Other parts of this series:
The global corporate banking landscape is changing dramatically, with banks forced to rethink their business models to stay competitive. More and more often, banks are focusing on areas that match up with their capabilities, whether in retail, corporate or investment banking.
This is a departure from previous models, which lumped corporate clients into groups that suited the bank rather than the client. For example, small- to medium-sized enterprises (SMEs) might be placed in retail banking, with larger capitalization companies handled by other business lines, such as commercial and investment banking (CIB) for large or structured loans or M&A transactions. Other divisions might handle cash management, trade finance or leasing.
To put it bluntly, this is not what the client wants. Corporate clients do not seek cash management or trade financing as such; rather, they want solutions to cover their treasury needs—whether through loans or leasing—solutions to mitigate the risks of importing and exporting, or solutions to help find areas of profitable growth.
Newcomers, including challenger banks and fintechs, are starting to provide corporate clients with comprehensive views of their needs, and traditional banks need to react—and quickly. Cash management and trade financing are two businesses which have historically invested in technology. Moreover, they are “sticky” businesses that can serve as the basis for a long-term client relationship. Some banks are beginning to combine and converge these businesses, providing a window into the future of corporate banking overall.
In the digital era, corporate banking can be a solid foundation for growth, but banks need ways to differentiate themselves from competitors, possibly through the formation of consortia or through partnerships with external platforms. Some banks have created their own platforms for entrepreneurs, while others are teaming up with fintechs or software companies.
Banks also need to consider the impact of Open Banking on their corporate banking businesses. The first step in Open Banking is the ability to gather account information to provide the client with a full view of its multi-bank activity. More sophisticated aspects of Open Banking enable banks to provide a superior experience to the end client with insightful reporting, capturing growth through increased share of wallet and/or through gains in new clients.
In my next post, we will examine some of the technological aspects of the solutions-based approach to corporate banking.