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UOB goes digital to manage B2B cash-on-delivery risks
THE cash-on-delivery model remains dominant for many businesses in Singapore - especially small- and medium-sized enterprises (SMEs) - despite the risks in handling cash and the resources needed to verify payments and reconcile collections against invoices.
There are few viable alternatives for cash-on-delivery in the business-to-business (B2B) space. Cheques also entail risks and require manual reconciliation.
To address this pain point, United Overseas Bank (UOB) on Monday launched a QR-based collections solution to allow businesses to collect payments from buyers through fund transfer service PayNow at the point of delivery. This allows for instant payment and reconciliation, compared with the industry average of four days to reconcile invoices manually.
Known as UOB mCollect, businesses generate a QR code on their mobile device and provide the code to the customer, who then scans it to make payment. After payment is made, funds are credited to the supplier's account immediately through PayNow and reconciled automatically.
Currently, more than two-thirds of UOB's corporate customers which still receive cash payments from buyers tend to be small businesses.
This mode of cash payment is most commonly seen in the wholesale trade sector, as well as in the retail and services space.
So Lay Hua, UOB's head of group transaction banking, group wholesale banking, noted: "While good progress has been made to encourage more cashless payments among businesses, there is still a gap when it comes to the collection process, specifically with cash-on-delivery payments."
This new solution by UOB aims to plug this gap, helping companies to reduce risks in handling physical cash as well as improve cashflow and productivity, she added.
One company that piloted the use of UOB mCollect is meat supplier and food processor Boong Food, part of Boong Group.
"We make hundreds of deliveries each day," said Steve Wong, CEO of Boong Group. "When collecting payment, which is often made in cash, our salespeople have to spend time verifying the amount and payee details and tallying the payments at the end of the day."
The digital payments solution helps to streamline the collection process, reduce the time needed for each delivery and also benefits the company's finance team, Mr Wong added.
Goodair, an air-conditioning unit supplier and servicing company, also tapped UOB mCollect to enable service technicians to collect payments on the spot.
Its finance manager Mabel Wan said that it has helped to shorten the time taken to receive payments, which in turn helped the business to improve its cashflow.
Cashflow management is one of the perennial bugbears of local SMEs as they often face issues such as late payments by customers.
UOB mCollect is in line with efforts by banks here to nudge businesses towards the e-payments train. In the last few months, DBS and OCBC raised their cheque charges and at the same time provided monetary discounts to those who switch to digital payments.