The digital transformation across any number of verticals — from retail to healthcare — has fostered a consumer mindset that demands deep engagement, speed and convenience.
And while the headlines may focus on the battle for the individual consumer’s share of wallet, banks are facing an increasingly competitive environment when it comes to getting — and, of course, keeping — corporate clients.
In a Masterclass conducted by Karen Webster, Norm DeLuca, managing director of banking solutions at Bottomline Technologies, said banks must put corporate clients at the center of their digital transformation roadmaps, helping those enterprises capitalize on the competitive advantage fostered by advanced technologies.
To get a sense of the changing needs and expectations of enterprises, said DeLuca, financial institutions (FIs) should recognize the significant influence that the consumer and retail markets have on corporate treasurers.
“They’re experiencing technology as consumers, and they’re bringing those same expectations into their roles and corporations regardless of the size and scale of the company,” DeLuca told Webster.
He said treasurers are interested in the prioritization of simplicity and usability over features, and integration and interoperability are top of mind.
The Rise Of Intelligent Engagement In Corporate Banking
As for an overarching theme toward what might be termed “intelligent engagement in banking,” DeLuca told Webster that “we call it a transition from systems of record to systems of engagement.”
And in that evolution, DeLuca explained, software has moved from systems that simply kept records or initiated transactions toward systems that deliver an enhanced, more engaging experience. FinTech firms like Bottomline have invested in user experience (UX), user interface (UI), usability and, of course, data management. Intelligent systems can learn about users, and can then integrate more sources of data and translate that data into actionable insights.
“We think of it as an intelligent system of prediction that can sit on top of systems of record that are expensive and time-consuming to replace,” DeLuca told Webster.
He added that corporate and consumer expectations are pushing banks and setting higher expectations for them. Although it’s still early in the evolution of such technologies as artificial intelligence (AI), noted DeLuca, “we see rapidly increasing interest and demand for data solutions, and for AI and machine learning applied to that data.”
And the corporates themselves? They might not care what the label attached to the technology is, but they do want their banks to know them better. Only about 30 percent of those corporate clients think banks are delivering on their promise to deliver more insights on a predictive basis, said DeLuca, so there’s a gap that FIs need to fill. And it’s a huge opportunity for FIs to fill, DeLuca suggested, considering that 90 percent of those same corporates want their bank to know them and their business.
The Competitive Landscape
There is added pressure on banks to embrace advanced technology, observed DeLuca, in a competitive landscape that is increasingly populated by FinTechs — although the dynamic is changing there, too.
The space has evolved to the point where the nuances and complexities of banking and FinTech relationships are more widely recognized, said DeLuca, and this fosters more collaboration. But it’s clear to many FinTechs that small- to medium-sized business (SMB) markets are relatively less well-served by banks.
“They’ve been identified for years by FinTechs and their investors as big priorities … and banks need to respond to that,” he noted.
There is an opportunity for FIs to cement their relationships with smaller corporates that are willing to pay for solutions that present a unified view of data to help firms forecast their cash and other operational needs, DeLuca said.
“We’re seeing a lot of demand for intelligent cash flow forecasting,” he remarked.
FIs are focused on digitization that promotes cost reduction and increased efficiency — for both the banks and their corporate clients.
At the same time, those companies are showing an inclination to switch providers if they are not getting what they need out of their banking relationships.
“It’s demographically driven,” said DeLuca of firms’ willingness to change financial services providers.
“Younger generations have higher expectations that the decisions are all [or more] digital technology-based,” maintained DeLuca. “If that bank doesn’t have a compelling digital offering, they’re much more likely to move, even though it’s still hard and a pain. So, it’s not an instantaneous kind of binary change, but it’s definitely evolving more rapidly, and we do see [smaller] banks being disadvantaged … against the larger banks in the commercial markets.”
The Use Cases
The core offerings to corporates across a platform such as Bottomline’s are centered on payments and cash management functions, which of course are essential for any business.
“These are the core needs of the buyers in corporations and businesses when they start thinking about their banking relationships,” explained DeLuca.
With a nod toward payments, he said they are increasingly becoming “automatic background events” that are part of broader background experiences and value propositions from banks.
He also noted that the digitization of payments has been slowed a bit by a stubborn adherence to the paper check. That’s especially true of smaller businesses, where managers may be hesitant to change entrenched payables processes or take on the burden of collecting the additional data required to accompany electronic payments.
To coax that change toward digital payments, DeLuca said, context is key.
“We’ve focused on conversational payments and the exchange of messages and information to try to deepen the use case for moving to real-time payments,” he said. “It’s not just about the ability to initiate and execute a payment in real time. It’s about what you can gain more broadly through the conversation and the exchange of information that goes with the payment, which then deepens your insight into the customer and your engagement with that customer.”
The conversation turned to the regulatory landscape across the pond and on the continent.
DeLuca noted that the emergence and embrace of faster payments offers some indications of what might be in store for banking here in the U.S.
Europe has seen an explicit regulatory scheme take root, with changes intended to promote more competition with banks, and to offer more choices for consumers and, ultimately, businesses. Within the regulatory scheme, DeLuca added, there is essentially the transfer of primary data ownership from the bank to consumer. That shift is moving slowly amid complex infrastructure, as many providers do not (yet) offer integrated solutions.
We might not see a far-reaching regulatory framework in the U.S. on faster payments, but in North America, said DeLuca, the underlying trends and drivers are the same as they are across the globe — namely, there is a drive for openness and less friction in payments.
Said DeLuca: “We try to advise banks to think in the U.S. as if they were operating in the U.K. and Western Europe because it would really help them to hone the right kind of skills that they need to be more competitive.”
And to get there, he added, banks need to refine their business models to become more open to collaboration or third-party partnerships — a boon to smaller FIs that are relatively resource-constrained compared to their larger brethren.
As for what banks can do to conquer the challenges and embrace the opportunities that lie before them, DeLuca said: “Be bolder and move faster … most of the time, banks underestimate the potential for change and overestimate the risks of change. Regulation and compliance might be burdens, but they can’t be excuses.”