The race for corporate banks to catch up with their retail peers

Corporate and transaction banks (CTBs) face the challenge of delivering services equivalent to those offered by their retail bank peers. Over the last few years, there has been a big drive to digitize the retail bank; and, of course, across Europe, all banks have had to make their data available to third parties that offer bank consumer services in response to PSD2 and open banking.

Corporates, particularly large corporates, have not experienced the benefits of this evolution in retail banking. However, individuals who work for corporates are retail bank customers at home and guess what? They notice the difference in the services they receive from retail banks versus the services CTBs deliver to their organizations, and they are dissatisfied. What can CTBs do about this? 

Digitization and declining corporate satisfaction challenges

Every year, CGI conducts two sets of important market research. The CGI Global Client Insights involves in-depth, face-to-face interviews with more than 1,550 client executives, including 200 banks, to gather perspectives on the trends affecting their enterprises, including business and IT priorities, budgets and investment plans. Second, working with Global Treasury News, CGI conducts an online survey of corporate treasurers and banks. Now with eight years of data, this survey assesses both bankers and corporate treasurers’ views on the state of the corporate-to-bank relationship. It digs deep into offered services, satisfaction levels and future trends.

Through the 2019 CGI Global Client Insights, we found that 89% of CTB executives report they have a digital strategy in place, but only 9% believe it is producing results enterprise-wide. In addition, based on Global Treasury News survey data,corporate treasurer satisfaction continues to significantly decline—a four-year trend. These challenges combined with increased competition from adjacent banks, mainly retail banking, lead to a bigger churn rate in the market, making it clear that CTBs have to act, and act fast.

However, addressing these challenges is not as easy as it sounds. Large corporates want more than just a set of first-class services covering functions like cash management, payments and trade finance delivered through a superior customer journey. They also want new innovative services (currently delivered by FinTechs and new market entrants), tight integration among their own systems and, most of all, valuable insights from data. Further, research for the last four years indicates that corporates increasingly want to access services through a single portal.

Challenges facing corporates and their impact on CTBs

In parallel, corporates are subject to the same challenges facing their banks, as they experience their own digital disruption. They need to migrate their own back-office solutions accordingly, inevitably deploying real-time, cloud functionality with more open APIs along the way. Their mind-set is changing. This is going to present CTBs with another challenge; how to deliver to this more sophisticated, technology-savvy customer base.

As corporates transform their own back offices, they will want to integrate banking services seamlessly into their own treasury management and ERP systems. This will pressure banks to offer core services like payments and data through APIs. Large corporates want integrated products and data—a way to see real-time liquidity and interest rate/foreign exchange positions across multiple currencies, and preferably across multiple banks and accounts. They also would like access to actual human beings via 24/7 chat or other online capabilities.

For small to medium enterprises (SMEs), the challenge is different. SMEs do not have the time, resources or capacity to run applications, protect and control their organizations, and drive value from transaction data. They want someone else to run their off-premise applications. They also want advice and automation.

For many SMEs and smaller businesses, mobility is key, with tablets and high-function phones the channels of choice, as many staff are constantly on the move and rarely in an office. CTBs have the opportunity to deliver new services for these customers, such as integrated employee expense systems or the ability to record and process receipts electronically, and, in turn, create new revenue streams.

To offer these new services, leading CTBs are beginning to work with FinTechs, which have become market innovators and creators of new service offerings, and, in some cases, other banks. Further, they are investing in platforms capable of easily deploying new API-driven services quickly, safely and securely for their customers. This is a new opportunity for CTBs—becoming the face and provider of services through a business platform or marketplace. While it is much easier for customers to buy services through as few suppliers as possible, the services need to be safe, secure, high value and world class.

Only by getting their architecture right can CTBs enable the speed to market that is required to stay relevant and survive this cosmic shift in the market. CGI has been working with a number of CTBs across the globe to help them with these challenges. For example, we already have built a solution, CGI Open Finance, to help CTBs deliver in the brave new world. If you would like to learn more about our work or have questions on how to solve your challenges, please reach out to me.