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Banks Should Upgrade Business Payment Technology, Silicon Valley Bank’s Pradeep Moudgal Says

All the emphasis has been on consumer payments, but the business side will be more lucrative, according to the bank's head of global cards and merchant services.

Although the middle-market and large corporate customers of Silicon Valley Bank ($14.6 billion in assets) still like and expect "high touch" service, including visits and phone calls from their bank, there's opportunity for banks that can provide better payment technologies to their business customers, according to Pradeep T. Moudgal, head of global cards & merchant services, global services, Silicon Valley Bank, who spoke at Bank Systems & Technology's Executive Summit last week.

Moudgal observed several payment-related trends among his clients at Silicon Valley Bank. For one thing, clients are focused on electronic payments, reducing internal costs and managing their liquidity or cash position. Business clients are also seeking new technologies for daily cash management-related tasks. For example, "The emphasis for mobile payments to date has been the consumer, but the lucrative side is in business," Moudgal noted. "Clients are interested in managing capital more efficiently, they're streamlining, they're asking banks to be more transparent and compliant with rules, and they're talking to their suppliers about how they can change their payment behaviors." About $917 billion of global commercial payments in 2009 were made with commercial credit and debit cards, according to Moudgal. By 2015, the number should be $1.7 trillion. To accommodate these client preferences and market trends, banks have to become more innovative.

For example, to mitigate fraud, Moudgal believes U.S. banks must adopt chip and pin (the British phrase for credit and debit cards that contain a silicon chip that stores a card's PIN, which the cardholder enters to verify the transaction). "Chip and pin is the biggest fraud mitigant, there was a 67% reduction in fraud losses in the U.K. when they adopted chip and pin," he said. "Canada and Mexico are also going to be implementing chip and pin in the near future and many Asian and Latin American countries have already implemented this service."

Banks need to start offering electronic bank account management and payments hubs services, Moudgal said. "Customers asking for better ways to bank," he said. The silos banks maintain for their different payment products, he said, "causes clients to wonder, are banks going to solve my problems or complicate my life even more?"

The bank is looking at growing in new markets such as the United Kingdom, India, China, and Israel. To serve these markets, it will have to make sure its payment processes are global and that it offers a complete suite of payments and cash management solutions that meet the needs of clients.

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