Many financial sector businesses are looking to make the transition to digital banking. However, they should look carefully at which banks are best placed to serve their needs.
Having migrated to digital banking in their personal lives, people in charge of banking arrangements within businesses such as asset management groups see no reason why they should not enjoy the same transition in their corporate lives. They would like to do digital corporate banking, but with no loss of the customised service that many companies require.
Yet the transition to digital banking, whether driven by longer-established players or challengers, is taking longer in the corporate space. There are fewer equivalents of the ‘challenger’ retail bank in the corporate space. In fairness to the providers, we should acknowledge that corporate banking is far more complex than retail banking, for a variety of reasons, including the onboarding requirements, size of the transactions, the number of functions and different currencies and countries that may be involved.
For a long time, corporate banking has been seen, rightly or wrongly, as driven by personal relationships. This is often part of a higher-cost model. Some clients may fear change, worried that a digital transition would inevitably result in a loss of customisability, and so have been willing to bear the additional cost.
They have also had a poor overall banking experience, such as taking between 3 to 4 months to onboard corporate banking customers and open the bank account. Many report they have undergone a poor Know Your Client (KYC) experience, for example, repeatedly being asked to provide information they have already given, which can be frustrating and time consuming.
The pressure is mounting from at least some clients to make digital banking available, at least as an option. For traditional banks, the main issue standing in the way of progress is outdated legacy technology. This is just not a matter of a simple update. Layer upon layer of legacy technology, spanning across numerous functions and business lines is entangled, and has needed buy-in from a multitude of stakeholders.
To be clear, the process of migration is demanding and banks often need to wholly rethink certain parts of their operations. It may involve extra investment at a time when many are looking to cut back and, for some of the bigger banks, the investment may seem prohibitive – even if the investment would pay off in the long term. Financial businesses should therefore consider how smaller, more nimble providers could best meet their banking needs.
A truly digital corporate bank is not just one that replicates existing processes and transfers them online. It needs to think about its clients’ core objectives, how their products and services can provide seamless value end-to-end, in an integrated client-centric manner.
It is now more widely accepted that relationship banking and digital banking are not mutually exclusive. To give the best banking experience, a digital bank needs to offer everything from a fast and seamless onboarding process to straight-through processing, analytics to optimise cash management structures and liquidity, and tools to assist working capital management and employer services.
At Apex Group, through our subsidiary European Depositary Bank, we have been one of the first movers in these areas. We aim to provide an agile and responsive service across the value chain for our corporate clients. For example, we have built a leading digital onboarding platform that is paperless, successfully manages and collects KYC data and will onboard corporate clients within five days of receiving documentation. The platform provides multi-currency payments and FX solutions, multifactor authentication as part of enhances security measures, and fully integrated digital reporting and statements as well as automated Money Market Sweeps.
With bigger banks, sometimes the fact that they do not have the right technology is only part of the problem. They can also have an organisational structure and culture that is deeply embedded and without sufficient incentive to change.
Our offering continually evolves based on client needs. Our approach and success demonstrate the advantage that smaller firms can deliver in meeting the growing expectations in corporate banking, by responding to clients in a far more dynamic manner.