Cash management for the Amazons and Ubers of the world

Banking technology is evolving to meet platform business needs

Some of the world’s best-known companies are in what’s known as the platform business.

They have existed for the past 20 years or so, but how products and services are produced, shared, delivered and consumed has radically changed in this time.

The first decade, around the mid-1990s, was dominated by e-commerce companies, such as Amazon, where physical goods were sold via an online portal. E-commerce then developed further into e-marketplaces, with the likes of eBay enabling individuals to exchange goods and services on their platform.

The second decade, from the mid-2000s, saw the blossoming of the sharing/rent economy, with rapid growth in the number of platform companies such as Airbnb. Most recently, the gig economy has developed, with platforms such as TaskRabbit and Uber. These businesses do not carry inventory, but their value is to create the marketplace or network which connects supply and demand. Consequently, the bigger the network, the greater their value.

Unique cash management needs

Such distinctive business models lead to unique cash management requirements. With payments, traditional businesses tend to aggregate supplier and employee payments into scheduled payment runs. Salaries, for example, are paid on a fixed weekly or monthly schedule with a reasonably steady value. Platform businesses, with ’fluid’ buyers and suppliers, become more fragmented, with many ad-hoc transactions of varying, often low value. Collections also differ considerably, with the need to process high volumes of electronic incoming payments quickly, often from different countries and of different types – from credit and debit cards to digital wallets.

A large e-commerce operating in or looking to expand into multiple countries needs to engage with multiple buyers and sellers or payment service providers, and comply with different regulations in each location. This is a challenge for those seeking to expand across regions with significant regulatory, market and cultural diversity, such as ASEAN or South Asia.

Rising to the challenge

Such conditions are ripe for what’s known as application programming interfaces (API) banking. The benefit is that it gives platform businesses secure, seamless, real-time machine-to-machine payments. The potential is so big that banks like ours are rising to the challenge of developing such banking technology.

Consumers have come to expect a seamless experience when using these companies’ platforms, and there is no reason why the Amazons, eBays and Ubers of the world shouldn’t expect the same from their bank.

Platform businesses have blown the traditional way of doing business out of the water, and as new ways of doing business evolve so will companies’ cash management needs.