Killian Clifford

Mobile Money Consulting

January 2013

CORPORATE MOBILE PAYMENTS

THE OPPORTUNITY

White Paper

CONTENTS

Introduction ................................................................... 3

The Opportunity for Corporate Mobile Payments ................................... 3

Mobile Payments Ecosystem....................................... 4

Ecosystem Development ......................................................................... 4

Corporate Mobile Payments .................................................................... 4

Corporate Mobile Payments ........................................ 5

Business Case ........................................................................................... 5

Driver for the Payments Industry ............................................................ 5

Roles And Advice for Industry Participants ............... 6

Corporations ............................................................................................ 6

Banks ........................................................................................................ 6

Mobile Operators ..................................................................................... 7

PSPs and Platform Vendors ..................................................................... 7

Government, Development and Multilaterals Agencies ......................... 8

Conclusion ................................................................................................ 8

Page | 3

CORPORATE MOBILE PAYMENTS INTRODUCTION

INTRODUCTION

THE OPPORTUNITY FOR CORPORATE MOBILE PAYMENTS

The cost of collecting and distributing cash is a major overhead for many corporations throughout the world

and can be as high as 20% in some markets. The emergence of mobile technology offers a unique opportunity

to eliminate much of that expense.

Consumer mobile payments leading the way…

Mobile technology is revolutionising financial services the world over. Often it is consumer-led, whether it is

P2P transfer for the financially excluded in emerging markets or smart-phone enabled merchant payments in

more developed markets. To date businesses have been slower to adopt mobile as a method of payment.

However corporate mobile payments offer major potential for the business sector.

…with significant opportunity for corporate payments

In particular, there is significant opportunity for mobile corporate collections and disbursements

to replace cash as a method of payment and to substantially reduce the cost of cash handling.

Managing payment processes with cash introduces numerous inefficiencies into the payments

supply chain and can be a major overhead for those that do so (such as companies specialising in

consumer goods). The business case is especially strong in emerging markets where upwards of

75% of corporate receivables and disbursements can be in cash1. Even in more developed

markets this can be as high as 25%. However in those emerging markets where financial inclusion

remains low many small businesses may not have had an alternative payment method to cash –

until now.

Cash is still King in many markets but mobile now offering a serious alternative

With the near ubiquity of mobile phones and the launch of mobile

transfer, mobile payment and mobile banking services in most

markets, an alternative payments infrastructure is being created that

both bypasses cash and reaches beyond more traditional electronic

payment methods. This new ecosystem brings in the multitude of small

retailers and distributers that sit at the bottom of the payments supply

chain. Corporations in these markets now have the opportunity to

leverage off of this infrastructure to eliminate inefficiencies in their

payments processes and thus to make substantial cost savings which

will ultimately benefit both shareholders and consumers alike.

This White Paper introduces the concept of corporate mobile payments and sets them in the context of the

overall mobile payments ecosystem, examines the business case for their adoption by corporations and looks

at their potential as a driver for the mobile payments industry overall. Finally, with insights and thoughts from

industry leaders, it explains the role that each type of participant should look to play in the industry.

1 IFC Mobile Money Study 2011

75% of

receivables in

cash in EM!

Page | 4

CORPORATE MOBILE PAYMENTS ECOSYSTEM

MOBILE PAYMENTS ECOSYSTEM

ECOSYSTEM DEVELOPMENT

Examining the development of a model mobile

payments ecosystem within an emerging markets

setting (such as we are seeing in East Africa),

payments starts out as peer to peer (P2P) transfers.

Then, providing the service is competitively

positioned and marketed, new users are recruited

to the service and the number of payments will

begin to rise exponentially

Building a critical mass of

consumers at the base of the

pyramid attracts businesses to

the service, both in the form of

accepting payments (e.g. bill

payments; merchant payments

(P2M), corporate receivables

(B2B)) or initiating payments

(e.g. salaries, corporate disbursements (B2B) etc).

At the same time this critical mass brings the

public sector and bilateral agencies to the service

to distribute social welfare and relief payments or

receive tax payments (G2P).

With the network effect now firmly in place,

banks, card companies and other financial service

providers are attracted to the service as a vehicle

to offer their products and payment services,

which in turn attracts existing banked customers

and the new mobile payment ecosystem is now

firmly established

CORPORATE MOBILE PAYMENTS

Within a developed mobile payments ecosystem

Corporate Mobile Payments are a part of B2B

payments:

As the payment flow for mobile receivables above

demonstrates, corporate mobile payments touch

every part of the ecosystem. The consumer (whose

own wallet may have been funded by a transfer –

P2P), transacts and pays a merchant via mobile

(P2M) who in turn pays his own supplier via mobile

(B2B) who in turn may pay his supplier or

corporation by mobile (B2B).

Today many markets are beginning

to reach beyond P2P as their

payments ecosystems evolve. As

we shall see corporate mobile

payments have the potential to

speed up this evolution, change

conventional thinking on ecosystem development

and revolutionise the mobile payments sector.

Corp payments

natural part of

mobile ecosystem

development

Market opening

up for corporate

mobile payments

Page | 5

CORPORATE MOBILE PAYMENTS OPPORTUNITY

CORPORATE MOBILE PAYMENTS

BUSINESS CASE

The business case for corporate mobile payments

is compelling. Taking the example of corporate

receivables, the cost of cash collection is

significant including as it does the cost of

collection, transportation, securing, insuring,

manual reconciliation, plus the time delays that

result from these processes.

In emerging markets, the cost of cash collection

can be as much as 20% of the amount collected.

Even in more developed markets the cost can be

between 5-10%. For consumer

goods companies where cash can

represent up to 75% of receivables

this overhead is significant –

potentially $10m-$15m for every

$100m in sales. Corporate mobile

payments present the opportunity

to eliminate these inefficiencies

and make substantial cost savings to be passed on

to consumers and shareholders.

DRIVER FOR THE PAYMENTS INDUSTRY

Corporate mobile payments can be an important

driver for the mobile payments industry

by encouraging acceptance at the

merchant and distributor level. In the

traditional P2P-led model the assumed

thinking is that consumer demand

drives merchant P2M payment

acceptance, which in turn drives acceptance of B2B

payments by distributors and corporations.

Merchants’ mobile wallets can also be loaded

independently of consumer P2M transactions by

topping up directly or linking to a bank account.

However by incentivising mobile receivables via

methods such as invoice discounting etc,

corporations can encourage mobile payments

acceptance by merchants and distributors. This in

turn encourages consumer mobile payments

(perhaps through further consumer discounts)

thus acting as a driver for the industry and turning

the consumer-led model on its head.

Cost of cash

collection up to

20% of sales

Drive

acceptance at

merchant level

Page | 6

CORPORATE MOBILE PAYMENTS ROLES

ROLES AND ADVICE FOR INDUSTRY PARTICIPANTS

In this section we will examine the roles that

different members of the corporate mobile

payments ecosystem should play, along with

insights and thoughts from industry leaders.

CORPORATIONS

Corporations, especially those dealing in consumer

goods, have the most to gain from the adoption of

corporate mobile payments and it is in their best

interest to promote the practice within

their supply chain. Understanding the

business case and value proposition for

customers and merchants is crucial. For

instance, is it best to incentivise mobile

payments through invoice discounting

or should registration in a mobile

payment scheme be compulsory? An

awareness and education campaign for merchants

could also be coordinated with partner banks,

mobile operators or even PSP’s. A close

relationship with these participants is essential

and choosing the right partner for mobile

payments is an important first step.

BANKS

For banks, offering corporate mobile payments as

part of a suite of corporate treasury services needs

to be a core part its strategic offering as the

industry grows. Facilitating that growth not only

improves those important corporate relationships

but also allows banks to get a foothold in an

industry that is developing fast and coming under

increasing competition from non-bank players.

Offering secure access to payments, risk

management and automated back office systems

is a banking-industry core strength, and is

something corporations will actively seek out

when embarking on mobile payments. Ensuring

that these are in place for mobile payments will be

the key to success.

For banks about to embark on corporate mobile

payments, Citibank has the following advice:

“Banks are in a unique position to play a central

role in Corporate Mobile Receivables through

having strong relationships in place

with many of the partners in the

Mobile Ecosystem. Keys to success

are:

Keep it simple! – User friendly

graphics and easy to use, logical UX for end

users.

Adoption, adoption, adoption! – Most critical to

success, motivating end users requires well

thought out planning and execution, can be

highly customizable and is a joint exercise with

the provider and the corporate

Value add! – Modelling the savings can be a

great tool to show a Corporate CFO savings

across his or her enterprise” , Joseph Alonzo,

Director, Global Receivables Product

Management, Citi.

Mike Walters, Head of UK Corporate Payments at

Barclays highlights the importance for banks of not

just focusing on consumers when developing

mobile solutions for customers:

“Financial institutions and corporates alike need to

keep pace with changing consumer

behaviour and the increasing use of

social media sites and mobile phone

applications. Banks must

understand what this means for

their clients in different segments

and develop technologies that

facilitate these interactions in an easy, fast, simple

and affordable way. Banks should look to develop

solutions that take these trends and seek to make

the lives easier for consumers and corporates alike.

Banks with a significant global retail and corporate

franchise will need to develop scalable mobile

platforms to service their wide range of clients,

from individual customers all the way through to

the largest multinational. That way they will be

well positioned to help their clients in this exciting

area."

Research

business case

and partners

carefully

“simple,

customizable &

value-added

solutions”

“focus

on consumers and

corporates alike”

Page | 7

CORPORATE MOBILE PAYMENTS ROLES

MOBILE OPERATORS

Payments should be central to every MNOs

corporate solution product set. MNOs can facilitate

payments in the corporate supply chain and

leverage off of this to offer other value added

mobile-centric data and location services, such as

inventory and logistics management. MNOs also

have proven success in mobilising wallet

deployments throughout the world. Those skills

will be crucial in ensuring the corporate mobile

payments ecosystem is successfully built up by

placing wallets in the hands of consumers,

merchants and distributors alike, all of which will

drive payment volumes in the industry. Mike

Ritchie-Cox, Head of Consumer Goods Industry at

Vodafone Global Enterprise Ltd recommends that

MNO’s look to work as broad a range of ecosystem

partners as possible to take advantage of the

sector:

“Large corporates in developing countries often

feel that their revenues are exposed

through the costs and risks of

handling cash. Mobile payments

solutions can significantly mitigate

the risks and successful services like

those in East Africa enable funds to

be transferred securely, simply and in

real-time, between consumers and

businesses of different sizes. Entire value chains

can be made more efficient. The risk of fraud, theft

and loss reduces significantly when payments are

made or collected via mobile. Staff safety is

increased and the costs of handling cash (including

security costs) significantly diminish.

There is strong demand for this service in

developing markets and MNO’s should look to

work with a broad range of businesses to ensure

that they are taking advantage of mobile payment

platforms. To give you an idea of the scale of the

service, in Kenya alone last year mobile P2P

transfers were used to send the equivalent of more

than three times the World Bank’s estimated value

of remittances flowing into the country – that is 15

million customers generating more than 165

million transactions per month”

Chidi Okpala, Director & Head of Airtel Money

Afirca takes up the same point to advise that MNOs

can also look beyond consumer P2P transfers to

take advantage of and to facilitate growth in the

industry:

"Corporate mobile payments offer significant

opportunities to both corporations and

the wider mobile payments industry.

Mobile operators should look to

facilitate this by putting wallets in the

hands of consumers and merchants

and to offer corporates a dedicated

mobile payments product. MNO’s can

champion that agenda by providing integrated

payments services for governments, businesses,

NGOs, embassies, schools and other types of

institutions with solutions that meet their everyday

payments administration and processing needs”.

PSPS AND PLATFORM VENDORS

To facilitate corporate mobile payments platform

vendors need to move beyond the offerings that

were sufficient for P2P transfer and look to

introduce agile and scalable solutions that offer

‘bank-grade’ security to protect transaction and

client data and prevent fraud. Payment Service

Providers (PSPs) shouldn’t forget the financial

inclusion angle either, a point taken up by Visa:

“I expect mobile money technology to become

more and more relevant, as it helps

overcome some of the historical

challenges to delivering financial

services to more than 2.5 billion

consumers worldwide who do not

have a formal banking relationship.

PSPs and platform providers should

look to deploy their technology and

capabilities in markets where

electronic payments don’t exist today and to focus

on the needs of the corporations, merchants and

consumers in those markets to build a payments

infrastructure that both drives financial inclusion

and increases efficiency and economic output.

For these reasons, I believe Corporates will begin

using mobile payments and related technology to

forge more connections with consumers and with

each other.”, Hannes Van Rensburg, Group

Country Manager, Visa Sub Saharan Africa and CEO

Fundamo – a Visa Company

Payment Service Providers can look to facilitate

interoperability for corporate mobile payments.

Vodafone:

“work with a

broad range of

partners”

“provide

integrated

payment

services”

“adapt

solutions to

needs of

developing

markets”

Page | 8

CORPORATE MOBILE PAYMENTS ROLES

Also in working directly with corporations and

their chosen partner, PSPs, through training and

awareness programs, can help corporations act as

merchant acquirers, encourage consumer

payments and act as a driver for the wider mobile

payments industry. For MasterCard the time has

never been better for PSPs and other industry

participants to take advantage of the

opportunity by the sector:

“There has never been a more

opportune time to make efficient

payments in the corporate supply

chain system than now. This has

been facilitated by a number of

converging trends:

The ubiquity and ever increasing sophistication

of mobile phones that offer a secure user

interface to payment platforms;

A similar increased sophistication of mobile

payment platforms that have developed to

offer secure access to efficient payment

processing;

The increased availability of data and

bandwidth at reasonable costs.

These factors mean all participants in the

ecosystem should be positioning themselves to

enable this segment and to take advantage of the

opportunity it offers”, Sanjiv Purushotham, Senior

Business Leader, Business Expansion, MasterCard

Middle East Africa.

GOVERNMENT, DEVELOPMENT AND

MULTILATERALS AGENCIES

Whilst the sector will be largely private sector

driven, the non-private sector has its role to play

too, particularly when it comes to increasing

awareness levels in the SME sector, whether it be

via training and educational programs or the

promotion of knowledge sharing platforms such as

the SME Finance Forum. Margarete Biallas, Global

Product Leader Retail Payment Institutions &

Innovation at IFC Advisory Services emphasises the

importance of supporting SMEs in this sector:

"Recent innovations in payments and the ubiquity

of the mobile phone imply that mobile banking

offers a unique opportunity to enhance the

efficiency of the supply and distribution chains of

corporates by reducing transaction cost and fraud

related to cash transactions.

Many corporates have created

sophisticated supply and

distribution chains for their

products to reach every corner

of the markets they operate in. However, these

supply chains, which are dominated by informal

and small SMEs, are highly dependent on cash

processing, particularly towards the retail end of

the chain. In addition to improving efficiency, the

electronic data from the e-transfers can help build

financial history for these SMEs with formal

financial institutions, leading to access to other

financial services such as credit; improve access to

market demand knowledge; and optimize

distribution patterns.

E-payment services can be seen as an entry point

to formal financial services for the poor; to be

expanded into e-financial services thereafter.

Increasing access to finance for SMEs should be a

key strategic focus for government, development

and multilateral agencies worldwide, given their

critical contribution to the economic fabric of

emerging markets."

CONCLUSION

Corporate mobile payments can offer significant

benefits and cost savings for those that adopt

them and also act as a driver for the mobile

payments industry. As mobile payment systems

increase in their ubiquity and sophistication, can

now begin to unlock that potential. Understanding

the opportunity and assessing and picking the right

partners in the ecosystem will be crucial to

succeeding.

For more information visit http://www.mobilemoneyconsulting.com/

Killian Clifford

Director, Mobile Money Consulting

killianclifford@mobilemoneyconsulting.com

+44 7763118702

@killclifford

© Mobile Money Consulting 2013

“never

been a more

opportune time

than now”

“support

SMEs”