Started well, but banks need to follow

By Justin Silsbury, Senior Product Manager for Cash Management, Infosys Finacle

Justin Silsbury, Senior Product Manager for Cash Management, Infosys Finacle

First steps

Traditionally, businesses were so dependent on manual processes and physical interactions for banking transactions that banks even installed customer service representatives at their customers’ premises. It would take a pandemic to push tech-averse corporate banking to quickly digitize. Today, corporate banks and their customers are in a race for transformation and are increasing strategic investments to modernize their systems.

As a technology partner to several global corporate banks, Infosys Finacle wanted to understand key trends in corporate banking, including customer needs, focus on innovation, digital transformation maturity and emerging business models, in a post-pandemic context. Earlier this year, we collaborated with Red Hat and Strategic Treasurer to ask more than 100 corporate bankers around the world for their perspective on important developments in their business. The report, Moving Forward: Expanding Digital Adoption in Business Banking, highlights the adoption of technology as a primary theme, with overwhelming numbers of respondents acknowledging the need for digital transformation: when asked to rate the importance of various technologies to driving business outcomes wanted, 84% of respondents said open APIs were essential or very important. . Other digital technologies also received high marks: mobility (81%), advanced analytics (85%), cloud computing (83%), AI (83%) and RPA (66%).

However, there remains a significant gap between recognition and execution, which would then translate into successful business results. For example, despite their perceived importance, advanced analytics, open APIs, and cloud computing, only 10-12% of survey respondents still confirmed the desired results.

While corporate banks clearly need to accelerate the pace of digital adoption within their organizations, rising expectations from corporate customers will only mean they need to deliver better business results faster.

From our experience, we can say that businesses are looking for banking products and services based on real-time bases, for example, real-time cash management or real-time payments. Another critical requirement is getting real-time information to help them make better decisions. Businesses are also looking for simplicity and efficiency in their banking operations through automation, integrated offerings and seamless connectivity with their banks.

All of the above confirms that modern technologies will have a vital role to play, improving customer experience and, therefore, business results!

There is an opportunity; there is threat…

Companies are signaling an opportunity by voicing these expectations, but they are also taking steps that could create some problems for their banks, especially the digital laggards among them. For example, treasurers, who typically juggle a large number of banking relationships, are increasingly looking to streamline at least the major ones. They will eventually succeed, as technology-driven modernization allows them to consolidate their operations in fewer banks.

Companies, which are becoming more digitally mature, are also considering working with non-bank providers, such as fintech companies. These companies are at the forefront of innovation in areas such as cross-border payments and other cash management products, leveraging automation, AI and other technologies to enable treasurers to conduct these transactions entirely online. In addition to fintech companies, digital-only banks and other next-gen players are also scrambling to attract corporate customers.

…And there are also proven use cases

Faced with competitive pressure, incumbent merchant banks need to step up their efforts, investments and adoption of digital technology to retain their customers. The good news is that they can quickly take advantage of a number of established use cases, some of which are listed below.

Analytics for cash flow management: Accurately forecasting cash flow is a top priority for treasurers, and also one of their biggest challenges. This became even more difficult when the pandemic severely disrupted cash flow and rendered traditional forecasting models useless. Corporate treasurers are urgently looking for solutions with deep analytics capabilities that can process huge amounts of data (including external ones) in real time to provide accurate projections even in a volatile environment. Segment-driven information is also a key issue. Since business dynamics and cash flow vary from industry to industry – some companies have cyclical cash flows while others operate almost on a cash-and-carry basis – treasurers need of solutions with an understanding not only of their specific operations, as well as a deeper insight into cash management trends in their industry.

AI/ML for digital consulting: A big responsibility of the RMs was to advise the treasurers on how to manage their cash. For example, if the business account had funds that would not be needed for five days, the RM would suggest transferring it into a money market instrument to earn interest during that time. As a rule, this discussion took place on the other side of the table. But with tech-savvy millennials entering the workforce, businesses are demanding digital experiences and self-service capabilities, similar to those enjoyed by retail customers. Technologies, such as artificial intelligence and machine learning, are giving rise to digital advisory services, which automatically inform treasurers as soon as they log on about opportunities to optimize their liquidity. Corporate banks should leverage these technology-driven solutions to retain future customers.

API for seamless connectivity: Corporate customers waste a lot of time and effort logging into their multiple corporate banking provider portals separately. What treasurers want is to be able to connect to all banking portals by simply logging into their internal systems. Banks can meet this demand by leveraging APIs to seamlessly connect their systems to corporate ERP/TMS (Treasury Management Systems). In addition to facilitating connections, APIs also play an important role in enabling banks to adopt ecosystem-driven platform or business models, and thus offer non-financial third-party products. Through APIs, corporate banks can even grant customers preferential access to partner services. A good example here is ICICI Bank’s Connected Partner Portal which offers business tools like Zoho, Paybooks, etc. at a special price for all business banking customers.

Another hugely important technology in the context of platform-centric banking discussion is the cloud; with all digital transformations becoming cloud-based, corporate banks leveraging the cloud can co-create ecosystems, run marketplace platforms, and adopt innovative business models, such as banking as a service.

Channel solutions for anytime, anywhere transactions: Even channel solutions are important for enabling treasurers to perform actions on the go, self-service, on the device of their choice. Businesses also prefer an integrated value chain covering all transactions, from payments to trade finance, which enables integrated experiences across digital channels. Additionally, insights reports and dashboards can also be automated and made available on channel feeds.

Last but not least, banks may have multiple blockchain use cases to businesses, in areas such as cross-border payments, trade finance and identity management.

In summary…

Digital technologies have extended beyond retail banking to provide transformational opportunities for corporate banks. Thus, corporate banks that have been forced to digitalize to cope with conditions brought on by the pandemic, can leverage a multitude of use cases to improve business outcomes. This is also imperative to meet the expectations of their increasingly tech-savvy customers. As corporate banks have moved into digital adoption overdrive, they need to pick up the pace and leverage modern technologies to create strong propositions to continue to reset existing competitive advantages.