Long reads

The trends driving digitalisation in corporate banking

Sebastian Zawada

Sebastian Zawada

Content and Community Officer, Finextra

The intensifying competition from non-bank platforms and the commoditisation of products, as well as the ability to onboard, connect, and deliver new and existing services to corporate customers digitally is becoming paramount. Further to this, with the ever evolving and increasingly global needs of their corporate customers, banks now face a diverse and complex set of challenges.

Corporate services are a key component of the banking proposition. Companies ranging from small and medium-size enterprises to firms with annual revenues in the billions represent an annual global revenue pool of around $1.85 trillion.

Research conducted by JPMorgan Chase in 2020, on what is driving treasury’s digital transformation, reveals the Covid-19 pandemic heightened the importance of enhancing client engagement and customer experience, with banks in the vanguard increasing technology budgets and accelerating projects.

Research found that corporate treasury departments are amid a digital revolution, which has elevated the treasurer’s role to become more of a forward-thinking, strategic business partner. The study outlined how the current trend of digitalisation is necessary for a simpler onboarding process for corporate treasurers.

This was exemplified in a Finextra and Volante Technologies hosted webinar, which explored the trends driving corporate treasurer demand for greater digitalisation of corporate banking.

Experts from Silicon Valley Bank and BNY Mellon also joined the discussion to identify the key drivers and emerging trends faced by banks when serving the needs of the corporate market, and explored the reasons why corporate treasurers are not receiving the same benefits from digitisation in their corporate lives, that are abundant in their retail experience.

John Farrell, SVP product management at Volante Technologies, said: “We are seeing a real interest from the forward-looking banks to really streamline, lead and take the friction out of the corporate onboarding process. This is a growing trend because they see a market opportunity there for those banks that aren't kind of paying attention to this the way they should be.”

Varun Yadav, global innovation program, treasury services at BNY Mellon, identified that the main trend driving corporate treasury demand for greater digitalisation is to increase efficiency.  

“It’s very typical for the onboarding process to last several days or several weeks in certain cases, it's not desirable to a corporate, they have to often deal with providing more and more documentation repeatedly.”

In a global survey conducted by EY, in 2019, on digital transformation in treasury services, it was found that onboarding processes are the main challenge for corporate treasurers. 

In developing tools and processes to improve the client onboarding experience, 56% of corporate treasurers interviewed identified the need of reducing complexity and shortening the time required to complete key onboarding documentation.

The research also outlined the potential of automation and digital transformation becoming more necessary than ever as corporates strive for real-time monitoring of cash flows, optimisation of working capital and the flexibility to respond to rapid changes in the macro landscape.

Yadav highlighted the potential of developing digital capabilities and how it can support corporate clients in their customer journeys.

“Banks are now investing more and more in digital capabilities, including developing APIs, adopting AI and machine learning capabilities. This has taken its time certainly at BNY Mellon, but we have certainly invested in developing a suite of API capabilities.”

Yadav added that developing and introducing new digital channels for corporate treasurers requires to be a right move for them and not intervening with their existing processes. 

“I think the basic expectation from banks would be to provide solutions that actually can fit into their existing processes and systems without causing too much disruption, but still be able to drive the efficiencies that they're looking for.”

Tristan Blampied, senior product manager at Silicon Valley Bank, explained the role of technology and how it can offer opportunities to automate and reduce friction during the onboarding process and deliver significant benefits for corporate treasurers.

“If we look at onboarding, things like electronic channels and payments are the secret for the banks in approaching corporate banking services and the vendors that supply the corporate systems to work together as closely as possible.”

Tristan added: “If the bank is integrating its systems within a corporate system, then they can automatically speak to one another before the corporate treasurer has even lifted a finger. We have reduced the time and work effort to progress onboarding to the bank by well over 60%.”

By enhancing treasury services to plug the capability gaps customers currently experience, banks can help accelerate the move to universal real-time treasury while delivering relevant services that meet the needs of corporate treasurers.

In a recent whitepaper, published by EuroFinance in partnership with JP Morgan, on digital transformation of treasury, it revealed that  new impetus to adoption of new technologies accounts for almost 80% of companies surveyed.

Companies surveyed highlighted that there are significant challenges in introducing digital capabilities to corporate treasury and a slower process compared to the retail sector.

Farrell pointed out that the process of embracing a ‘digital first’ mentality, taking a risk of investing and using newer technologies for corporates is sometimes delayed by the bank itself.

“From a corporate perspective, it's not always about the bank, it can be about where that corporate sits in the hierarchy of the bank.”

Farrell added: “Banks that realise this early, like a lot of the ones we do business with, are going to take advantage of that market opportunity and they are going to realise that change is not a choice anymore. It is a necessity.”

Blampied pointed out the discrepancy and opportunities available for the corporate market in transferring the digitalisation processes already implemented by the retail sector.

“First, we need to understand and identify the differences that a corporate user will want and need, compared to a retail user. For example, payment authorisation workflows will be critical to a corporate. But it still needs to happen with the lowest amount of friction possible”.

Blampied added that the key is finding the right balance between friction and security which is particularly prevalent and more complex in the corporate space. Once that is achieved, there are significant opportunities available to increase digital capabilities for corporate treasurers.

“APIs in particular can readily drive and run wide range of innovative services and products to corporates but unlike retail, it's not a one size fits all solution”.

Yadav also identified the trend of corporate investment in cloud computing. “There are a lot of industries which have adopted cloud, and I think it has to a very large extent, delivered on the promises and benefits it provides.”

Statements made by Yadav show that cloud infrastructure offers a kind of enterprise level service, that otherwise would not be possible in a more traditional infrastructure and environment.

Research conducted by EY in 2020 on UK banks’ business infrastructure echoed the statements made by Yadav and highlighted a growing trend for banks investing in cloud infrastructure.

27% of banks expect to migrate at least half of their business infrastructure (systems and/or applications) to public cloud by 2022.

Summarising the discussion, all webinar panellists agreed that there are signs of progress in digitalisation of corporate banking with efforts intensifying in the recent months.

Farrell closed the discussion:

“I do see a wave of change coming for corporate treasury. I think we will see that incremental value creation leveraging the new capabilities that exists in the marketplace, whether it is a product, service, or a technology. I do think that will continue and ramp up.”

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