Envisioning the corporate bank of the future

Banks today have come a long way from a brick and mortar franchise to a digital only - mobile friendly bank, where the customer can do all his banking from a smart phone. Many technology advancements have seen human intervention being eliminated completely, improving efficiencies for the bank and sometimes for the customers. Having said that, corporate banks in the region are still playing catch up with their first world counterparts due to the lack of collaboration and low investments in financial technologies. The time would not be very far when corporate banks will have to start rethinking their business model and reinvent themselves to stay in the game by investing in technology that can perceive, learn reason, assist in decision making and act to help the bank solve problems. 

The “corporate bank of the future” would look significantly different than it does today. The global crisis has taught corporate bankers a great lesson, and made them focus on issues such as  ‘counterparty risk, ignored ‘transaction-banking’ and increase associated technology investments. Although corporate banks have delivered steady returns since the 2008 crisis, banks face a daunting challenge to become infrastructure strong to accelerate growth and become agile and digital focused. 

There are three key areas where corporate banks of the future must invest in. The first is enhanced stakeholder journeys which focuses on cross product platforms, frictionless cross channel experience and data driven relationship managers. The second is the challenge to redefine the ecosystem using open APIs, collaboration, and having predictive analytics ingrained into the DNA of the bank. The last is area to invest in is end-to-end (E2E) digitisation in order to achieve client centric staright-through processing, operational scale, and robotics efficiency.

Corporate banking customers are demanding and expect the same customer experience and efficiencies that they are used to in other sectors. Corporate banks must invest in a seamless omni-channel experience, which is unbiased and has a full understanding of the customer journey and have internal processes fit into it and not the other way around. Everything must be in one place, content from different backend systems providing a unified customer experience across different platforms, web, mobile, or branch. A single digital platform with personalised experiences would also help drive increased customer usage and benefit the bank. Similarly, coverage relationship managers must be provided with a robust CRM platform supported with analytic tools to make informed decisions while managing customer portfolios. A platform which can be accessed while on the move, with real time customer information, such as transaction details, both executed and under process, benchmarking with competition, credit approvals, call reports, product pipeline, mandates, product utilisation, exceptions, share of wallet, etc.

While ecosystems will transform the way banks operate today, it is important to understand why ecosystems are emerging now and how different would it be and what incentive would it offer for customers and to the early adopters. While the banks were able to contain costs, margins are largely driven by the market and competition. New digital entrants are also emerging and threatening customer relationships and banks profitability. Based on Mckinsey’s Global Banking pool, margins continue to fall worldwide. China has witnessed a drop of 35 basis points, and North America by 46 basis points, impacting institution’s return of investment (ROE). Banks are also losing share in some products especially in emerging markets. Another report from Oliver Wyman stated how banks must need to adapt to survive. It is imperative for banks to have an open ecosystem, with modular APIs, for third parties to collaborate and offer value added services to the customers and predictive analytics on risk management for treasurers to make informed decisions.

Digitisation refers to creating a digital representation of physical objects. In other words, digitisation is about converting something non-digital into a digital representation. Three key components of E2E digitisation include transforming the way institutions interact with the customers, operational efficiency through seamless integration of process automation and straight through processing. Based on the recent survey from BCG, corporate banking clients has shown that when institutions digitise their relationship models, they have the potential to increase revenue by 15% to 25%, decrease costs by 5% to 15%, and improve return on regulatory capital by 5% to 10%.

Digitisation, automation, and analytics are going to disrupt a large section of corporate banks. Over 40% of the corporate time is spent on “non-core” administrative tasks, which can be automated. 

Amol Bahuguna is the head of payments and cash management, institutional and transaction banking at Commercial Bank of Dubai.