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The digitization trends reshaping corporate banking

As companies continue to embrace digital transformation, the role of their banks is changing. Digitization is gathering pace in transaction banking, but there’s still a long way to go. Even today, more than half of banks (57%) are classed as slow starters for digital transformation, according to Publicis Sapient’s 2022 Global Banking Benchmark Study.  
In this blog, we look at how corporate banking will change, the needs of corporate banking clients, and what banks can do to meet them. 

Legacy technology troubles aren’t going anywhere

It’s no secret that legacy technology holds banks back. The legacy systems that banks utilize today have been cobbled together over the years, resulting in a spaghetti architecture with many complex integrations.  

The preference for modernization, where new technology is bolted onto existing, outdated systems, only helps banks move so far forward. This approach is often seen as the safer route compared to wholesale change or transformation.   

In our report ‘How Corporate Banks Can Transform the Treasury’, 10x CEO Anthony Jenkins likens this approach to trying to modernize an old car, part by part. Instead of updating each component, banks should look at technology like upgrading to an electric vehicle. Something much simpler under the hood that gives banks what they need, and that's ready for the future. 

With 64% of corporate banks highlighting legacy technology and system integration challenges as their biggest obstacle when deploying new tech, more needs to be done to move away from legacy systems that carry increasing risk. 

Client demands are evolving

NTT found that corporates are three times more likely to choose to communicate via API than traditional methods like email or meetings. What does this mean? It’s more valuable for a corporate to call an API and retrieve the data they need than physically meet with their bank. The emphasis here is on insight and actionability. Corporates need easier, faster access to their financial data. 

“We are seeing demand for real-time access to banking through the use of APIs, giving our clients alternative options for connectivity,” says David Shinkins, Global Head of Cash Management Sales at Barclays Corporate Banking, in a recent interview with Burnmark. “This is to improve payment processing, more timely access to information, and better-informed decision-making. Ultimately, we want to give our clients connectivity options that suit their needs and business processes.” 

How banks and corporates use data is changing, and banks are expected to generate better insights for their clients, as David explains: “Gone are the days when banks will just issue a vanilla bank statement. Corporates will expect greater insights from the data they hold, both internally and externally.”  

At the same time, there’s growing demand from Corporate Treasurers for tools that give them greater flexibility, and a better view of their entire organization’s finances.    

“Virtual accounts provide clients with greater visibility and control of their account structures, giving them the ability to open or close accounts themselves in real-time,” says David. “They also allow clients to segregate their funds, allocate cash, and reconcile payments more effectively.”  

It’s faster and cheaper to open virtual accounts than physical ones. It's also much easier to align account structures with the organization, which is always changing. 

Platform ecosystems are coming

Capgemini says new-age disruptors who have already shaken up payments and retail banking are beginning to focus on corporate banking. To remain competitive, banks need to embrace real-time treasury management, cash-flow forecasting that delivers actionable insights, and better product management that enables relationship pricing.  

Real-time data also gives banks more visibility into client behaviors, enabling banks to offer tailored services to corporates at the point of need.  

“You can now see in real-time that customers are taking balances away from you for liquidity management purposes,” explains Antony, “Or because they can get a better FX rate somewhere else, which will enable you to intervene quite quickly.” 

Another trend is the introduction of platform business models and partnership-led ecosystems. While 68% of corporate banks describe themselves as universal players today, that number will drop to 43% over the next five years. By contrast, fewer than a third of corporate banks describe themselves as open platform players today, but that number is expected to grow to 72% by 2026.  

“We are strong believers of ecosystems,” says Adriana Pierelli, Managing Director of Global Client Management at BNY Mellon, featured in our corporate banking report. “We believe in open platforms, APIs, and having a modular approach that allows our customers to select the capabilities they need and want”. 

To adapt to this new world, where corporates use their banks in a new way, banks need to abandon the piecemeal approach to tech upgrades. The banking platforms of tomorrow are fully digital. They rely on an event-based architecture that enables real-time data streaming to give corporates fast access to all their data.  

At 10x, we believe that transformation begins at the core, and can be achieved faster, easier, and with less risk than you’d think.

Get in touch with the team to learn how we can support your transformation today or access our report on How Corporate Banks Can Transform the Treasury