Corporate Banking Should Focus On Five Digital Innovation Initiatives
Leaders at institutional banks are more than ever required to execute on their digital innovation agenda, with digital transformation reshaping how corporate banks service their clients and operate internally. Cedar Management Consulting has identified five digital innovation initiatives to help businesses acquire a competitive advantage.
1):- APIs for business-to-business transactions that are open to the public
Many banks have constructed monolithic transaction banking systems and proprietary Host-2-Host adapters with their corporate customers throughout the years. API-based B2B services are now taking their place. This is not only speedier but also significantly more cost-effective.
More than 60% of banking executives who responded to a recent study said they invested in B2B API solutions.
In the areas of payment processing, payments, invoice verification, and working capital finance, B2B APIs have a compelling business rationale. Regulators are rolling out the platforms worldwide, and unified payment systems in India, for example, are allowing banks to take advantage of API platforms even more. Once a bank has transitioned to a B2B API platform, it may deem the H2H proprietary platforms too expensive and burdensome to continue using.
2):- Create a segmented onboarding strategy.
Corporate banks have typically pursued relationship management and branch/service-based relationship opening. However, it’s time to go outside the box and create a digital onboarding solution.
Banks should work with local chambers of commerce and company registrars to establish a solution for small and medium-sized businesses that includes cutting-edge authentication tools. Consider “Click and Sign” as an example of a new concept (as already approved by the European Union).
For credit appraisal data, Moody’s is being incorporated. The goal here should be to create relationships and provide bespoke solutions, with onboarding tooling as a bonus.
3):- Create a digital bank for small and medium-sized businesses.
The SME sector is a critical business segment for corporate banks, accounting for 80-85 percent of their clientele. Onboarding, accounting, salary processing, payments, and certain essential trading services are part of the digital SME banking package.
4):- Blockchain and smart contracts can be used to digitize.
The trade financing industry is being shattered. However, distributed ledgers and blockchain are here to stay. Documentation secured delivery and contracting in the industry, which is resolved using a consortium-based strategy.
Invest with caution; adoption must be assessed to avoid the danger of investing in technology that yields no demonstrable benefits. Know your clientele, the market conditions, and the preparedness of your counterparty to deal.
5):- Increasing the supply chain finance portfolio’s size
Supply chain finance programs are expected to account for up to 10% of corporate banks’ revenue stream. These unique lines of business are fascinating, and they assist banks in spreading risk throughout their SME customer portfolios.
Many of these items may only require a modest amount of relationship management or operational contact to be offered. As a result, corporate banks could benefit significantly from collaborating with a supply chain finance platform within the ecosystem.
Low-risk, high-reward offerings include distributor and buyer financing. Codix, HPD Lendscape, Neurosoft, Premium Technology, Aranova, and Demica, to mention a few, offer a variety of platforms. Banks can use this system on-premises or in the cloud.