The IDC Global Corporate Treasury Survey 2019 conducted by IDC in partnership with Finastra provides a unique snapshot of corporate treasurers’ current and future priorities. Looking across the findings, one of the most striking is that 47 percent of the respondents can see opportunities for banks to enhance their offerings and deliver more innovative solutions.
Banks need to respond to such demands or face the risk of losing relevance to this key customer group. So, what trends does the study reveal around treasurers’ evolving priorities, and their resulting expectations of their banking providers?
Access to funding tops treasurers’ list of priorities…
First, their priorities. In today’s environment, our study shows that treasurers put access to funding top by a wide margin and go on to voice concerns about banks’ complex KYC processes, strict policies and extensive documentation requirements. Also coming increasingly onto the radar is access to alternative sources of funding and trading opportunities, such as bond trading.
The second priority area is around risk management particularly managing counterparty risks, making better use of advanced analytics and automating more processes.
Treasurers’ third set of priorities is around productivity and usability, reflecting their drive to empower staff to do more with what they have. The focus here is getting more proactive alerts, insights and notifications. Also - maybe surprisingly mobile enablement remains a big priority for many corporates, even as we head into 2020.
…but it’s set to change significantly by 2022
If those are today’s priorities, what about tomorrow’s? Here our study suggests that the next three years will see rapid diversification: while funding may be number one now, going forward we’ll see access to real-time data and real-time payments jump to the top of the list, with liquidity management also rising in importance.
These shifts underline how open banking and real-time data and payments are transforming the way treasurers think about their business.
To future-proof themselves, banks face a crucial choice
Together, all these findings point to a need for banks to take positive action if they’re to future-proof their business and stay relevant.
The first step is to decide which of three principal directions they want to go in. The options are, firstly, to be a transactional-based product provider. Secondly, to evolve from that role to become a relationship-builder, nurturing client relationships through front-to-back digitalisation and self-service. And the third option is to become a platform player.
What do we mean by Platform Player? Not “just” a technology platform, although technology is a key enabler. Instead, operating as a platform involves offering “X-as-a-service” - whether it’s treasury-as-a-service to corporates, receivables-as-a-service to wider commercial customers, or something else. Whatever services they’re offering, the banks choosing this route leverage their back-office capabilities and economies of scale to deliver them.
The choice between these three options is fundamental to any bank’s future direction. And once the decision is made, it needs to build its own roadmap to get there, and then work with vendors such as Finastra to put the key stepping-stones and technology building-blocks in place.
Entering the new age of relationship banking
These changes will transform the corporate banking landscape, and the drivers for them are coming from two directions. First, customers are demanding them: banks have become very good at providing products, but they need to get better at engaging with customers.
An area that’s getting really interesting is around building that relationship model. Banks must move away from pushing products and transactions, and towards becoming more of an adviser to treasury. This requires fundamentally new revenue models based on customers’ success rather than charging them for transactions.
These shifts are overlaid by the second driver for change: intensifying margin compression. As economies of scale become even more important, the big players will still be able to run a successful transaction-based business. But smaller players will have to come up with a differentiating factor - which could well be providing the best advice to their customers to help them achieve their targeted business outcomes.
The message is clear: we’re entering a new age of relationship banking. As our study underlines, building stronger customer relationships will be the “secret sauce” for many banks to compete with the platform players. In my next blog, I’ll look at the technologies they can use to do this.
To read our research findings in full, click here.