Many banks now recognise that to remain competitive – in both the retail and corporate banking sectors – they must become integral to every part of their clients’ lives. The march stolen by some non-banks in retail banking has served as a warning for corporate banks; the traditional transaction banking model is under serious review.
While every bank wants to be corporate-centric, not all are in the same position to embrace the change they need to, Michel Jacobs, head of global sales, digital and payments at iGTB told Club@Sibos.
“If a transactional bank is not aiming to become an integral part of the corporate supply chain, to be able to truly optimise and maximise the use of capital, efficiency and processing on behalf of the corporate and use context to truly understand what to do… they will have a hard time.”
Like the retail banking world, corporate banking is rife with competitors, including fintechs such as money transfer company Transferwise, which recently reported its second profitable year in a row. The London-based company reported an annual post-tax net profit of £6.2 million for the fiscal year ending March 2018. Annual revenue nearly doubled to £117 million during the period, from £66 million the previous year. The company said USD3.9 billion worth of transactions is moved around each month by its more than 4 million users.
The principle of contextual banking, said Jacobs, is to focus less on the transaction and more on the interaction, understanding what a corporate wants to do and using machine learning (ML) to understand why. Once a bank understands the what and why of a transaction , it can maximise and optimise the execution, leading to better advisory services for corporates who can then make better decisions about their use of capital, for example. Such a focus will also enable banks to help their corporate customers leverage new capabilities such as real-time services.
“Banks can use the context of a transaction to truly understand what to do. If they don’t aim for this, they will have a hard time because there are many competitors going after the payment market,” he said.
For Diane Reyes, head of global liquidity and cash management at HSBC, customer centricity is all about fair outcomes for customers. “First and foremost we have to listen to what it is they are telling us and actually solve the problems they have. So we have to have some empathy in that regard.”
Lisa Vasic, head of transaction banking, Australia and Papua New Guinea at ANZ, told Club@Sibos that customer centricity required an understanding of what customers are trying to achieve in terms of the outcome of their business and how banking can help in the delivery of that. “Customers don’t want to distinguish between types of products and how they fulfil an internal process,” she said. “Banks must understand clients are looking for an experience that is easy, transparent and provides value.”
A challenge for banks, however, is that value-added services have grown organically, creating complex infrastructures and mechanisms through which capabilities are delivered. Centricity should be focused on simplicity, delivering services to clients in a way to make their lives easier. Digital technology plays a big role here, said Vasic, as does the recognition that banking is part of a broader community.
This was evidenced in the launch of the Trade Information Network at Sibos. Shortly before Sibos, ANZ, Banco Santander, BNP Paribas, Citi, Deutsche Bank, HSBC and Standard Chartered announced a joint initiative to build the digital Trade Information Network by the end of 2018. Once operational, it will become the first inclusive global multi-bank, multi-corporate network in trade finance.
The Network aims to address the unmet demand for financing earlier in the supply chain by enabling corporates to communicate trade information easily and securely directly with banks of their choice. In addition to the founding banks, more than 20 additional banks from around the world are participating in developing the Network and several corporates have expressed an interest in participating in pilots.
The Network has open architecture and standardised connectivity based on a governance model similar to Swift to achieve maximum adoption across the supply chain ecosystem. Corporates will use a simple one-time registration process which will allow them to connect with all banks on the Network.
“Centricity is about how we look to the future and understand how customers are thinking and also the problems fintechs are solving and what opportunities working with them provides,” said Vasic.
If a transaction bank is not totally focused on its client, “it shouldn’t be in business”, said Rosalie Fink, global head of FI product management at Bank of America Merrill Lynch. Customer centricity begins when products are designed, with a focus on making it easy for corporates to do business with the bank. A corporate client’s main business is not banking, nor making payments, she points out. “We service a lot of different clients – from consumer-focused organisations to large corporates. We have to find the right solution for each of them,” she said. Such a service must be straightforward – clients should not have to “go all over the organisation” to find answers.
HSBC’s Reyes identifies four ways banks can stay relevant to their corporate clients: training and education, internal development, partnering, and customer centricity. A digital leaders’ programme at the bank helps to train and educate staff, with leaders within different bank departments taught about agile methodology and user experience design. Reyes said this helped staff to understand how the IT and product managers worked.
Like an increasing number of financial institutions, HSBC also sources applications from within its own teams for use in its internal applications. One of Reyes’ staff members developed robotic software that pre-loads customer information. This demonstrated to clients that the bank is focused on efficiency and can utilise AI and ML.
Banks are going through the same digital transformation as their customers, Mark Evans, managing director, transaction banking at ANZ, told Club@Sibos and must anticipate what their customers’ needs will be in the future. “It’s easy to get distracted with the latest digital technologies and start experimenting with them for their own sake. At ANZ, we’re mindful that we need to solve real-world problems of our customers, and with our distributed ledger trials, for example, we made sure we were testing something that is useful before we develop it further.”
“Some of our customers, in our home markets of Australia and New Zealand and across our international footprint, are doing business in remote areas. Digital technologies are enabling financial inclusion, by transforming how people connect and do business, and connecting new groups of people into the economy. For example, it’s now easier to set up an ecommerce venture, to connect to payment systems, and to access finance.”
Evans points out that the future isn’t just about digital technologies – it’s also about people. “Even with artificial intelligence or machine learning, the development starts with humans; from the outset you have to have the right people with the right intent asking the right questions.”
This is a point iGTB’s Jacobs also makes: “How we transform within the banking industry includes people and processes.”