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Lagging Behind: The Digital Wakeup Call for Corporate Banking

Despite the challenges, the financial services industry has, for the most part, embraced digital banking – except for corporate banking. It’s understandable when you consider the scale and complexity of corporate banking. Think of the massive commercial loans, the international transactions across banking systems and the management and advice involved – it doesn’t seem congruent with the simplicity and speed of two-click banking.

But when banks fail to improve and move, innovative newcomers sweep in and take action. While there are some corporate banks who have embraced digital offerings, most of the industry is lagging behind badly. Why has it taken the industry so long to react? One reason could be that it has traditionally operated as a relationship business. But it’s also a very complicated transition. Corporate banks offer a large range of products with a host of accompanying regulatory and compliance issues that have to be fulfilled during each stage of the product.

Meanwhile, corporate clients are expecting a whole lot more than they are getting. Quite simply, they expect the service and convenience that makes up their customer experiences in every sphere of their life. Boston Consulting Group’s recent survey of corporate-banking customers worldwide reveals that the industry is on the cusp of “a far-reaching digital shakeout”. Corporate clients are not only open to using digital platforms to connect with their relationship managers (RMs) over digital platforms, but the majority are also willing to switch – and even pay a premium – to work with banks capable of delivering the type of integrated, omnichannel service they’ve come to expect.

The stakes are high for corporate banks. BCG recently assessed approximately 200 corporate banking divisions that serve small businesses, mid-market companies, and large corporations. The survey found that 45% of corporate banking divisions worldwide showed declining profits. According to BCG, the digitally nimble fin-techs will attract 30% of traditional corporate banking revenue over the next five years. With non-banking providers now offering lending and transactions, customers can now bypass traditional banks. With leaner and faster IT systems and processes, newcomers can be much more efficient than traditional corporate banks who are bogged down by legacy infrastructure. That means they can also offer more competitive prices and margins.

What do corporate customers want?

Customers want self-service, convenience, efficiency, and data security. Think of the CFO who receives a batch of wire transfers for approval. Rather than being tied to the office to finalize the transfers on a desktop, the CFO should be able to handle them instantly and securely on a mobile device. But mobility is just the starting point. Clients want real-time visibility into each day’s financial transactions. With a view into their company’s liquidity position in real time, they can make better-informed cash management decisions. More than two-thirds surveyed by BCG want to access their information in less than three clicks, particularly when it involves carrying out routine tasks, such as reviewing bank statements and submitting documentation. Straight- through processing is another must. When it comes to personal banking, these customers can be pre-approved for mortgages and transfer funds in a matter of minutes – so they expect no less from their corporate banking. They also don’t want to log in more than once and respond repeatedly to information requests.

To close these gaps, corporate-bank management needs to move decisively to build their capabilities to deliver seamless online banking complemented by real-time decision-making support and advice. Over a five-year period, these strategies can enhance revenues by 15% to 40% and improve cost-income ratios by 7 to 15 percentage points. The small group of banks and non- traditional players with advanced digital platforms are gaining market share by offering real-time, low-cost cross-border payments, pre-approved credit, and superior foreign-exchange rates. In the process, they are generating 3% to 6% more in annual cross-selling revenues than their peers.

How can digital tools improve CX?

With digital tools like dashboards with the metrics to track pricing, discounts, and other variables RMs can offer personalized and proactive customer service to their clients, while being more cost-effective and consistent in their service. Using digital tools cuts down on manual inputting and fact-finding, which in turn, improves the quality and time spent with clients.

Corporate clients often account for a big chunk of bank revenue. Providing limited online banking and mobile access won’t cut it. Corporate banks need to embrace innovative technology solutions that can properly service the needs of corporate clients. It’s a win-win. By digitally connecting with clients, banks will benefit from new efficiencies and cost-savings, while customers will get the service they deserve. Rather than being marginalized bit by bit, corporate banks must act now and take hold of the market share where they can add value.

Conversational Banking,Customer Experience,Digital Transformation