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Banks Need FinTech To Stay Competitive – And Secure

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There seems to be no shortage of action in the corporate banking space, whether it be scandals (like Royal Bank of Scotland’s Global Restructuring Group fiasco), cyberattacks (such as the $81 million stolen from the central bank of Bangladesh) or anomalies like Brexit impacting top financial institutions across the globe. So, what can corporates expect from their banks in 2017? PYMNTS explores some of the predictions industry players laid out for the year head.

 

FinTech Continues Its Disruption

In a recent interview with PYMNTS, Mike Galarza, founder and CEO of AP automation firm Entryless, touted 2016 as the year that corporates stopped relying on banks.

“As more businesses seek out financial services from their SaaS providers, banks will remain in use solely because they are the only ones legally able to store money for consumers and companies,” the executive said. “It’s not difficult to imagine removal of that arbitrary barrier.”

Traditional banks have continued their sloth-like pace in FinTech adoption, added Galarza, which has led corporates to seek innovative services from non-bank players.

“In the accounting industry, businesses already trust providers of Software-as-a-Service (SaaS) with their most valuable asset: data,” he said. “It makes sense that many would be open to doing the same thing with their money.”

 

But Banks Continue To Thrive

Despite this criticism of traditional banks’ pace of FinTech adoption, other analysts say FIs continue to dominate in the corporate banking space. A paper published by Boston Consulting Group (BCG) described today as a critical moment in banking history as players face pressure from alternative players and corporate clients that demand newer, better services.

Still, BCG found, corporate banking — especially across Western Europe — remains profitable, and their success was demonstrated across their customer bases, from small businesses to the largest corporations.

It’s difficult to determine the health of the corporate banking space across the world, however, with researchers finding varying degrees of success and failures depending on geographical market. One thing’s for certain: Corporate banks everywhere need to embrace technology.

“The time for this radical shift is now,” Boston Consulting Group declared. “Top players are already using digital approaches to boost corporate banking value creation and generate the profits needed to support far-reaching digital transformation, including next-generation corporate bank models, such as industry-specific ecosystems.”

 

Fraud Prevention Remains Paramount

The list of cyberattacks on banks from 2016 is long. In 2017, analysts say, corporate banking institutions need to keep cybersecurity top-of-mind when adopting new technologies to help them stay competitive.

Cybersecurity and Big Data firm ThetaRay released its own predictions for banking security in the new year, with CEO Mark Gazit forecasting several trends likely to impact corporate banking in particular. They include the proliferation of fraud rings, regulatory pressures increasing on banks and the need for banks to address the issue of de-risking under Anti-Money Laundering regulations.

“Cyberattacks will continue to threaten financial institutions in 2017,” Gazit wrote. “Because of these challenges, it seems that financial institutions will be busy focusing on little more than internal issues — compliance, security and the bottom line — leaving little room for new customer-facing initiatives that could improve the experience.”

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