Digital Business Requires Digital Banking

I talk a lot about how the digitization of banking is changing the customer relationship, and this is as true for the corporate customer as the retail consumer.

Examples are appearing everywhere of real-time access to cash netting and pooling, and immediate payments across borders and continents, but there are nuances to the beat of the digital drum in the corporate world that we do not see as clearly as in the consumer space. Take QR codes for example. When QR codes came onto the scene in 2011, I immediately saw it as a game-changer. A QR code is essentially an enhanced version of the average barcode. However, it can hold roughly 350 times the amount of information that can be stored on a one-dimensional barcode, and thereby has the potential to allow corporates to send out billing information to clients with all the payments information in the QR code. The QR code could easily embed the amount due, the customer account details, the beneficiary’s account details and other relevant information such as Purchase Order and Invoice number details. Armed with a QR code, corporates would be able to track the complete procure-to-pay cycle with integrated physical paper and digital detail for tracking. That means you could use embedded QR codes, or NFC of course, in all documentation across the supply chain, and never have to wonder what happened between Chennai, Dubai and Mumbai again (or London to Pratt’s Bottom if you prefer).

This is just the tip of the iceberg however, as we get into the next wave of digitization with the Internet of things and wearable computing. Think of all stock items communicating their whereabouts and pricing all the time. Think of store thieves being tracked as they not only remove items from the store, but being traced to where they live. Think of the ships, containers, items within the container and component of items within the container all shouting “I’m here, and my name, rank and serial number are Samsung Galaxy 5 SNE4-1X98-20H1”. Obviously, that is the technology piece, but the financial app inside the items will also be a key part of the process. This container contains $5,256,174.75 cents worth of goods, and we know that because we can track the 19,714,142 components inside, their values and serial numbers. Even more profound will be the impact of 3D printing, as one banker recently pointed out to me. When you no longer need to source goods from China but can just cheaply print them in the production line on a produce-as-needed basis, you really see things change.

Perhaps this is why it is so critical that banking keep up with corporates, and corporates keep up with consumers.

By way of example, I presented at a conference in Asia shortly after the iPad was released and put forward the view that just as consumers were all now using Android and Apple smartphones, corporate treasury staff would soon all be using iPad apps to manage their cash flows and forecasting. The audience laughed and gave me a low vote on the score feedback sheets and yet, just eighteen months later, banks such as JP Morgan and Bank of America were rolling out a variety of functional apps for accessing corporate accounts and moving money around the world. And that is the point: we are not moving money around the world anymore. We are moving data. The digitization of money and the secure movement of data between counterparties is what is required for business today, and financial transactions and banking must adapt to remain relevant.

This is the core of the message pointed out in the book Digital Bank. The digitization of everything is possible today, and it means we are no longer living in a world of channels, omni- or otherwise, but living in a world of integrated digitization around us. It is why companies are all seeking to investigate the possibilities of augmented marketing and service, where the consumer or component can be tracked in real-time and proactively engaged. It is also why the pressure for change is bubbling more and more from the consumer world over to the corporate environment, and from the corporate environment across to the bank.

This world is not a simple one. As one bank colleague explained to me the other day when debating counterparty risk. The bank network exists to ensure that value is exchanged securely between known and unknown entities around the world. Often a transaction will pass through multiple banks to reach its final destination, and this is why Know Your Customer (KYC) has become such a hot topic. Nevertheless, if everything can be tracked and traced, monitored and located, requested and communicated with in real-time, all the time, then the world does become a different world.

So, for all the talk of Digital Banks, the discussion of the digital world and its impact upon creating digital business is just as key. And there are many companies now trying to enable digital business, such as Traxpay, by combining the digitization of money and the secure movement of data between counterparties.

Mr. Skinner is author of the new book Digital Bank, and comments on the financial markets through his blog the Finanser. His email address is if you wish to reach him.

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