Today’s corporates expect a lot from their banks. Research has shown that 65% of corporates feel that their financial institutions do not understand their needs (Aite Group) while 63% of corporates say service innovation is key to their business – only 40% see banks performing (EY – Successful Corporate Banking Report). Dr Paul Curry, product manager for payments and messaging at Misys, writes
Simple provision of transaction services is no longer enough for a bank to retain and grow its corporate customer base. These days, there are three essential characteristics a service must have:
Go deeper with GlobalData
- Provision of a holistic view. If a corporate is going to put multiple lines of business through a bank, it expects to be able to take full advantage of this in terms of visibility and control. For example, a corporate treasurer will demand the ability to have access to data on its consolidated position and the ability to sweep liquidity between these lines of business to get the most benefit from what is increasingly an expensive commodity.
- Competitive and agile pricing structures for the services. A bank must be in the position to offer relationship based pricing as opposed to simple product pricing based upon individual business lines.
- Excellent user experience. We are increasingly used to engaging with digital channels, the characteristics of which include intuitive user interfaces and access to rich real-time data that can be readily and flexibly analysed and consumed. Traditional GUIs may still be acceptable in the back-office of a bank, but not for a corporate user ("54% of institutions have less than 45% of their corporate banking products digitally enabled- Gartner, Digitalising corporate banking 2015")
Meeting these service characteristics poses several challenges for banks:
- Bank operations still tend to be in silos. Even if there is an organisational desire to address this, the legacy infrastructure (still in place after 30 years in some cases) can often make this a seemingly impossible challenge. Banks are in a dilemma: they have substantial IPR invested in applications that are simply not equipped for the challenge, yet a corporate will expect new service offerings to be reflected in days. However, relatively simple changes in the bank will require coding with a release cycle of months. Where banks have attempted to replace these applications they have frequently under-delivered in terms of functionality and with a much higher TCO than predicted – "rip and replace" is simply too expensive and brings an unacceptable risk profile (a major FI that I’ve worked with estimated a figure of $50m to replace its high value payment system when all SI work is taken into consideration and I have also seen implementation timeframes in excess of 2 years). This is frequently exacerbated by fragmented front end systems. Today a corporate will expect an omni-channel portal to bring the different lines of business together, so that they can view and act upon consolidated data. Banks must offer front to back office solutions that have this capability.
- Few applications are "enterprise aware". The above example of pricing is an excellent case in point. All of the lines of business in the bank will implement some form of pricing, however as it resides in channel-specific applications it will be product-centric rather than customer- centric. Banks need to be able to offer innovative pricing that truly reflects the value of the full portfolio of business that a corporate brings – concepts such as promotional offers and bundled pricing are common in other industry segments (e.g. Telecommunications), but banks struggle to offer this. Operational dashboards and analytics face the same problem – banks need to offer state-of-the-art technology solutions that will empower corporates to have greater insight into the way that banking services are working for them, as well as the ability to refine and tailor them. Corporates need to be able to make evidence-based decisions about their banking relationships.
- Insulating the corporate from change. As many aspects of transaction processing become commoditised, corporates expect their banks to shield them from efforts on their side to adapt to infrastructure changes while ensuring that they can take full advantage of market innovation. This means that banks need to stay ahead of the curve in transaction banking developments in a way that provides business benefit to a corporate, without the onerous task of the corporate continuously changing their systems.
So what practical steps does a bank need to undertake to ensure the health of its corporate business?
- Implement hub-based solutions. These are centralised "command and control" points for transaction processing. In addition to fulfilling the need for a holistic view of the corporate business, it helps to address points 1 and 3 above. Hub-based solutions provide a point in the bank’s infrastructure where everything comes together. The use of standards-based interfaces (ISO20022 being the one that has gained most traction) means that banks can leave their existing applications in place doing the job that they were designed to do (and often continue to do well), while gaining the benefits that can only come when their data is viewed and acted upon "in the whole". If transaction processing has a point of centralisation, changes (regulatory, scheme-based etc.) can be applied in one place – not in individual channels – reducing effort, cost and risk. Furthermore, hub-based solutions establish clear contracts with the connected applications and the bank (if it has the appetite and capabilities), can undertake its own adaptations and integration work on this basis.
- Rationalisation of business processing. Only put into the transaction hub what belongs in the hub. Many failed projects are the result of compromising on this principle and result in a new solution which is a mirror image of the original one on a new platform. The impact is that, once again, the bank finds itself unable to respond to change because (unintentional) silo based processing is being developed. In the discussion above, both pricing and operational dashboards are areas where banks should utilise best of breed components as opposed to a partial solution in the channels or hub.
- Providing excellent user experience. Banks need to ensure that providers have strong credentials in digital channels solutions. The "shop-window" has to be impressive – it needs to operate across business lines and be equal to what the user-base expects based upon their everyday experience, e.g. social media and Google search capabilities. ("CIOs and business leaders must raise digital corporate banking strategy creation from the lines of business (LOBs) and channels to the CIO level. Doing so will propel digital technologies beyond the automation of specific projects, processes and services to enterprise-level initiatives- Gartner, Digitalising corporate banking 2015")
Corporates are very choosy with respect to where they place their business. Banks have an excellent opportunity to both retain existing corporate business and grow this revenue stream, by ensuring that their systems meet client expectation – an achievable challenge if they follow the steps above when they choose a vendor or develop their systems to deliver their transformation programme.
How well do you really know your competitors?
Access the most comprehensive Company Profiles on the market, powered by GlobalData. Save hours of research. Gain competitive edge.
Thank you!
Your download email will arrive shortly
Not ready to buy yet? Download a free sample
We are confident about the unique quality of our Company Profiles. However, we want you to make the most beneficial decision for your business, so we offer a free sample that you can download by submitting the below form
By GlobalData
