A better understanding of the needs of corporate customers is becoming “a crucial competitive advantage” for corporate banks, according to a new report commissioned by Misys and researched and written by Aite Group. But banks are “ill-prepared” to face the challenge of a customer-centric strategy. Fintech start-ups “have emerged to fill this void”, the report says, because they can “deliver beter transaction efficiencies”. But the result is “even more heterogeneous architecture and scattered data”.

The report, Killer fintech use cases for corporate banking: Problems waiting for solutions, says that banks must not pursue “more niche solutions for different parts of the corporate client problem”. Rather, banks must:

  • focus on cross-border business integration, allied with best-of-breed technology to meet cost objectives and respond to changing customer service demands;
  • deliver a harmonised technology platform for the management of corporate liquidity, risk, funding and trade finance, or risk becoming “transactional engines”;
  • work with vendors to deliver a connected corporate banking experience.

Banks are now partnering and collaborating with fintechs while fintechs are abandoning the argument that they could add value by removing banks from the equation.

Corporates, meanwhile, want to be innovative in their own sector but adopt a more “wait-and-see attitude” towards fintech innovation.

“The added value of corporate transaction banking is not so much in always creating new product structures but rather in understanding how the product structures can be best offered and configured to the conditions of corporate clients’ supply chains,” says the report.

Corporate silos get in the way

At the same time, however, “contrary to a general market consensus that banks are fundamentally perceived to be falling short when it comes to knowing what their customers want, Aite Group’s conclusion is that corporate behaviour contributes to creating a line of separation.” It explains that internal silos with lines of business such as sales, procurement, logistics, treasury and IT – all with conflicting goals – “make it extremely challenging for a bank to provide holistic solutions”.

What corporations want, the report says, is:

  • operational efficiency
  • increased efficiency in trade and working capital finance
  • more real-time cash, liquidity, and payment management capabilities
  • Ready access to credit and better visualisation of corporate assets
  • Minimised financial and operational risks

Expanding on the second of those, the report says that corporate treasurers want total oversight of working capital management and financial supply chain management. Treasurers, therefore, need to develop “a comprehensive payment strategy”. “Ensuring supplier financial stability and multi-tier engagement, rather than just immediate first tier supplier engagement, calls for sourcing and working capital management strategies (including supply chain finance and accounts payable) that can be best supported by more integrated financial supply chain management solutions from banking partners or marketplace solutions,” it says.

Banks need to think about the impact of digitisation in trade, in terms of dematerialisation and also data- and information-enabled supply chains, new networks and sources of information.

Banks, therefore, need to “take the leap” from documentary trade processing and disparate platforms for supply chain financing to “an integrated platform that delivers paperless trade capabilities, the full breadth of supply chain finance from pre- to post-shipment, and a robust platform to continue to automate the process.”

“A platform of platforms”

It adds that the trade platforms of tomorrow should be able to analyse and make financial assumptions “to inform credit and risk decisions in near-real time, leveraging new trigger points and realising huge efficiency gains in trade and supply chain finance.”

With the emergence of distributed ledger technologies, it’s possible that “these trigger points could execute smart contracts to deliver unprecedented automation in powerful new trust networks.” That would help to manage, track and secure trade transactions, connecting all parties involved.

A bold vision, described as “a platform of platforms”, could be developed by a bank, a consortium or a bank-agnostic platform. It could offer a single web services layer and a functionality-rich portal “to aggregate information from multiple banks, non-bank financing solutions, marketplace lenders, ,e-document platforms, watch lists, regulators, and other third-party data providers. In this model, corporate subscribers would only need to provide their information once, making it available to all authorised parties.”

Such a portal could also provide, for example, social media information to help drive credit decisions as well as benchmark information.