This is an excerpt from Finextra’s report, 'The Future of Digital Banking in the UK 2022'.  

The past few years have been a period of intense change in the corporate banking world. The ongoing digital revolution, changing market dynamics, and the entry of new challengers have all played a role in metamorphosing corporate banking as we know it. The COVID-19 pandemic proved to be the tipping point in its transformation. As we look to the future of corporate banking, digital transformation plays a prominent role.

In the initial stages of this transformation, which began in the early 2000s, the focus was simply on digitising existing ways of working. Next came the phase where the emphasis was not just on digitising the customer journey but also on delivering new digital channels. Today, we’re witnessing the unfolding of next wave of digital transformation, where banking will seamlessly embed itself into the customers’ journeys. For instance, advanced analytics can enable banks to analyse and anticipate customer behaviour, recommend best actions to customers, and even automate them on their behalf. We’re also witnessing the advent of embedded finance, which brings capabilities such as Buy Now Pay Later (BNPL) and open payments.

In our latest report, Leaping Forward: Scaling Digital Innovation in Corporate Banking in partnership with Strategic Treasurer and Red Hat, we found that to acquire digital capabilities in prospective growth drivers such as transaction lines of business, banks prefer either to buy packaged applications and tailor them for their needs or to use a hybrid approach. Either way, embracing a platform-centric approach to create, capture, and deliver value is a priority for corporate banks.

While different banks are at different stages of their transformation journeys, progressive banks with digitised customer portals are already seeing customer engagement. As banks continue to define their innovation strategies and design their digital transformation initiatives, here are a few key trends to consider:

Growing demand for digital self-service offerings

Nearly half of the bankers who participated in the Corporate Banking Digital Innovation survey said that digital self-service capabilities will be crucial to strengthening client relationships. They also picked ‘full suite of digital self-service treasury offerings’ as the likely top differentiator by 2026.

For instance, Santander Corporate Bank conceived Santander Global Connect, a solution that provides cash management transparency and control to customers, as well as the tools to manage their global cash resources from a single online portal.

As company operations get digitised, corporate customers will increasingly seek sophisticated digital cash management solutions from their banks. This will not only provide them complete visibility and control over the cash management value chain but also enable optimal management of cash and treasury.

Innovative business models

With platform-centric approaches becoming popular with corporate banks, there is an opportunity to disrupt the traditional business model where banks distribute only their own products and services. For example, ICICI Bank launched a comprehensive digital banking platform called InstaBIZ for its SME and self-employed customers to manage their business banking transactions securely and conveniently using online and mobile banking.

The survey indicates a 42% shift towards the platform business model between now and 2026. This will allow corporate banks to embrace the role of an aggregator offering both financial and non-financial products and services. By enabling access to complementary partner products such as insurance and joint products such as syndicated loans, banks can recommend contextual offerings built to suit the needs of the industry segments in which their corporate clients operate.

Embracing technologies – cloud, analytics, open APIs

Modern technologies are shaping new digital experiences across other segments and corporate customers expect similar experiences in their corporate banking engagements too. Banks understand the importance of these technologies in facilitating these experiences. For instance, 84% of respondents in the Corporate Banking Digital Innovation survey hailed open APIs either as essential or very important. The number was 85% for advanced analytics. Also, 83% of respondents identified cloud as a crucial technology for their banks.

At the same time, only about a tenth of the respondents said they have achieved significant success in the adoption of these technologies. With the growing focus on customer-centricity and increasing competition from fintech and challenger banks, however, banks certainly feel a greater sense of urgency to embrace technology effectively. Goldman Sachs, for example, took a cloud-based approach to disrupt their transaction banking. It allows the bank to deliver 99.99% uptime.

Fintech partnerships

Given the need to offer innovative services to maintain and expand market share, banks may find it necessary to partner with fintechs. According to the Corporate Banking Digital Innovation survey, while banks might want to hold their core products close, they are open to partner with fintechs in areas such as payments, cash management, and connectivity channel offerings.

While traditional banks acknowledge the importance of modern technologies, there is still a long way to go when it comes to adoption at scale and leveraging these technologies effectively. Yet, it is more crucial than ever for banks to adopt innovative business models and drive new digital strategies to realise their growth vision. Therefore, the time is right for corporate banks to identify and acknowledge the barriers to transformation and overcome them to build future-ready organisations.