If you see credit cards as simply the easiest way to pay for meals, hotels or socks, you may need to think again. Having achieved domination of mid-range consumer spending, card companies are looking at two new worlds ripe for conquest, both of which have important consequences for CIOs across sectors.
One is the world of tiny transactions – a newspaper, cup of coffee or bar of chocolate. The other, at the opposite end of the financial scale, is the business-to-business payment – anything from daily delivery of carburettor components to a car assembly plant to the provision of cleaning services to the public sector.
Why is this happening? Partly because of banks and card companies actively seeking new markets, and partly because developments in technology can now offer better integration of these new payment options with existing corporate systems. ‘Better’ meaning potentially faster, simpler, cheaper – or all three.
But there is a third factor that is bigger than either of these two. It is the realisation among CXOs across many sectors of the economy that there can be very positive revenue and profit implications from faster and more certain processing of payments from their customers and debtors. And in today’s hyper-cost conscious world, the same considerations apply across much of the public sector, and there they apply to both the collection and the dispensing of funds.
I myself have seen details of current and recent assignments in the UK and Europe in which the client organisation has identified significant incremental revenue that can be won from taking a fresh look at how payments are processed. And the beauty of these benefits is that they can be gained without battling for new business or making painful cost cuts, but simply by introducing smarter payment methods into their payment processing routines.
The examples that I have seen range from utility companies and vehicle assembly plants to local councils to a shopping mall estate owner. The initiatives have come in most cases from the group or divisional CEO or CFO, asking why there is a delay in raising invoices and getting paid for goods or services that have been delivered promptly. A position which when collated across the debtor book (and given the ongoing nature of late payments) can make a significant difference to both back-office headcount requirements and the bottom-line performance at the end of the year.
It has also been interesting to note that in several cases marketing people have been quick to latch onto the possibilities that card-based payments can provide – for example up-selling, cross-selling, or alignment with the next wave of loyalty schemes.
So where does the CIO come into these new initiatives? The answer is that if they are to be implemented properly, the CIO must have a central role. That is because whatever new payment systems are introduced, one absolute imperative is to integrate them with the organisation’s core financial systems. Otherwise – at the risk of stating the obvious – the financial people risk losing control over the financial situation, and the cost in terms of muddle and confusion can outweigh the benefits of faster and closer-to-100 per cent payments.
If the adoption of these new card-originated payments becomes widespread, something more akin to a transformation programme than integration is likely to be desirable or even essential. However recent experience shows that for many organisations such a programme is a price worth paying if they are to win the considerable prize of a major leap forward in getting paid the money owing to them – and getting it promptly and in full.
My advice to CIOs in any organisation likely to be taking a fresh look at its payment processing options is to get yourself clued up on what is happening in the world of today’s smart payment cards, and to do so before your CEO or CFO starts pushing you for answers. The major card companies are keen to work with organisations, providing CIOs with a source of authoritative advice and ideas. And increasingly organisations like my own can assist with guidance on the pros and cons of the various business and technology options, real-life case studies and clear route-maps to pilot and then broaden the use of today’s ‘even smarter’ cards.
A fresh look at ‘new ways to pay’ can for many organisations be the right initiative at the right time in today’s challenging business climate. But the change – and the benefits stemming from it – cannot happen successfully without the active involvement of the CIO.