The advent of alternative payment methods (APMs) – non-card-based payments options – presents plenty of opportunities for treasurers to look at digital transformation within their organization. “When you talk about digital transformation, it’s not limited to having an online portal or presence for customers, but also the whole end-to-end value chain,” says Mahesh Narayan, global product lead for mobile money & e-commerce at Standard Chartered.
A number of trends are playing out and accelerating the deployment of APMs. Post the pandemic, there has been an explosion of online sales using mobile devices or computers. “Whether they are products or services, people are reaching out to their mobile phones or laptops to procure products or services,” Narayan continues. “This has created a huge shift in the way the services are being rendered whether you are a B2C or a B2B organization.”
It has become absolutely critical, he says, for organizations to keep this shift in mind. And in this era of instant gratification, consumers also expect services to be rendered instantaneously. They similarly expect the experience – and the convenience – to be the same when it comes to payments.
Because of these trends, corporates are likewise shifting the way they look at payments and starting to embrace these APMs. “Traditionally, as a consumer, when you think of online commerce, what you would do if you are ordering online is reach in to your wallet for your credit card to key in your card details to make the payment,” he explains.
But thanks to the rise of instant payments, QR payments, mobile wallets, and latest trends such as buy-now-pay-later, consumers have a lot more options today when it comes to online payments. “These payment methods are a lot more cost-effective, faster, and secure,” Narayan points out. Compared with credit cards, APMs allow corporates to save considerably on interchange fees. “There are also lesser headaches with respect to chargebacks. Finality of transactions is also greater.”
Instant visibility of transactions is another advantage. This means treasurers are able to manage the cash flow and the company’s liquidity a lot better. Narayan also notes that companies are able to automate the reconciliation and manage it a lot faster. “Traditionally, when you think about receivables reconciliation, it would take several weeks or days. With instant payments, it takes a few seconds.”
Organizations will have to adapt to these changes. “It is not a one-size-fits-all,” he cautions. “The digital natives who have invested in these technologies early on have an upper hand and are relatively more future-proof. But there are many other organizations that are in a catch-up mode. With the pandemic, everything happened so suddenly overnight. Some organizations may have done a few things from a digitization perspective but when you are talking digitalization more holistically, it is about the end-to-end journey.”
For Narayan, this is a win-win for consumers, intermediaries, and merchants. “Things are evolving very fast,” he observes. “Central banks are playing an active role if you look at what’s happening across Asia in terms of deploying the fast payment rails, and quickly following through with the overlay services such as the QR code, request-to-pay, etc.”
Countries such as Singapore, Hong Kong, and India, are ahead of the curve but many others are catching up. Central banks and clearing houses are taking these real-time payments to the next level and bringing them to the masses. “From the central banks’ perspective, it is a great way to drive financial inclusion, eliminate cash in the economy, and reduce the risks involved with physical cash.”
This article was also published on The Asset.
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