5 Drivers Accelerating End-to-End Transformation in Commercial Banking

Providing a great experience for customers is no longer an optional investment, it is increasingly the most important competitive advantage a company can have. Customer relationship management is particularly important as the rise of digital channels makes it easier for customers to research and switch to a competitor’s offering. In commercial banking, Relationship Managers (RMs) are critical in nurturing that customer relationship, securing customer loyalty and generating new business from existing customers.

Since the onset of COVID-19, many customer-facing teams have been busy helping small-to-medium enterprises (SMEs) to navigate the financial fallout of the pandemic, manage their cashflow and provide guidance on available stimulus packages, all while pivoting from primarily in-person engagements to virtual. This has been no easy feat.

Yet, when it comes to onboarding new customers, not much has changed in many commercial banks. Relationship managers still spend much of their working day on manual tasks, switching between siloed systems and ultimately operating in a very inefficient manner. Ironically, lower revenue retail customers will often have access to better digital channels than high value corporate customers and their relationship managers. This negatively impacts customer relationships from the very first touchpoint.

But what market and industry drivers are pushing commercial banks specifically to accelerate their digital transformation plans?

There are top five drivers of change that are redefining how financial organizations serve their customers:

1.     COVID-19

2020 delivered a significant digital wake-up call for all banks. The pandemic has prompted many organizations to switch to a new hybrid blend of servicing between traditional customer-facing engagement and digital channels. Yet many are still struggling to strike the right balance. According to Greenwich Associates, one-third of US small-to-medium enterprises (SMEs) are considering switching their financial provider due to their bank’s COVID-19 servicing failures.

Frictionless digital services are paramount to helping your customers recover from the crisis – whether it’s providing digital identity and verification for faster onboarding or offering increased overdrafts to the customers who need it most in the right channel. To achieve this, banks need to be able to deliver greater value to customers digitally and boost operational efficiencies with increased process automation.

2.     Volume of Regulatory Change

The speed of regulatory change continues to gather pace. With financial crime on the rise globally, regulators are applying increased pressure on banks to identify customers with links to criminals or politically exposed persons (PEPs). The ability to Know Your Customer (KYC) and their behavior (KYB) and your customer’s customer (KYCC) is more important than ever before in an increasingly remote and digital financial services world. A reliance on manual processes and the increased headcount hired to meet growing compliance demands will not, in isolation, help your bank to remain compliant. RegTech solutions that integrate with a wider ecosystem of data, screening and transaction monitoring providers can help you identify regulatory requirements across multiple jurisdictions, automate KYC and AML processes, and reduce the chance for human error.

3.     Digital Disrupters

Over the last few years, we’ve seen significant disruption and change in the financial services industry as challenger banks, like Monzo and Starling, entered the banking space. The result is that customers can now sign up to a new digital bank within minutes.

Given the increasing complexity of onboarding, it’s no surprise that a staggering number of financial firms globally are losing their competitive edge to these digital-first disruptive competitors. Customers are naturally going to gravitate to financial services providers that deliver the same high-tech, low-touch experience as the consumer digital services they are familiar with. In fact, according to Fenergo research, 92% of CEOs agree that they need to transform radically to compete with digital-first neo-banks.

4.     Cloud Adoption

Cloud adoption is now peaking across many industries. For incumbent banks, the need to upgrade core systems and integrate the latest technologies has become an immediate priority. The pandemic is forcing many firms to re-examine their approach to digital transformation, with increased focus on achieving a cloud-aligned environment.

Using cloud, financial services can drive increased innovation by leveraging new technologies, such as natural language processing and machine learning, to unlock new processes that enhance customer interaction and experience with real-time, personalized services. They can also simplify business processes like KYC compliance. According to Statista, financial companies are expected to spend $500 billion globally on information technology by 2021, with a significant portion funneled into cloud adoption.

5.     Cost Pressures

It is abundantly clear that Covid-19 has acted as a major catalyst for digitalization. Banks are now increasingly focused on digitalizing customer-facing operations to elevate customer engagement and keep costs down.

Digitally enabling customer-facing teams with greater customer intelligence and digital onboarding capabilities through their CRM system can generate significant efficiencies and cut the cost of compliance.

According to McKinsey, digitalizing commercial processes can result in a 25% improvement to commercial banks’ margins along with an improved pull-through rate and experience for both RMs and customers.

Conclusion

To compete with disruptive competitors, traditional banks must provide the same frictionless digital experience throughout the customer lifecycle. Customer-facing sales teams are just the tip of the CX (customer experience) iceberg. The reality is that superior CX depends on an end-to-end value chain and interconnected platforms across end-to-end operations, providing convenient onboarding and well-timed customer engagement.