In my first blog in this two-part series, I shared a key finding of The Global Treasurer’s Transaction Banking Survey (GTNews survey) for 2019—declining corporate client satisfaction. In that blog, I covered possible drivers behind this four-year decline, along with how corporate banks can respond. In this second blog, I explore the technology aspects of the corporate client-banking relationship, as well as how that relationship is evolving, alongside open banking.
In 2019, as in 2018, the number one technical priority raised by corporate clients is benefitting from new technologies, including blockchain. Corporate clients want their banks to use their scale, size and reach to deliver the benefits of these new technologies to the corporate treasurer. Closely following this priority is enhancing working capital management, along with meeting new and upcoming regulations.
As we expected, when it comes to technology, several emerging technology areas are just as important, and possibly even more important, than blockchain. Some of these include robotic process automation, intelligent automation, and even advanced or predictive analytics. All of these technologies, when properly applied, enable corporate banks to deliver more accurate, useful and timely information, helping corporate treasurers run their businesses more effectively. As we know from previous surveys, these technologies have been on the wish list of corporate clients for a number of years. The trend now seems to have moved from being about technology (what is it?) to being about the deliverables (how can I use it?).
Corporate clients also were quick to point out in the survey that they realize there is a fine balancing act between cost and benefit. Cost is very important to them, but they also realize the importance of value, as corporate banking is very much a “you get what you pay for” type of market.
The research, as in previous years, also peeks into where corporate banks are investing and where they believe they can add the most value to their corporate clients. It is interesting to see how well aligned they are to corporate client demands. The top two areas where corporate banks believe they can create competitive differentiation are acting as a long-term partner and investing in continually improving their products and services (both at 88%). Ultimately, they are focusing on providing best-in-class products and services, as well as rolling out more digital servicing to deliver a more instant—and comprehensive—customer experience.
When questioned in more detail, one of our large banking clients shared that its goal is to understand individual client needs better, so that it can provide more customized services to meet their requirements, even in some cases developing custom solutions. This is an interesting development and demonstrates the flexibility built into modern systems, which enables corporate banks to adjust standard products through parameter changes rather than wholesale development. In the days of legacy systems, this would have cost millions and taken years to bring to market.
It does seem that corporate banks are finally aligning themselves to the needs of their clients. For many years, we saw corporate banks investing in several areas that simply did not align with corporate client needs. This change is great news for both the banks and their clients because it means the industry can create some real traction in moving clients closer to achieving their business goals—and reverse the trend of declining satisfaction.
Another key topic is open banking, which has been operating in several markets in retail banking but has not yet gained much traction in the corporate banking world. Part of the reason for this is that everyone understands the needs of the retail customer, as we are all retail customers ourselves, but few FinTechs understand corporate client needs or even how to access corporate clients. So new partnerships are developing where leading corporate banks are working with FinTechs to help them understand both the complex needs of the corporate treasurer and the regulatory minefield that applies to this market, while also providing valuable access to the corporate customer.
Open banking also has been slower to take off in corporate banking because, while regulation mandates it in a number of retail banking markets, there is no regulatory mandate for corporate banking—anywhere. Therefore, many corporate banks have rightly adopted a “wait and see” strategy to assess whether open banking can provide them any meaningful value. However, this is not the case for all banks. Some market-leading players are already working closely with selected FinTechs to build partnerships that deliver innovative new products, services and concepts.
As open banking in the corporate banking world takes off, it will be interesting to see if the solutions that come out of the non-mandated markets actually go further than they do in the mandated markets. It is quite likely that the non-mandated markets will have better success, as well as more innovative approaches, because banks will invest in development based on the business case rather than to simply comply with regulation.
Going further, open banking in the corporate world will drive real benefits from the use of open APIs. APIs have been around for a long time, but in the corporate banking world, much of the corporate integration still takes place through batch files. As these disappear and deeper integration and automation takes place through APIs, the benefits delivered to corporate clients will increase significantly, enabling the delivery of real-time information and true integration of services into treasury management systems.
Finally, the survey looked at the more general use of technology by corporate banks to deliver in real time. We see the move to real time particularly in the payments world, as more banks transition to instant payments; however, this is just the first step. Corporate treasurers have been demanding access to timely information for many years, and technology is now enabling this.
In summary, while the bad news is that corporate client satisfaction is at an all-time low, the good news is that, for the first time in many years, banks more closely align with their clients’ requirements. They are investing in the solutions, innovation and services their corporate clients want and, as a result, the majority of corporate clients are sticking with their main bankers and not outsourcing services to third parties—at least for now. Overall then, the picture looks good for corporate bankers. However, to improve corporate client satisfaction levels, they are going to have to act fast and deliver on their promises.
I invite you to download a free copy of the The Global Treasurer’s Transaction Banking Survey. In addition, CGI is working with corporate banks across the globe to develop and executive digital strategies and solutions to meet the growing and changing demands of corporate clients. Please feel free to contact me with any questions about our research and experiences, as well as how we might help your business.