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Digital corporate banking: understanding commercial contextual banking (part one)

Digital corporate banking: understanding commercial contextual banking (part one)

The last couple of years have demonstrated how reliant we are on digital services – whether it’s ordering groceries or managing our finances online. Today, more than ever, we rely on the ability to transact at our leisure from the convenience of our chosen device. We also want to view our relationship with a bank or vendor, on-demand, from a single screen. 


Financial institutions understood the benefits of digital for their retail customers early on and continue to invest heavily in these capabilities. On the other hand, the corporate banking sector has not embraced digital with the same fervor, even as demand is growing and client satisfaction is declining.


The 2021 Global Treasurer's Banking Transaction Survey reveals corporate clients’ satisfaction has dropped to the lowest recorded level in the survey’s history, with 80 percent being only moderately satisfied with the services offered by their principal banking partner. 


According to the survey, when corporate treasurers were asked to name services that could provide more value, three fifths (60 percent) of respondents identified a single view of their company’s bank balance in real-time. Harmonization of standards between banks remained important for half the respondents. Payments automation (47 percent), single dashboards (42 percent), corporate to bank integration (44 percent), customer experience (35 percent) and geographic coverage were also top concerns and had the highest priority for corporate treasurers.

Why is corporate banking a laggard when it comes to digital adoption?


First, corporate banking is primarily built on relationships – many of which are nurtured over years, via in-person meetings and interactions. Further, many processes remain paper-based, even requiring signatures obtained in person.


The pandemic, however, is changing this mindset faster than anyone could have imagined. Corporates and their banking partners have had no choice but to establish and build relationships remotely at a time when businesses needed unprecedented flexibility and support. The situation also exposed the stark digital chasm between personal and business banking experiences.


In addition, corporate banking services are complex in nature. Retail banking processes are linear (debits and credits) and services are highly productized (loans, savings and checking). In the corporate banking arena, a large corporation may have hundreds of accounts across multiple banks, currencies and geographies. Also, corporate banking processes are more complex, spanning trade finance, cash and liquidity management and FX, to name a few.


In addition, positions and portfolios require constant monitoring and management. For example, a corporate who is financing a sizable international construction project will look to its banking partners for a strategy to hedge exchange rates year-over-year. Corporates are looking for much more than just a provider of financial services – they are looking for a partner to help manage their business effectively.


Opportunities ahead


Corporate banks are staring at a digitalization opportunity that could be worth over a trillion dollars. The prospects are ‘digital natives’ who will become financially active by 2025. This approach clearly suggests – adopting a contextual banking practice is an imperative and not an option in a digital economy. 


Indeed, as various industries adopt technology ‘as’ their business, rather than ‘in’ their business, the combination of smart devices, rapidly-evolving customer experience capabilities and real-time processing of big data, means new opportunities arise for banks to meet customers’ needs on a highly-personalized and dynamic basis.


Expectations are changing and banks that quickly pivot to digital stand to deliver three essential and profitable benefits to their corporate clients:


  • A contextualized, enriched customer experience that leverages digital to augment critical personal relationships – delivering the best of both worlds.


  • New levels of capital clarity and agility. Digital technologies allow banks to provide actionable insights, such as a global view of all positions, the impact of FX movements, and regulatory changes. When managed actively and effectively, these can have a positive effect on a corporate’s bottom line.


  • Greater operational efficiency through automated processes such as reconciliation, trade processing, account opening and management.


By adopting contextual banking with the help of new technologies (such as Artificial Intelligence and Machine Learning), banks can leverage vast amounts of data by breaking silos to generate detailed insights and drive digital transformation. In the next blog in this series, we look at commercial contextual banking in action.

Disclaimer: The statements and opinions expressed in this article are those of the author(s) and do not necessarily reflect the positions of Thoughtworks.

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