It’s no secret that in the current economic climate, corporate banks are under pressure. They struggle with an installed base of pre-modern apps and archaic processes. This is the time when corporate banks are changing the way they serve their customers. They need to start using a combination of digital and human services that will enrich the customer experience, improve cost performance and support growth.
Corporate banks need some digital love
Most banks that have digitized basic cash management have prioritized operational efficiency and service continuity. They have invested significantly in improving the digital consumer experience in retail. At the same time, they overlooked the growing digital maturity of enterprise customers. Banks need to balance their relationship-focused approach to corporate customers with a digital-channel approach. The inefficiencies inherent in traditional working practices make it difficult to achieve savings, improve prices and manage challenges such as:
- A fragmented legacy IT landscape. Systems and solutions that allowed banks to upgrade with minimal risk in the past are now a significant barrier to sustainability and digital transformation. Today’s typical legacy enterprise banking applications are still monolithic, a mix of systems of engagement and systems of record – not cloud-ready and integrated in an ad-hoc fashion. The legacy base bank is the antithesis of the end-to-end digital bank. It is neither flexible enough nor fast enough to cope with the agility and real-time needs of end-to-end transparent “true digital” banking.
- Outdated and paper-intensive processes. Corporate banking is besieged by paper-intensive handling throughout transaction cycles and between stakeholders. Most financial service providers are aware of the desirability of paperless processing. However, they still end up keeping paper records due to legislation or weak internal governance. In this paper-centric environment, third-party vendors store records offsite at significant cost. Banks tolerate this cost as “business as usual” and often overlook the opportunity for efficiency.
- The need to drive large-scale digital innovation. Large incumbent corporate banks have maintained an edge despite their high operating costs, but the pandemic has changed market behavior and expectations. More businesses are automating their operations and demanding sophisticated digital solutions that support their business, but most banks are still struggling to deliver.
- Rigid and inflexible business models impeding agility. Banks create products and offer them to customers. They produce value upstream, and their consumers consume it downstream. There is a linear flow of value that impacts pricing metrics, relationships, and ultimately business agility. Banks need to seriously consider moving from linear business models to network business models. Fintechs and other technology startups know how to exploit this opportunity; they are disrupting the industry with creative and digital business models that provide top quality products and services at affordable rates.
- Rules, rules, rules. The business banking industry is heavily regulated – and rightly so. There are valid concerns about security, compliance, and data privacy. Compliance violations can have a substantial impact on a company’s bottom line: penalties, reputational damage and loss of important customers. The ever-changing regulatory landscape with open banking rules, API standards, ISO and manual compliance monitoring with non-integrated platforms (e.g. World-Check, blacklists) etc. leads to higher costs for banks.
Automating business banking processes is a huge opportunity
Corporate banks are under pressure to provide innovative and efficient services in order to stay competitive. Changing market conditions force them to re-examine their business models and adapt to a new reality. Automation is the new fabric of digital businesses and the new plumbing of systematic digitization. To that end, banks must make automation a cornerstone of their digital efforts.
This post was written by analyst Pushpa Marwal and it originally appeared here.