Banks have always been keen to embrace new technologies. They have to contend with extremely high volumes, zero tolerance for errors and instantaneous processing requirements, while at the same time pushing back against new entrants like digital-only challenger
banks, FinTech start-ups and even BigTech companies vying for a slice of the pie. All this competition has led to banks moving rapidly to modernise their processes and innovate when it comes to retail banking.
The story in the corporate and business banking space, however, is a bit different. Banks have adopted a slower, more deliberate pace here because of a number of reasons. For starters, business banking is considered more of a relationship-based service rather
than something transactional. While this is indeed true, it cannot be an excuse to skimp on providing the best digital experience possible to customers. Especially when customers have already built a preference for
online/ mobile service delivery rather than face-to-face or telephonic interactions.
Another reason for this delayed digitisation in corporate and business banking is the inherent complexity of the products. However, the trend is unmistakably towards a new paradigm in standardisation not just at a national level, but internationally as well.
For example, many countries are adjusting their local guidelines to closely match the EU
standards on digital identification which would eventually be a game changer for international trade and trade finance products. This means more standardized business banking products which require less operator intervention to deliver.
Continuing on this theme, here are 6 ways banks can use digital innovation to transform business banking and increase profits:
- Increasing Wallet Share – A digital platform makes it easier for banks to cross-sell related products to their clients. BigTech companies like Google, Amazon and Facebook use customer behaviour patterns to pitch them only those products that they
are most likely to buy based on their usage history. A sufficiently advanced digital banking platform can use data analytics to do something similar for a bank’s client base and significantly increase product cross-sell. Cross-selling is one of the most cost-effective
ways for banks to increase their wallet share from existing clients and will easily pay for the investments made to achieve it. By making it easier and faster for customers to perform transactions, banks can also boost transactional revenue.
2. Enhancing Operational Efficiency – Customer servicing can be a significant cost centre for banks and manual servicing can lead to delays which can directly affect revenue. To offset this, companies are using advanced chatbots
which offer an easy-to-use mechanism to deal with most simple queries at a minimal cost. This aids in reducing the burden on customer servicing and improve operational efficiency as the most basic queries can be taken care of through process automation. A
more advanced version of these customer service chatbots is virtual advisors which can offer tips and thus drive sales of related products. Finally, features like push notifications from the app can further increase customer engagement as users are more likely
to view and trust notifications from apps that they have installed on their own.
3. Delivering Valuable Insights – Research suggests that clients want to use online/ mobile platforms for gaining
insights on “market and industry trends” more than anything else. Banks indeed have a treasure trove of data on this and packaging that data into usable insights for their customers can really be a game changer. Rather than relying on expensive third-party
industry research reports, most clients would prefer it if their own bank could provide them with research that is tailor-made for them. For example, a breakdown of how a regulatory change might affect an industry or some insights into i nterest rate or currency
exchange rate movements might be shared with clients.
4. Getting a head start – Customers are increasingly gaining a preference for having a single unified platform for all their banking needs. In the European Union, for example, the PSD2 regulation
allows service providers to amalgamate a customer’s various bank accounts and offer a single window solution to view and initiate transactions. PSD2 is essentially a regulatory shot in the arm for Open Banking and APAC countries like Singapore, Australia and
New Zealand have plans of their own in this regard. This is something that is likely to spread to other jurisdictions
as well as Open Banking initiatives begin to gain traction.
What this essentially means is that banks which have a head start in providing customers with an intuitive and valuable front-end digital banking experience would gain significantly by becoming their preferred choice for the future. Banks which do not adapt
would have to suffice by become nothing more than utility service providers and lose the opportunity to directly engage with their own customers.
5. An Untapped Market – SMEs don’t usually have access to the same equity and debt markets that their Fortune 500 counterparts do. In SE Asia, this has led to a situation where 86% of
the funding for S ME’s comes from internal sources and only 6% is
funded by banks. In the Middle East, there is a massive $240 billion funding gap
for SMEs as well. The right digital banking platform can really help tap into this unserved market. It gives banks a foot in the door so that they can start with less risky, non-funded products and slowly build up the comfort to cross sell products that require
a direct exposure.
Keeping the clients engaged with a versatile digital banking platform will mean that the bank will have a top-of-the-mind recall advantage when they are ready to deepen their relationship with the customer. From a credit risk point of view as well, having
a longer engagement history with the client would just make it easier to build trust internally.
6. The Disruption is already here – Retail customers have been spoiled for choice when it comes to having multiple options for buying financial products and services. And as the retail segment gets ever more saturated, FinTech start-ups, as well
as existing tech giants, are focusing their attention on the SME and corporate banking segment. Companies like EquityNet allow SMEs to raise equity online, while companies like
Transferwise and others allow for online FX conversions for SMEs.
No amount of relationship building can hold back the tide when some service providers make it so easy for customers to shift to an online platform. The trend in the retail banking space has proven this beyond doubt. The most effective way to compete is by
offering an omnichannel service that matches or exceeds the service levels of online competitors.
Conclusion – Future Proofing
The financial services sector continues to be a rapidly changing industry. It is perhaps the nature of the beast that the most valuable sectors of the economy are the ones that attract the most attention and hence witness the greatest disruption. However,
this disruption is not something that is necessarily bad for established banks. If anything, it is an opportunity for them to use their vast treasure troves of data and their strong customer relationship and marry those advantages with the benefits that new
digital platforms bring.
Banks have the advantage of being able to partner with the right tech solution providers and match or exceed the user experience that can be provided by competitors. If BigTech companies can cross the Rubicon and compete in the payments space, why shouldn’t
banks compete with them by offering their services through amazing digital platforms to their customers?