Friday, March 9, 2012

Future of Banking - Part II

In the previous article (click here), we saw some of the trends that are sweeping across the world of banking technology today. These changes will revolutionize the way we bank in future. We continue from where we left off, covering new developments, this time mainly in Corporate Banking.

7. Remote Deposit Capture: In the U.S., banks now supply a scanner which their business customers use to scan the cheques they receive. The images are then uploaded to a bank portal, from where the image is directly sent to the clearing house for clearing. 

Individual customers can photograph a cheque they have received using their Smartphone, and automatically upload the image through an app to the bank’s portal, which sends it online for clearing. No need to go to the bank to deposit the cheque at all! This development is specific to the U.S., since a special Act ensures legal validity of the cheque thus deposited electronically.

8. The end of L/C: Letters of Credit have been at the heart of world trade for decades, but they would soon be history. ICC (International Chamber of Commerce, the body which regulates world trade) is in the process of giving recognition to a new instrument called the Bank Payment Obligation (BPO) which will one day replace the L/C. The BPO can be exchanged between banks via XML messages and incorporated into an automated STP (Straight Through Processing) environment, causing substantial cost reduction and bringing operational efficiency.

9. Automation of Supply Chain Finance: Soon, Corporate buyers will receive quotations, select suppliers, place orders, receive bills and make payments directly through their bank’s portal. Sellers can bid for tenders, accept orders and raise invoices online, through their bank's portal, without handling any paper. This is much more than simply scanning a physical invoice or any other commercial document – the system will generate its own serial number, have digital signature etc and be a legally binding document without any physical existence. Further more; the Bank’s Core systems will be integrated with the Corporate ERP systems, making communication between the two entirely automated.

Automation of the Supply Chain will save billions of dollars across the world and prevent millions of trees from being cut. The BPO, and Supply Chain Automation taken together will completely revolutionize the way corporate financing is done by banks in the world today.

10. eBAM (Electronic Bank Account Management): Can you imagine how many bank accounts a large corporation such as McDonald’s or General Electric might have? Could be in thousands. Managing so many bank accounts – opening, closing, keeping the list of signatories and their operating mandates updated, efficiently utilizing the funds lying around in them, sending instructions of various types to the banks and following up with them is a mammoth task. eBAM, a product launched by SWIFT allows a company to open accounts, add or remove signatories and close accounts online without any manual intervention. Since transactions (i.e. sending and receiving money) have already moved online, once Banks perform the mandatory KYC (Know Your Customer) exercise and establish a relationship, a Corporate customer can open accounts, operate them and close accounts when the purpose is over, all by itself, without any manual intervention by the bank 

To conclude, Banking will look very different from the way it looks today. Plastic cards and cheque books will cease to exist, you will not need to know what your account number is. Mobile phone based payment systems will make physical currency become redundant, and offices will become truly paperless!

Apple’s iPhone is hardly four years old, but in such a short span of time it has turned the world of mobile telephony upside down. Developments which are at a conception stage will become mainstream tomorrow, and that day is not far away!

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