The recent global crisis spotlighted retail banking, but similar forces are at work in the corporate banking sector. Out of sight often means out of mind. However, the jolt for corporate banks overly reliant on paperwork and branch dependencies is real.
For corporate banks, the need of the hour is to pivot to new mindsets and create partnerships in the fast-evolving ecosystem influenced by pure-play B2B ecosystems (Paysme, Tinkoff, Stripe) and BigTechs (Amazon). It will be essential to bounce back from pandemic aftershocks and transit to banking models that are experiential, sustainable, and inclusive.
2022 Corporate Banking Landscape.
Complicating the turbulence are hardly new factors – stringency in regulation, shifting millennial client needs, digital revolution, and globalization. Unsurprisingly, Bill Gates spoke of banks as dinosaurs almost three decades ago.
In times of shrinking lending margins, increased cyber security breaches, tech-savvy customers, and the fast-and-furious inroads of Fintechs, corporate banks must leverage big data and scale their advanced analytics capabilities. We are past the tipping point; 2022 is the turnaround year.
- Customer experience is now business of experience: Consider this August 2021 report. 97% think banking apps as a customer service tool must have a place in corporate banking. 66% say yes for chatbots and virtual assistants, and 72% for mobile wallets. The dire need for corporate banks to simplify their business processes using intelligent automation is brought home by a sobering stat: 1 in 5 millennials plan to bypass corporate work and start enterprises. Be it the digital-first mindset, mobile-friendly attitude, their businesses having international components, or the information-hungry behavior; corporate banks must pivot from banking to the business of experience. After all, commercial clients using digital services for their personal needs know how vital seamless and experiential journeys are. Given the heightened intolerance levels, it is a plot that corporate banks cannot get wrong. Here’s the evidence: An October 2020 survey showed that in the previous 12 months (coinciding with the pandemic’s peak), 16% of SMEs switched banks against the industry average of 10%.
- From traditional supply-chain finance to ecosystem platforms and B2B super apps. Marketplace ecosystems enable geographic expansion and create new business models and sources of finance. With a Banking-as-a-service platform (open banking), leading organizations (Citi, DBS, for instance) are leveraging APIs to open data and services to third parties. For example, BBVA revamped its supply chain finance solution, allowing third parties to retrieve business user balances and transactions in a market standard format. Unlike stand-alone operating banks relying only on the internet with limited solutions (supplier finance and distributor finance), ecosystem platforms bring in broader market players (membership banks, trust companies, and multiple corporates). The shift is in technology (blockchain included) and business models (trading platforms, client brokerage, and IT solutions services). The People’s Bank of China recently coordinated a new platform to leverage blockchain technology. The outcomes? Improved capital efficiency and surge in the financing, not to mention the scope of future innovations.
- Back to Basics with Open Banking: Be it achieving operational excellence, customizing product proposition, or leveraging data and analytics, corporate banks in 2022 will adopt a ‘back-to-school’ approach. Scrutinize manual processes and then understand customer expectations by looking at the tools and products they use; corporate banks can then move to test the stability and security of their services (front-office and back-office ones). Why is this important? Because as open banking lifts off, the revenue opportunities ($9.6 Bn, 2022) and the SMEs that will adopt it (71%) are simply unmissable. Even so, open banking allows better tracking of business performances and simplifies accounting, payroll, and auditing.
What about the other drivers? For one, boosting operational excellence (including sales force enablement and process digitization) will improve cost structures and customer experience. Secondly, customizing product propositions will facilitate sector-specific solutions, and leveraging data and analytics across pricing, selling, retention, and prospecting will augment corporate banks’ revenues.
- Accessing Automation: As OCR technology enables corporate banking to beat legacy systems and paper-based documentation, automation’s role in 2022 will only grow. Simplifying applications, automated underwriting, dynamic documenting, e-signing, and paperless transactions will be the various transition points to a bank’s touchless process. A recent study by Dun & Bradstreet reports that 36% of businesses had already begun to automate specific tasks.
Pre-automated techniques from the front office, central processing, and authorizations must transit to AI-automated processes. Per March 2021 KPMG CEO Outlook Pulse Survey, 74% of business leaders report that digitization of their operations and formulation of the next-generation operating model has picked up from 50% (as reported in August 2020).
As corporate banks take on multi-headed challenges – upended trade finances, risk in cash-flow crunches, complying to newer sustainability standards, and meeting head-on the growing threat of B2B super apps – their solutions would encompass data mining, incorporating analytics in processes, and adopting ‘as-a-Service’ models.
2022 as a year will test incumbent banks for their transformative mindsets. At stake are resiliency and relevancy.