It’s Time to Get Serious about Digital Corporate Banking

Conor Colleary
Group Vice President Solution Consulting, Customer Success and Partners

The last few months have 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.

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

The 2019 Global Treasurer's Banking Transaction Survey reveals corporate clients’ satisfaction has dropped to the lowest recorded level in the survey’s history, with only 49% of corporate clients rating their bankers as good or excellent. The report also revealed “pent up demand for digital, ‘best-in-class’ products and services—but banks are failing to deliver.” Approximately half of all respondents say this is very important to them, but only 8% of banks are providing these services. Besides, 79% of corporates report that open banking will change the way they interact with banking services providers.

2019 Global Treasurer's Banking Transaction Survey

Last month (May 2020), analyst firm Greenwich Associates released a market report that delivered additional insight into how corporates are changing their expectations and behaviors. Specifically, companies are looking for easy integration between their treasury systems and bank platform, along with real-time information and self-service functions that can improve efficiency. Digital Know Your Customer and onboarding processes are also a priority, with 60 percent of large European companies saying they award incremental business in cash management to providers that can deliver these capabilities.

Opportunities Ahead

Expectations are changing, and banks that can quickly pivot to digital, stand to deliver three essential—and profitable—benefits to their corporate clients:

  • Greater operational efficiency through automated processes, such as reconciliation, trade processing, account opening, and management.
  • A personalized and enriched customer experience that leverages digital to augment critical personal relationships— delivering the best of both worlds
  • New levels of capital clarity and agility. Digital technologies allow banks to provide actionable insights, such as a global view of all positions, the impact of FX movements, and regulatory changes, that—when managed actively and effectively—can have a positive effect on a corporate’s bottom line

There are interests and opportunities. When these factors converge, market challengers are usually quick to follow. Today, we’re seeing FinTechs move into the corporate financial services sector. Cross-border payment is one area where they’re gaining traction due to attractive pricing and secure customer experience.

Jumpstart Transformation

Why haven’t financial institutions moved faster to digital when it comes to their corporate business?

First, corporate banking is primarily built on relationships—many of which are cultivated over years, via in-person meetings and interactions. And, many processes remain paper-based, even requiring wet signatures that are often obtained in person.

The recent health crisis 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. The situation also has exposed the dramatic digital chasm between personal and business banking experiences.

In addition, corporate banking services are complex. Retail banking processes are linear (debits and credits), and services are highly productized (loans, savings, and checking). In the corporate banking arena, a large corporation may have hundreds of accounts across multiple banks, currencies, and geographies. Also, 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.  For example, a corporate financing a sizeable international construction project will look to its banking partners for a strategy to hedge exchange rates year-over-year to optimize their investment and reduce overall loan costs and risks. Corporates are looking for much more than just a provider of financial services--they are looking for a partner to help them manage their business more effectively.

Time to Move

We’re seeing important regulatory initiatives that will expand opportunities to introduce digital into the corporate banking realm.  Developments include the introduction of standards for digital identification, electronic verification, and digital payments as the European Union continues to progress toward the creation of a single digital market.  Payments Services Directive 2 (PSD2), as well as open banking directives, are crucial elements of this initiative.

Maturity and adoption of emerging technologies, such as machine learning, natural language processing, advanced chatbots, and more, are also paving the way to introduce compelling value-add digital services to the corporate banking sector. This new business environment is primed for a new digital paradigm in corporate banking, one where the winners will be the first movers who can leverage their expertise with data and technology to deliver the best, most innovative services to their corporate customers.

Where to Start

Every corporate bank’s digital journey will be unique. The two most important factors determining the path forward will be a bank’s current state or baseline when it comes to digital capabilities and the needs of its unique client base. Corporate banks must embrace digital transformation from the customer perspective. It’s not enough to digitize an existing process.  Instead, the goal should be to evolve the process to help customers achieve their business objectives. For example, the question should not be, “How do we introduce digital to FX?” Instead, the bank should ask, “How can we help our corporate customers to leverage FX to actually make money?”

That said, many organizations choose to begin with their most labor-intensive processes. Syndicated lending is one example. An organization can apply natural language processing to manage a syndicated process via email. The same technology can be applied to cross-border payments. Processes that have numerous stakeholders, such as credit approvals for a large corporate facility, are also ripe for digital transformation.

Ready for the Road Ahead

Flexibility is critical as banks begin to navigate the road to digital transformation. A componentized architecture gives corporate banks the ability to start their journey at the place that’s right for them and then set their own course and speed.

Oracle’s corporate banking solutions embrace this approach. Instead of delivering a monolithic solution, Oracle has created components that enable tremendous flexibility. For example, a bank may already have a liquidity management solution, but choose to use Oracle for virtual accounts.  This approach allows corporate banks to achieve value quickly and continue to build based on their evolving needs. It also enables them to partner easily with FinTechs to optimize value for their customer base.

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.

To learn more, feel free to message me to explore more, or have a conversation.

For more information, please visit:
Oracle Corporate Banking Solutions: oracle.com/corporate-banking
Oracle Financial Services: oracle.com/financial-services

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