Why Are Corporate Banks the Last in the Race to Digitize?

The last year has demonstrated just how reliant we, as individuals, have become on digital services—whether it’s ordering groceries for delivery or managing our finances online.

Today, more than ever, we rely on the ability to transact at our leisure from the convenience of our chosen device. We also want to view our entire relationship and history with a bank or vendor, on-demand, from a single screen. Financial institutions understood early on the benefits of digital for their retail customers and continue to invest heavily in these capabilities.

But the corporate banking sector has not embraced digital with the same fervor, even as demand is growing, and client satisfaction is declining.

Here are three reasons why:

1. Cultural Inertia:

Corporate banking is largely built on relationships—many of which are cultivated over years via in-person meetings and interactions. And, there remains a strong legacy of paper-based processes, even requiring wet signatures that are often obtained in person. The pandemic is changing this mindset faster than anyone could have imagined. Corporates and their banking partners have had no choice but to cultivate and build their relationships remotely at a time when businesses need more flexibility and support than ever. 

2. Complexity:

There is no denying that corporate banking services are complex. In contrast, retail banking processes are linear—debits and credits—and services are highly productized—loans, savings, and checking. In the corporate banking arena, a large corporate may have hundreds of accounts across multiple banks. Corporate banking processes themselves are much more complicated, spanning trade finance, cash and liquidity management, and FX to name just a few. Positions and portfolios also require constant monitoring and management. 

3. Legacy Lock-in:

Corporate banking represents the lion’s share of a bank’s profits. As such, banks are very risk averse when it comes to replacing legacy systems that could have even a short-term negative impact on client service. They seek componentized solutions that enable them to modernize with minimal risk, beginning where they want and proceeding at their own pace. 

Corporates look to their banking partners to deliver unprecedented value as they navigate these turbulent economic times. Digital transformation—when focused on advancing clients’ business objectives—can set a reliable foundation for strong and profitable corporate client relationships.