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While the global corporate banking landscape changes dramatically, banks are rethinking business models to stay competitive and bring innovative offerings (be it in retail, corporate, or investment banking). Earlier, corporate clients were grouped in segments that suited the banks and not the clients (like SMEs were placed in retail banking, and larger cap companies came under the purview of commercial and investment banking or even M&A teams).

Leading banks are dedicating more of 2022 to offer solutions that meet such clients’ treasury needs – loans or leasing; these solutions are vital in mitigating risks related to import-export and other areas that impact profits and growth.  

What is the future of corporate banking? 

2022 banking trends are making headlines (rise of the super app, the growth in digital currencies, spending money in the metaverse, boost in ESG banking policies, and new moves for the cross-border payments area), but the future of corporate banking is closely linked to digital transformations.

As the industry matures, more free flow of data among banks, their clients, and third parties will be seen. These corporate banking ecosystems will surface new operating models that allow significant disruption. As an example of just two, watch out how this segment brings a single gateway for frictionless access to services and effectively mitigates risk through multi-dimensional data analytics.

The long-term digital impact on various corporate banking 

At this point, it would help get a top-level view of the ways digital initiatives transform multiple lines of business.

  1. Straight lending: Revenue increases as online applications are processed with quicker TAT. Costs decrease as workflow/straight-through process automation improves.
  2. Cash management: Revenue increases as the cash management tools get more functional and assist in better lead generation. Cost decreases as cash management platforms improve, thereby increasing the straight-through-processing share.
  3. Specialized finance: Across trade/supply chain finance, leasing, and asset-backed finance, successful digital initiatives increase revenue through better marketing push and superior lead generation. Simultaneously, cost decreases with digital workflow optimization efforts.
  4. Capital markets: For this line of business, going digital offers higher convenience (via self-service options) and decreases costs from process efficiency gains.

Once we understand how the various LOBs would respond, it is worthwhile to talk about the significant shifts in the corporate banking industry.

Essential digital levers that are driving growth in corporate banking 

Reimagining digital tech stacks: As digital transformations are unique to the entity (given their start points and end goals), the difference would come as corporate banks will compete on the technology stacks that shape their vision.

CX investments: Like retail banking, the growth plays for corporates revolve around how best customer journeys are aligned with product life cycles and how robust customer behaviors are anchored to market scenarios.

The boundaryless customer: Post COVID, like employees, the best banks understand their customers are free to transact from anywhere. How quickly the transition to “anywhere banking” permeates into the operating culture will differentiate the winners.

Ecosystem advantages: In addition to what has been stated, the increasing prevalence of multi-party transactions, Corporate APIs, open banking regulations, and available data are potent variables set to test a corporate bank’s appetite (and speed) for change.

Finally, any digital and corporate banking discussion is incomplete without talking about the Treasury APIs.

The rise and rise of Treasury APIs

Post-COVID, SMEs and larger corporates must invest in increased connectivity and straight-through access to supply chains and ecosystems. Here, banks have a unique opportunity to support their corporate clients’ increasingly complex needs through Open Banking and (APIs).

Be it – real-time information access, status updates on balances and payments, straight-through and real-time processing of transactions, reduced integration and process complexity, and intelligent multi-currency liquidity management solutions – corporate clients are eager to get all the help they can.

Similarly, some of the world’s most influential banks – Citibank, J.P. Morgan, DBS, Bank of America, and Wells Fargo – are already in the game. Their treasury and payments APIs are up and running, reeling in specific benefits like:

  1. New revenue streams via monetizing enhanced services for corporates.
  2. Capturing real-time data for data-driven decisions by the treasury or commercial sales
  3. Resolving issues in reconciliation to improve STP rates in payments and collections
  4. Scaling services that will enhance operational efficiencies and lower internal cash risks.

Conclusion

In the final analysis, embedding innovative technologies (such as robotics) along the value chain, industrializing core production, and redefining the IT and operating models will prove significant in redefining their product offerings. Moreover, emerging as a critical differentiator will be the advanced analytics DNA competency. This will help banks scale use cases and pursue continual improvement.

Eventually, the future of corporate banking in digital transformation will come from how quickly the financial entities digitize their processes end-to-end to increase customer satisfaction and reduce costs by building digital customer-centric journeys.

 

Article by

Banking Practice