The transformation of corporate banking is underway, and the relationship between banks and businesses looks very different in a digital-first world.
Change is driven by various factors, from tech maturity to new business needs. But it's much needed as legacy tech stacks creak and data teams grow while banks struggle to provide corporates with data and insights in a meaningful timeframe. This blog looks at the impact this has on relationship pricing and product management for banks and corporates.
The reality of relationship pricing
With data spread across disparate systems, pulling all transactional data together to determine interest, tariffs, fees, and charges across complex corporate structures is a real challenge. As a result, banks cannot accurately assess the entire client relationship.
"Banks never have the full picture," explains James Higgins, Director of Payments at 10x, "The technology they have in place doesn't allow them to stand behind the relationship pricing they put in place with any confidence."
This lack of visibility leads to inconsistent charges, which exposes banks to claims and refunds. And with no clear way of tracking activity or product usage, non-lending losses can be significant if clients hold large balances or if rates are incorrect.
With existing tech stacks, the only way to solve this issue today would be to throw people at the problem to analyze each relationship manually. Unfortunately, since this is operationally inefficient and expensive, banks tend to accept the cost of inaccurate fees and charges.
With a cloud-native platform like SuperCore™, corporate banks can move from batch processing across multiple systems to a single, real-time core platform. As a result, reporting becomes more accurate, much faster, and less manual. Plus, our no-code Bank Manager tool enables Relationship Directors to create interest and tariff incentives that benefit each client's unique operation, maximizing share of wallet.
Reacting to market conditions
"Like the rest of us, banks are struggling to predict the future," explains Graham Robinson, Head of Product and Engineering: Channels at 10x, "the challenge is that banks need to make product and pricing changes based on market conditions."
And while we face increased volatility, this is a problem for corporate banks, as it's operationally complex to update fees that are index-linked. "Banks need to respond quickly to market changes to gain first mover advantages and add value for their clients. Products will need to be updated frequently in-line with market shocks, corporate behavior, and competitor movements."
Banks need the platform and processes to adjust fees and rates quickly. Those that can update their entire product structure in minutes (rather than weeks) will stand out during periods of uncertainty.
Fix today, prepare for the future
To fast-track the product lifecycle and take the guesswork out of pricing, banks need to look at the root of the problem – legacy technology. Most banks have addressed the front-end part of their digital journey, but under the hood, an aging tech stack holds them back. Manual processes, data siloes, and layers of complexity/integration all stand in the way but can be dealt with collectively.
A cloud-native core banking platform holds the key to real-time data, providing
- A clear view of client liquidity
- A way to create interest and tariff incentives that maximize share of wallet
- A set of centralized, real-time tools that streamline treasury operations.
Rather than digitizing legacy processes, by rethinking entire products from the ground up with cloud-native technology, banks can deliver what their clients need today and build the foundations for the future.
For more on the transformation of corporate banking, read our report: How Corporate Banks can Transform the Treasury.