%, depending on the market in which the company is active. “These are savings that can ultimately be passed on to customers, consumers and shareholders,” Clifford says.
However, moving from cash to mobile is not easy. Changing consumer habits is notoriously difficult and their apprehension to pay with mobiles at the till is high for fear of identity theft. As of yet the technology is still in its infancy although it is growing fast.
Protect against fraud
This is why, if CFOs decide to shift to mobile payments, security must be a top priority. “Protecting transaction data and ensuring against fraud are essential,” Clifford told CFO Insight. Scale and real-time processes are further issues to consider. If large volumes of payments are to be processed, business partners need to have the relevant platform and products. Not only CFOs, but banks have to do their homework as well if mobile payments are to become more prevalent. They need to be a “core part” of banks’ “strategic offering” to treasury departments, the white paper argues. Due to these intricately linked topics, the shift to mobile payments might seem quite daunting to CFOs from the outset.
It is still not even clear how much large companies in the developed world would benefit from mobile payments. The white paper claims that savings in emerging markets for many small and medium-sized (SME) businesses would be the greatest, but chief financial officers from large companies active in more developed markets can also profit from mobile payments as well. Mobile disbursement in the B2C sector would, for instance, present an opportunity for large corporations.