In my first article based on the Global Corporate Treasury Survey 2019, I explored why building customer relationships is becoming ever more pivotal to corporate banking business models. In this follow-up, I go on to examine the technologies and ecosystems that will characterise the new era of relationship banking.
The primacy of data
First, some context. The survey findings show that by 2022, corporate treasurers’ number one priority will be all about real-time data and real-time payments. Flip that over to the banking side, and it means data is king.
This raises significant challenges. Most banks today have both analog and digital data islands scattered around their internal landscape. To turn all that data into a value-creating asset - including running analytics, deriving better insights for relationship managers and exposing those insights to corporate customers - they’ll need to bring all that data together.
It follows that data management services will play an ever-increasing role, both in banks’ efforts to provide services that benefit their clients, and also in conversations aimed at deepening their customer relationships.
For banks to make the most of their data, what should their first steps be? I’ll start my answer by taking stock of where banks are today. Which is in quite a good place.
One of the clearest findings from the survey is that banks are the most trusted partners in the ecosystem. They’re also the parties that many treasury functions are turning to for help in navigating through the transformation now underway in the market.
This puts banks in a unique position. But what they mustn’t do is become stagnant and try to entrench that role. Fortunately, there’s little sign of that happening. Going around the recent Sibos in London, I saw many examples of incumbent banks collaborating with fintechs via APIs to drive automation and become more customer-centric.
Also represented at Sibos were some of the challenger banks that are shaking up the market. Whilst these new entrants have been typically playing in the retail space, there was a lot of talk about how the formerly highly-protected corporate banking market is now being targeted by neobanks.
A shifting landscape
All of this points to a new banking landscape taking shape - one characterised by cooperation with fintechs, new alliances and new approaches to doing business. From Finastra’s point of view, one of the most interesting aspects is that these dynamics also encompass vendors.
In what ways? Well, we at Finastra believe the future is not “single-vendor” - and we recognise that we need to open up, not just in terms of open banking but also open platform. That’s why we’re now rolling out technologies like our FusionFabric.cloud, which enables both banks and other fintechs to plug seamlessly into our core engines and business verticals. This opening up via our platform becomes their differentiation layer within their markets.
Mapping out the roads ahead
This openness epitomises the evolving landscape in which banks are choosing between the three business models I highlighted in my first article transactional-based product provider, relationship-builder or platform player. We’ve used the survey data on treasury functions’ priorities to create individual roadmaps for the adoption of each model.
The first option - the product provider - will emerge in the near-term and involve relatively incremental change. This is a role that’s not going to go away.
Adoption of the second model the relationship bank - will also manifest itself quite soon, because corporate customers are looking for advice that adds value, and smaller and niche players will increasingly move in to meet that need. So, we’ll see a lot more activity around customer-centric services and relationships, with fintechs playing an enabling role.
The third model - the platform player - is a fundamentally different value proposition based around everything-as-a-service. This model is further out because it requires hyper-automation driven by highly advanced analytics, and an intimate understanding of customers’ needs to design compelling self-service offerings. Cloud will be the vehicle to deliver all this to the customer, meaning fundamental modernisation of the technology stack will also be needed - which will take time.
The future of platforms
What does all this mean for the banking landscape? In my view, some neobanks will become corporate banking platform players, encouraged by the traction that instant-banking-as-a-service offerings have gained on the retail side. In time, we’ll see specialised players running highly-automated corporate banking platforms delivering propositions like treasury-as-a-service and analytics-as-a-service.
But I think the real value will emerge when you merge the IP of banking incumbents with the technology capabilities of a greenfield bank. So, watch this space.
To read the research findings in full, click here.