Corporate banking is often seen to be removed from the digital disruption that has shook many traditional industries such as retail, music and travel.
In an industry that has operated as a relationship business, many corporate banking customers have shifted to digital banking for their personal banking yet opted to keep a wait-and-see attitude for their commercial banking needs.
A number of new competitors have entered the corporate banking landscape, with advanced digital platforms that are allowing customers to bypass traditional banks in a number of key areas such as real time, low cost cross currency payments.
Has the time now come for the corporate banking landscape to be exposed to a far-reaching digital shakeout ?
A Digital Shakeout?
Corporate banking, as the name suggests supports corporate customers with lending, cash management and trade finance services to organisations that dot the globe, representing a scale and complexity that seems at odds to the sleek simplicity of the point-and-click Internet world.
Corporate banks have historically struggled to make the transition to the new digital landscape due to the significant amount of legacy debt caused by two unsustainable approaches to technology:
Firstly, banks tried to build a one size fits all core banking system, a monolith, that could be scaled up over time to support different types of businesses from specialised lending, treasury services, through to cross border trade. As banking demands grew, customer requirements increased and regulation intensified, the monolith approach stalled under its own weight.
Secondly, the best of breed model, which relied on selecting the strongest system for each key business area or function, resulted in an eclectic system architecture. The patchwork of different systems, with multiple data islands, resulted in a lack of data aggregation, to make informed commercial decisions for clients as well as providing the transparency required by regulators.
Digital Is Driving Higher Expectations
The evolving landscape of corporate banking has attracted the attention of non-bank competitors. One such organisation, Ripple, offers an open payments protocol for international payments, enabling real-time settlement and clearing, reducing the need for intermediaries.
Business clients are not only open to transacting and liaising with relationship managers (RMs) over digital platforms but the majority are willing to pay a premium to work with banks that are capable of delivering a new type of highly integrated digital service that they have grown accustomed to and expect.
Three digital value propositions show particular promise for corporate banks: customer centric value propositions, enhanced digital advice, and real-time decision-making support.
(i) Customer-Centric Value Propositions
Today’s corporate banking customers require a customer centric proposition that is based on corporate connectivity, connecting the customer with the correct service as part of a multi channel offering. By providing the correct connectivity, based on self-service, convenience and efficiency, the bank can reduce the cost to serve while at the same time improving the customer experience and increasing client efficiency.
Data will be key to enabling this customer centric proposition, delivering new business intelligence such as risk and profitability, as well as unlocking new operational insights and digitally enabled sales, enabling banks to boost both customer cross sell and potential wallet share.
(ii) Seamless Online Banking
In a highly connected world, corporate customers need access to key information, such as bank statements and payments, in less than three clicks. The future of Corporate banking technology will have to combine highly connected tools and best-of-breed components on a platform that is driven by open interfaces and cross-business cohesion.
Banks will need to leverage modern business intelligence tools and application programming interfaces (APIs) that draw on the latest database technologies, visualization tools, and processing capabilities from the wider fintech ecosystem in order to provide the customer with a seamless online banking experience
(iii) Enhanced Digital Advice
Banks have traditionally automated disparate parts of their business, but are now looking at end to end process digitisation to increase efficiency and lower operational risk.
Fully digitised workflow applications, based on straight through processing and real time decision making offer the opportunity to revolutionise lending and treasury products. New workflow-based applications, will be able to offer dynamic dashboards with real-time cash, liquidity, and payment management capabilities, increasing the efficiency and transparency to the corporate user, while at the same time enabling banks to offer highly effective and targeted advice to their corporate clients.
In conclusion, corporate banks are under mounting pressure to respond to the new level of digital disruption as non traditional banking entrants continue to challenge and shake up the status quo.
The next generation of corporate banks will have to radically optimise performance by learning how to embrace digital transformation, developing a customer centric proposition, seamless online banking and enhanced digital advice at its very heart.
Only by developing a clear digital strategy will corporate banks stay relevant, while at the same time opening up new paths to sustained economic profit and customer benefit.
To discuss this or any other technology challenges you may have, please contact me directly.
Email : ian@IanAlderton.com