Following the pandemic, large corporate businesses are placing priority on moving at speed. Troublingly, there’s a growing perception that those businesses are themselves failing to keep up with the changing landscape.

It’s vital they do so. The tumultuous economic cycle we’re currently undergoing after all comes with opportunity. With drops come rises, and two-thirds of the value generated during a recovery cycle comes in the immediate two years afterwards.

Yet what complicates things is the changing demands put on corporate banks by business. NTT DATA recently surveyed nearly 900 senior decision makers across 12 countries to gain a clearer understanding of the current picture.

Here are some of its key findings.

Digital first matters

A big, irreversible change is that businesses clearly want a lot more interaction with their banks, but they want it on their terms. That means on a machine rather than human level.

Minimising friction and increasing efficiency are key demands from large corporates, lessening day-to-day direct interaction between them and their banks. Businesses want either self-service or machine to machine interaction with banking systems, and digital first is now very much expected. Our research confirmed it was more important to businesses than face-to-face interactions, a trend that’s not going to reverse with three times the number of corporate clients reporting they want to communicate through APIs.

Banks need to adjust both their culture and their technology stack to keep up: it’s high priority, but also beneficial work too. Digital first allows them to offer customers a more flexible, bespoke service, that’s also more streamlined when it comes to scaling down - and ideally up! But the tech stack needs to cover ground to accommodate that, and at pace. To facilitate customers who might now want to start a transaction in one place and complete it in another, and to cater for the numerous daily interactions they’re now having with banking services.

This is a by-product of online banking that’s long been building. The days of customers interacting with banks every week or so are gone. Our research concludes that the relationship now is a lot more frequent - but far less face to face.

Quick evolving banks are adapting to this, particularly disruptors who originated from the tech sector. It goes beyond self-service banking: the drive now is towards fuller integration. Companies want to build the tech into their own stack and harness the opportunities of automation and AI.

It’s good news for the progressive, but a very real problem for traditional banks. Legacy technology and systems are a clear business impediment, and some traditional banks are losing momentum as they bring in the expertise and systems to adapt.

In some cases, they are also hampered by legacy organisational structures that work department by department, rather than to a holistic strategy.

Local and regional demand

Appreciating technology stacks don’t instinctively recognise international borders, corporate banking still must take this into consideration when building out their digital infrastructure. Ignoring local knowledge and regional regulatory variations is done at their own peril.

For example, banking may be globalised, but a major multi-national in the United States needs to be able to talk to each one of the 4,000 smaller regional banks that operate in the US as well.

Local demand matters, and whilst ISO 20022 has emerged as a global standard for sending payment instructions between financial institutions of all sizes, it’s still developing. There’s a clear advantage for early adopters of it.

Region by region, the priorities for banks also vary.

We discovered that in Europe, blockchain use is of real interest, whereas in the US the priority is towards IoT data when it comes to trade finance. Head to LATAM, and the onus is more towards investment into data that can be viewed and segmented.

Sustainable Sustainability and ESG

Hand-in-hand with tech change in 2022 are environmental concerns. The to-do list of policymakers and regulators is zeroed in on ESG and sustainability issues, they tell us. The world is shifting towards lower carbon ways of doing business, and there are pressure points from multiple directions for corporate banks to consider.

On one side, governments are bringing in more stringent measures and ESG targets. But as telling, customers are demanding the same, as their customers are demanding it of them.

Values and beliefs matter, an irreversible trend as more and more millennials assume C-suite positions.

Banks are already conscious of this. In Europe in particular, regulations are not new. Many banks are already working to published standards such as TCFD, PRI and NGFS, pending confirmation of final regulations.

The work is complex. Adapting fast is a clear business opportunity here, but also there’s a need to fully understand the sustainability impact covering all the processes of a bank.

The difficulty some face with ESG initiatives is an opportunity of course for a fast-moving corporate bank. To be the place where customers come to in order to get the information they need – and potentially to unlock preferential financing as well.

Regtech

Much of the existing banking regulatory framework surrounds two familiar acronyms: KYC (know your customer) and AML (anti-money laundering). They’ve each brought about the rise of regulatory technology, or regtech.

It’s a major growth area in fintech, and important to onboarding new clients.

Still, our research exposed gaps:

-         44% of banks report the need for more investment in onboarding

-         39% say their customer onboarding is too slow

Onboarding is pivotal to a long-term working partnership and making sure that process is as smooth as possible from day one. Positively, banks are prioritising this.

-         57% of working on AI-enhanced KYC/AML processing

-         55% are accelerating the digitisation of KYC/AML

There are regional variations. APAC is 10% ahead of development focus here compared to other regions in the world. In the US, there’s particular focus on the digitisation of KYC/AML processing. Europe, meanwhile, lags a little behind in reporting a ‘fast and seamless’ process when it comes to onboarding (stricter requirements and regulations are a factor there).

Integration and rationalisation

After years of low interest rates, banks have sought varied sources of income. However, return on investment will never not be important and it remains a major consideration for technology spend decisions.

Internally, CFOs are also leaning more on data analytics and automation – pooling information from multiple channels – as part of their own decision-making process. Those channels require rationalising, and that’s a driver for modern banking too.

Again, banks know it. 35% of those surveyed have already undertaken rationalisation work, with the aim of allowing a single customer view for senior leaders.

The main reasons? Cost-saving is an obvious one, yet not the most popular. More respondents were keener to improve the experience they offer clients. The benefit of a single portal for a bank’s offerings was key to that.

Also, the opening up of product features through APIs and web platform integration, in turn making those available to clients. This isn’t new work, yet the current focus is more on the web platform side: complete API and host-to-host integrations are in short supply, yet also in demand. The banks who get to that first are in a clear position of strength.

Where’s the investment going?

Whilst opening up banking is the top investment priority amongst those we surveyed, what comes through is a clear drive towards robotic process automation.

That’s to be expected: blockchain and IoT are of importance to corporate banking, as there’s some certainty that value can already be derived there.

Yet the key drivers for change are also enhancing operations through the use of artificial intelligence, and that aforementioned robotic process automation and digitisation.

Add in too that C-suite and senior decision makers are leaning heavily on data and insights, leading to 46% of banks putting their investment in this area.

Decisions and expertise

The future is moving fast, and technology is being pressed to keep up.

There’s a tech stack demand that’s building for banks, and change is being demanded by their clients. The conundrum is whether banks build their own tech, or buy it in. At the moment, 61% are developing in-house solutions and 39% buying off the shelf (the latter number drops to 33% in Europe and the US).

The cracks are where banks are placing their investment. We discovered disparities between expectations from businesses and the investment coming from banks. Take sustainability: banks aren’t matching the demand from clients yet. Corporates are looking for banks to join up their channels, and yet omnichannel investment isn’t fully meeting that either.

Work is clearly required.

Client-first future

Refreshingly, 2022 sees optimism in both the market again, and in a world where changes brought in to deal with the COVID-19 pandemic are longer lasting than anticipated. Still, it’s been proven that business can change fast, and that fresh thinking can come through at speed.

Today, phoning someone up to deal with a demand is too slow. Businesses want fast, almost instant decisions. They prefer self-service from their bank, where services can be configured and adapted as required.

Corporate banks need to adapt to that and need their tech stack to be able to service it.

The broader move is towards a bank of the future that is client-led rather than product-led. One that innovates and that marries up cutting edge fintech to its traditional experience. To achieve this, banking CFOs are leaning too on more sophisticated data analytics for their decision making.

AI use is therefore heavily expanding. Deep learning and natural language processing are vital, not least in facilitating a frictionless yet personalised end-to-end banking experience.

At the heart of all this change? Data. The future bank, client-led, needs that data to not sit in siloes, but to flow securely between its services, enriched by AI.

That’s the key to the experience corporate clients will demand – and also the key to their loyalty.