Modern banking is operating under significant pressure. Corporate banking is facing increasing competition from alternative lenders, technology giants, and fintechs. Banks must deliver relationship-based pricing and engagement for their customers while expanding their revenue streams to remain profitable. The business of banking in a post-pandemic world calls for new rules and new approaches. Corporate banks are rising to the challenge. In this article we will highlight some of the trends in corporate banking that can transform the treasury function.
Simplification and Consolidation of Account Management
The emergence of technology powered business models across different sectors has put the spotlight on customer experience. Today customers want hyper-personalized, relationship-based, and value-driven experiences from every business they engage with, including banking. Delivering a superlative business experience to their corporate banking customers is a priority. This will necessitate a 360-degree overhaul of how accounts are managed as well considerable simplification of processes with a focus on efficiency. For example, banks can offer virtual accounts that will allow treasury managers to manage multiple segregated accounts for different business units, with a single view of them in real time. This will ensure greater visibility of cash flow as well as the option to open or close accounts at their convenience. Cash visibility and liquidity management needs real-time data for better decision making. It cannot wait till the end of day reconciliation is over. As banks expand their operations across geographies real-time cash management is a business imperative.
The Shift to BaaS and Banking Platforms
The banking world is currently witnessing the emergence and rapid adoption of innovative models like embedded finance, Banking-as-a-service (BaaS), and integrated platforms. BaaS has the advantage of lower cost, scalability, and the ability to provide a better customer experience. The use of API enabled service architectures makes it possible to link real-time customer information and bank data to deliver personalized customer experience. Commercial banking models will see significant transformation with players opting for BaaS models or becoming platform providers. And many will evolve into digital commercial banks in the near future. These digital commercial banks will need to re-bundle their services. They will have to actively rationalize existing products, outsource certain services, decide whether to have complete ownership of the client or have their products white labelled. They must create new income streams through data-driven insights including advisory services to clients with their specialized banking knowledge. They must also aim to deliver an unparalleled customer experience to corporate clients with integrated and optimized products.
Symbiotic Growth in an API Economy
The emergence of fintechs, neo banks, and tech giants have changed the dynamics of the banking sector. Competition for customer share of wallet is at an unprecedented high, but there is also opportunity for symbiotic growth. Fintechs and tech giants have the technology prowess that banks need while banks have unparalleled reach, enjoy customer trust, and hold significant data within their vaults. As all players in the sector strive to deliver superlative and personalized customer experiences, they can consider partnering to leverage each other’s strengths. Banks can choose to become the orchestrators of a comprehensive ecosystem and operate a platform-based model powered by APIs. Many leading banks like Citi, DBS, and BBVA are already leveraging APIs and supporting open data services by third parties.
Customer Data and Analytics
The new banking economy with its focus on hyper personalization and relationship-based strategies will depend heavily on intelligent analysis of customer data from across the ecosystem. This calls for advanced data processing capabilities and Artificial Intelligence and Machine Learning can drive the new phase of corporate banking. AI is expected to help improve diverse aspects of commercial banking ranging from treasury functions to credit risk analysis. Distributed ledger technology is also expected to gain popularity as it can ensure transparency, efficiency, and security.
The Technology Foundation
Of course, to make this happen banks need a robust technology platform. They need advanced technology solutions that can launch new products seamlessly, integrate analytical tools for real-time insights, and execute transactions at high speed and minimal cost. Such a system can also efficiently manage an interconnected ecosystem of stakeholders including intermediaries, clients, fintechs, and other suppliers. This digital foundation must be able to enhance security, increase speed and transparency across transactions, ensure ESG compliance, and manage risk policies. Most importantly, banks will continue to operate in a heightened risk environment. Regulatory scrutiny will increase and failure to comply will have serious consequences. Corporate banks must sharpen their focus on cyber security, data privacy, fraud prevention, and regulatory compliance. Robust technology solutions with intrinsic security measures and comprehensive regulatory capabilities are critical investments. Banks must collaborate with third-party solution providers who can provide robust middle layer solutions to power innovation. The transformation must bring together processes for data mining and analytics and facilitate adoption of new age models like BaaS while ensuring security.
The banking sector is now undergoing sweeping transformation with technology driving innovation and new strategies. The sector now needs a digitally capable and empowered workforce that can drive technology change, adapt to agile working styles, and perform under new governance structures with more decision-making powers. Banks must pay equal attention to upskilling their workforce and driving a cultural transformation as well as a technological one.