A “profound, radical change” is underway in the banking market. So observed Jerry Norton, Head of Strategy for CGI’s financial services business, during a recent webinar presenting the results of CGI’s Corporate Banking Survey 2018. The survey, which was carried out in July/August, attracted responses from 140 corporate treasury and finance practitioners and 240 banking service providers operating across Western Europe, North America and Asia Pacific. The results show that the corporate banking market is in a period of turbulence and that in his perspective it can only increase.
Norton noted that the good news was that corporate satisfaction with banking partners had changed very little since the 2017 survey: 56% of respondents were highly satisfied, compared to 54% the previous year. However, the percentage of corporates which are reviewing their banking relationships had increased since the previous survey, with 56% of all companies – and 90% of mid-range companies – currently reviewing their banking partnerships.
Worse still, satisfaction with certain bank services was “plummeting”: 22% fewer corporates were satisfied with payments compared to 2017, while satisfaction with trade finance had dropped by 18%. He commented that while the banking industry was preoccupied with payments from a compliance point of view, “we’re not looking from the point of view of what the corporate might want, which is all about value add.” Likewise, he suggested that anticipated improvements in trade finance had yet to reach corporates – potentially creating a discrepancy between expectations and reality.
Norton categorised the results of the survey into what he described as four “transformation pillars”:
- Protect the bank
The survey found that only 19% of corporates are reviewing their bank relationships due to security concerns. However, KYC and the on-boarding process remained a pressing issue for corporates, with seamless on-boarding cited by 52% of respondents as an area where banks could improve.
He added that corporates want banks to add value by “horizon scanning” – in other words, by understanding and interpreting upcoming regulations, and helping corporates digest the implications. The survey results also suggested that banks underestimate the level of responsibility that corporates are willing to take on where security is concerned: 14% of corporate respondents said that corporates should be responsible for protection from cyberattacks, but only 2% of bank respondents said the same.
- Modernise the bank
Where access channels were concerned, only 1% of corporates are currently using APIs – but 13% selected this as their preferred option. Meanwhile, 29% of bank respondents said they intended to provide open APIs. The survey also revealed that 24% of treasurers prefer to use treasury workstations defined as an integrated set of functions provided by third parties, up from 7% two years ago.
Norton discussed the impact of ‘digital drag’, noting that banks’ existing infrastructures are holding back their ability to service corporate customers. As a result, the digital transformation in banking has yet to touch some of the interaction points with corporates. Meanwhile, although the perceived ‘fintech threat’ has subsided over the last couple of years, there is considerable demand for talent – and this makes it difficult for banks to address digital drag.
- Digitise the bank
While banks and corporates are “fairly synchronised” when it comes to the importance of data, there is scope to do more with that data. However, he also emphasised the need for more integration in the delivery of corporate banking products, adding that the information larger corporates receive from their ERP systems is sometimes “stale”.
Where customer experience is concerned, the survey found that only 28% of corporates rated their banks’ customer experience and digital services as good or very good. Norton pointed out that there was a clear discrepancy between banks and corporates in this area: 21% of corporates cited automated processes and functionality as a top three area of focus in digital banking, compared to only 6% of banks. He commented that while banks may be automating their own internal processes, this has yet to extend to external customer processes; corporates may not yet be seeing the benefits.
- Extend the bank
The survey found that the implementation challenges associated with PSD2 seemed to be subsiding – but at the same time, the number of corporates considering non-bank providers had increased by 23%.
Banks also cited a number of different areas of focus in their business strategies, including customer experience (54%), innovation (46%) and cost efficiency (31%). Norton said that while this could be seen as a lack of clarity, another explanation could be that in the current market, larger banks “have got to try everything in order to find the approach that actually will deliver, and to stop somebody else coming in and stealing business away from them.”
Taking advantage of Open Banking
Finally, Norton spoke about how corporates’ expectations of banking had been shaped by their experiences in consumer banking, and the reality that the same ease of use was not available in corporate banking services.
With corporates increasingly open to the opportunities of Open Banking, he noted that principles such as virtual accounts, single sign-ons and aggregation could apply “equally well to the corporate market as they do to the consumer market” – but that currently, these are easier to adopt in the consumer market.