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Corporate Banking Series, Part 1: Corporate Banking Landscape

Growth and profitability in the banking industry are increasingly tied to productivity metrics such as innovation, development cycle times and continuous technology investment. Digital transformation in the banking industry began in earnest more than a decade ago and reshaped retail banking by putting giving the customer more control over their accounts by providing features delivered on multiple digital channels; web browsers, smartphones, wearables and even conversational/chat channels.

This transformation is emphatically validated in the ongoing global Covid-19 pandemic situation where banks continue to serve their retail customers on digital channels with minimal face-to-face engagement at bank branches.  The trend is against bank branches with many slated to be re-purposed with technology orchestrating the customer engagement process.

These same banking customers also work for SMEs and Corporations and are now expecting much of the same banking capabilities to be provided to support business accounts. Corporate banking has traditionally been considered a “high touch” set of services provided by the banks to business customers.  Skepticism about the ROI on major technology investments has inhibited the deployment of technology in corporate banking, relative to that in retail banking business.  This is now shifting to blend digital capabilities alongside the in-person requirements still needed to support complete servicing for the business customer in the wake of a global pandemic that shifted so much business and social interaction to digital channels.

Solutions for corporate banking are changing very quickly as digitally nimble Fintech firms offer unique and novel point solutions such as real-time payments, supply chain financing and instant credit decisions. Furthermore, corporate entities are rapidly digitizing their ways-of-working and expect to engage with their banks accordingly. Banks that do not digitize rapidly will find themselves spiral in terms of market share, revenues and profits as nimble corporate banks capture new clients and re-investing their profits to continue innovating for new services.  

The risk of disintermediation between banks and their traditional corporate clients rises as innovative digital business banking solutions offered by Fintech firms offers options for corporate entities to manage their liquidity.

A key driver for Fintech firms who are aggressively courting corporate entities is that the segment remains attractive and solid revenue growth despite challenging margins.  This also holds for banks providing corporate banking services; it’s still an attractive segment and contributes significantly to a bank’s bottom line.  The need to keep up with the developments by undertaking front-to-back digital transformations to grow in tandem with the digital aspirations of their corporate customers.  

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