Five digital innovation priorities for corporate banking

28 February 2022 3 min. read

With digital transformation redesigning how corporate banks serve their clients and operate internally, leaders at institutional banks are more than ever expected to deliver on their digital innovation agenda. Subject matter experts at Cedar Management Consulting outline five digital innovation priorities that can help gain a competitive edge.

Open B2B APIs

Many banks over the years have built monolithic transaction banking systems and proprietary Host-2-Host adapters with their corporate customers. These are now giving way to API-based B2B services. This is not only faster but much more economical.

In a recent survey of banking executives, more than 60% of the respondents indicated they investing in B2B API solutions.

Five digital innovation priorities for corporate banking

There is a clear business case for the B2B APIs in the areas of cash management, payments, invoice reconciliation, and working capital financing. The platforms being rolled out globally by regulators and, for example, unified payment systems in India are enabling banks to further leverage API platforms. Once moved onto a B2B API platform, a bank may consider how expensive and cumbersome H2H proprietary platforms may be retired in a phased manner.

Build smart onboarding by segment

Corporate banks have traditionally followed a relationship management and branch/service centre-based opening of relationship. The time has come to innovate across segments and build a digital onboarding solution.

Banks should look to develop a solution for self-service onboarding for small and medium size corporates in partnership with local chambers of commerce and registrars of companies along with start-of-the-art authentication solutions. Consider innovations such as “Click and Sign” (as already approved by the European Union).

Develop assisted onboarding for medium and large corporate and institutional clients, allowing relationship managers to have tablet-based apps with information services such as Moody’s being integrated for credit appraisal information. The objective here should be to make relationship managers invest most time in relationship building and offering customised solutions, and let tooling do the onboarding.

Develop a digital SME bank

The SME sector is an important business segment for corporate banks with 80-85% of clients falling within this segment for commercial banks. Financial institutions should strongly consider offering a digital SME banking solution, whereby onboarding, account services, salary processing, payments and certain basic trade services are offered through a digital platform well supported by virtual relationship managers and robot employees.

Digitise through blockchain and smart contracts

The trade finance business is being disrupted. Blockchain and distributed ledgers are here to stay. Documentation secured delivery and contracting were material pain points in the industry which are resolved through a consortium-based approach.

Invest carefully, adoption needs to be measured to avoid the pitfall of investing in technology without measurable returns. Know your clients, understand the market realities and counter party readiness to transact.

Grow the supply chain finance portfolio

Up to 10% of the revenue pool of corporate banks will be based on supply chain finance products such as factoring, supplier finance, receivables finance and buyer-led programmes. These niche lines of businesses are very interesting and help banks in distributing risk across the SME customer portfolio.

Many of these products may be offered via a platform with limited relationship management or operational interaction. Partnering with a supply chain finance platform, within an ecosystem could be very rewarding for corporate banks as it brings in digitally originated and highly scalable business.

Products such as distributor financing and buyer financing are low risk, high income products. There are multiple platforms available from suppliers such as Codix, HPD Lendscape, Neurosoft, Premium Technology, Aranova and Demica to name a select few. Banks also have the option to put this solution on cloud or on premise.