Corporate Banking

Transformation

The industry is transforming towards to a digital financial ecosystem, driving the corporate banking sector to where customer engagement is digital-first, paper products are transformed to digital products on digital platforms, artificial intelligence is used to complement human interactions and finance is embedded seamlessly into everyday life. According to the seventh annual global banking survey conducted by The Economist Intelligence Unit in March, 45% of respondents said their strategic response to the COVID crisis was to build a “true digital ecosystem [1] .”

 Digital-first Engagement

Attracting the digitally transformed business consumer

Retail banking digtial adoption has spilled over to corporate banks. The growing influence of BigTechs has raised the bar for customer service and awareness of digital channels. Digital is now the preferred engagement tool of  choice. COIVD-19 has accelerated this.

Corporare banks must deliver experiences with an eye to digital-first, without losing the important element of human engagement when needed. They need to understand the customer journey, exploit deep insights and develop a user experience across the customer lifecycle.

Corporate banks need to ensure that the human element is properly integrated into the customer journey rather than being an afterthought or point of last resort. This means the branch role may evolve into a business advice centre for more complex financial transactions. However, businesses also expect banks to work in the same hybrid way that they now operate, human interaction with a relationship manager may be done using remote techniques such as videoconferences.

Delivering end-to-end digital experiences will require the integration of networking, cloud, digital workplace, AI & analytics and security.

Digital Platforms

Simpler to buy and serve

Digital banking & payments have become the norm and these rely on underlying digital platforms. Many banks have made progress on digitising their own products, payments, and service but still lag BigTech, FinTechs and neobanks.

Unlike consumer banking, businesses are increasingly digitally transforming their own operations and are seeking to integrate financials and banking processes into their own operational process to remove bottlenecks and reduce time. This means that corporate banking plaforms need to interface digitally with their customer's business systems. To address this banks are modernising their platforms to deliver an open API based architecture. 

Another area of development is digital payments, with considerable growth in B2B payments. This market will grow from $903 billion in 2021, to $1.6 trillion by 2028, at a CAGR of 10.20% [1]. Banks will upgrade their payments platforms to meet the new ISO20022 messaging standard being adopted by SWIFT for cross-border payments.

Digital Platforms are the core technology that will allow banks to compete long-term leveraging cloud, AI & analytics and security.

Intelligent Operations

Resilient and automated

Rising interest rates are improving the Net Interest Margin (NIM) in Corporare Banking but competition from digital born neobanks will maintain pressure on profitability. Resilience is now also key.

Corporate Banks will focus on automation to complement a shift to higher-value human work as a necessity to reduce cost-to-serve and increase resilience. This will include the intelligent automation of transactional banking and a focus on digitial-assistance for more complex financial arrangements.

Banks with EU operations will need to consider the planned DORA operational resilience regulation expected to be implemented by 2024. This covers ICT risk management and resilience testing.

Banks are likely to need a customer's ESG data in future to asses areas such as Green Finance.

Digitisation, robotic process automation and artificial intelligence will work alongside a secure digital workplace supporting hybrid working.

 Open Finance Ecosystems

Frictionless & convenient

Businesses are increasingly digitally transforming their own operations and are seeking to integrate financials and banking processes into their own operational process to remove bottlenecks and reduce time.

Corporare banks will need to shift focus from business banking to simplifying business processes using intelligent automation and as-a-service models to meet customer demands for automated functions and insights to driver efficiency in their operations.

The first step is Open Banking. The EU & UK regulators have mandated that banks open APIs to third parties. The New Payments Architecture (NPA) being implemented in the UK by 2024 is a step towards Open Banking 3.0 [1]. Other countries are adopting similar practices.

Open Banking allows access to near-real-time account balances and transaction data to provide timely insight into financial positions across the bank accounts that corporates may hold. Payment Initiation APIs, particularly using Faster Payments in the UK and Instant Payments in other jurisdictions may make account receivables cheaper and more efficient through quicker settlement as compared to card payments.

Data is a major area for innovation, only 14% of corporate executives rate the quality of data and analytics at their bank as very good [2]. Banks can provide better financial insight to corporates to help provide better cash management, risk management, trade finance and treasury. This may develop into further as a service offering to provide financial management services.

Open Finance ecosystems will ultimately provide integrated financial experiences, estimated to be a $7 trillion market [3]. BigTech companies are using embedded finance, via payments, as an “on-ramp” to financial services.

Distributed Leger Technology (DLT), such as Blochchain, may also become a key part of a Open Finance ecosystem especially in the case of cross-border payments, digital assets custody and supply chain finance.

One-to-many API connectivity with market players, is key. Drives cloud, data analytics and security.