Wednesday, 29 May 2013

Unnecessary friction with businesses cash flow

One of the interesting things about industry conferences is when guest speakers, who, free of the baggage carried by most of the attendees, tell you exactly what your customers want based on evidence, empirical data and examples from success stories from other industries. Whether these opinions tally with your own product and development road map is another matter and is a topic best left to another day!

At the Visa Insights conference last month, there were two such examples. David Rowan, Editor of Wired magazine, was clear in his belief that the buzz words among businesses and consumers when it comes to payments are ‘friction free’. Apple and Amazon already lead this; everyone else is playing catch up. This got me thinking about what ‘friction free’ would actually mean to businesses.  
Most likely, they would agree with an earlier speaker from Facebook that ‘3D Secure – the process whereby a cardholder goes through an extra step of verification for online purchases – was a good idea at the time. That time has passed.'  They would probably also comment that it’s all very well one part of their payment cycle working smoothly but if the remainder remains trapped in a web of bureaucracy, slow processes and systems that don’t talk to each other, it’s irrelevant anyway.


Increasing competition in financial services is a concept much lauded by government, trade groups and regulators alike. In the business lending space, the likes of Funding Store, iwoca and Platform Black are harnessing business demand and clever technologies to provide genuinely innovative lending services to SMEs that are being taken up rapidly. In transactional banking though, the reverse is true – competition has actually decreased in the last ten years. The banks (who still control 91% of the UK market by the way) have bought up smaller rivals and new players are put off by the complexity, cost and the high degree of regulation. Surprise, surprise, the victims of this are UK SMEs continue to suffer from slow cash flow, difficult access to lending and the perception that there is a real lack of support for their business.
So, having laid out the issue, what exactly would ‘frictionless’ mean for a typical UK business. My own view is that this would mean being able to use all the services they need to make and accept payments from one account. This account provides timely and detailed reporting and can easily fit with their accounting package. They have the ability to pay or be paid by any customer or supplier around the world, they know where their payment is and their cash flows freely. Is that really so much of an insight?