Digital transformation in corporate banking

Never before has there been a more challenging time for banks to serve their corporate clients. The financial crisis pushed an envelope of change through the financial markets, as well as other industries, and provided a catalyst for radical reforms to regulation, technology, approaches to risk, internal operating models and internal client demands.

With this evolution has come an expansion in the role of the corporate treasurer and greater empowerment of the treasury function overall. These functions now form a greater part of the organisations in which they operate and have wider responsibility for working across key departments and effecting positive change. Their demands and behaviours have become increasingly important – and ultimately more complex – and it’s critical that they are supported by partner organisations – banking institutions and technology solutions providers – that specifically address their needs and can evolve as they evolve.

Additionally, as greater numbers of the Millennial generation join the workforce, so digital technologies and innovation will take a greater role in the way that corporates manage their treasury functions. While the world of corporate treasury is very different to that of retail world it is easy to forget that corporate treasurers are retail customers in their own right and will have preconceived expectations as to the service and experience they expect to receive when interacting with a bank.

As a result banks are having to look at technology, product and changes in customer behavior through a prism of being more mobile, more social, more analytical and taking a more diversified view on what our customers are expecting the bank to deliver. Similar to the consumer retail world, corporate customers are also expecting a more intimate relationship with their bank. Expectations are shifting from the traditional face-to-face model to instant, 24/7 contact through digital channels as well as customers expecting that their needs are being anticipated and quickly catered for as part of a low-cost or free package that is automatically rolled up into banks service offering.

The convergence between the corporate and retail worlds will continue to accelerate. Human-centric services are increasingly sitting on the edge of corporate banking as are innovative corporate purchasing and payment programs, such as integrated expense management, multi-currency purchasing cards, automated VAT reclaim capabilities, and smart wallets which can be integrated to corporate loyalty and discount programs. The big challenge for banks is how they can take corporate banking to the next level so that it transcends simple recording and processing of data to a point where real value is added that fulfills the needs of the corporate customer and they receive more sophisticated, customer-centric services from their banks.

In order to support the changes that the market and their clients are feeling banks will have to transform their business models, particularly in the development of products and services which traditionally have been done internally and somewhat in a vacuum. Banks need to ensure that the previously silo’d business units within their organisations no longer face-off against one another and are working in harmony and are delivering a consistent look, feel and experience for their customers. The most innovative banks have recognized that this rapid speed of change means that the client needs to be at the centre of everything and they are embedding the client throughout the product development cycle. This ensures that as the market changes and as the needs of the client change then the services that the bank offers can evolve in a way that best suits the customer.

In the past 12-18 months the mobile space is one particular area that has seen increased use on the corporate banking side as firms look to take advantage of the full capabilities of mobile devices to try and improve interactions between the bank and its corporates clients. This is a great example where consumer technology is really driving the user experience on the corporate customer side. The abundant availability of GPS chips embedded into mobile devices is also enabling firms to make their products and applications context and location aware, and further optimizing the usage of the real estate available on mobile devices.

Banking applications are one more area where innovation is starting to take shape. Rather than operating a loose constellation of products that are frustrating for clients and time-consuming to navigate banks are beginning to offer an application based approach to products which provides users with a single entry point, a single user experience and a single set of security protocols no matter where products are accessed from. The only drawback in this approach however is that the restrictions that banks are under in terms of regulation, security, data protection will limit how open their infrastructure can be and it’s unlikely that they will reach the levels of openness that consumer brands like Apple and Google can reach.

While a handful of the global banks are becoming more concerned with the impact of digital, mobile and the convergence of the corporate and retail worlds the majority of banks are not prepared to make the significant investment that is necessary to meet the challenges of this revolution. Increasingly the brand association of banks is driven by the software and technology that is used to enable and deliver services to the end customer. Software is the differentiator and for banks to retain their client base, and their brand loyalty, they must invest heavily and place software at the centre of their digital banking strategies.

Firms are increasingly talking about the digital revolution but one major issue lies in the fact that the majority of those making decisions on product, client engagement and future strategy are not online, do not use digital channels and are not experiencing the digital world for themselves. With company firewalls limiting internet usage and blocking YouTube, Facebook, and other networking platforms it isn’t surprising that these decision makers are disenfranchised from the digital world, don’t understand it and therefore don’t take advantage of it. The reality however is that the social aspect of banking is not going away and it will continue to affect an increasing number of banks customers, including corporates.

Expectations are growing based on personal experiences and customers now expect a consistent, omnichannel experience, with 24/7 availability, and capabilities more attuned to the world of consumer and retail. If banks they are not meeting those challenges then they will be left behind and will risk losing their customers to smaller, more agile firms that can more effectively take advantage of technology and deliver a customer experience more aligned to that delivered by consumer organisations.