Just for a moment, imagine that you are a corporate treasurer, forced to find a new lead transaction banking provider because one of your incumbents is either getting out of the business, prefers to work with companies that are smaller/bigger/borrow more money or has closed down its operations in several countries where you do business. You have gone through the effort of creating a complex RFP and sent it to 3 or more banks and after an exhaustive search and extensive contract negotiations, you have made your decision and it's time to start the onboarding process. You are excited to move your banking activity to a new provider that has done such a masterful job of convincing you of their superior products and solutions, their investments in leading edge technology and their world-class customer service. And then reality hits….the onboarding process kicks into high gear. You understand that banks are facing increasing regulatory scrutiny in the areas of KYC and AML because even your current providers are looking for regular updates for compliance purposes. But you hope that the process has been streamlined since the last time you established a new primary transaction banking relationship. After filling out reams of paper documents, fielding multiple calls from different areas of the bank asking for the same information you have already provided, pinging your bank relationship manager for status updates on a weekly basis, and wondering out loud more than a few times…. "why did I choose this bank?"….the onboarding process is finally complete ((except for some of those more complicated host-to-host integration pieces) and it only took twelve weeks from start to finish.
As described in a recent Celent report titled Onboarding in Corporate Transaction Banking: Prioritizing Investments for Reducing Friction, transaction banking providers have lots of room for improvement when it comes to starting the relationship off on the right foot. Our thesis is that improving the onboarding process from a client-centric perspective should be one of the most important priorities for transaction banking. Whether establishing a new relationship or assisting a client in expanding an existing one, implementing transaction banking services in an efficient, timely, and transparent manner can be a key demonstration of a bank’s commitment to client-centric innovation.
Even with significant technology investments over the past decade by banks to improve components of the onboarding process, it is common to hear frustration on the part of corporate clients about its manual nature, the increase in the amount paperwork being requested by banks, the length of time it takes to be able to use the account or services, and the lack of visibility into the process. It's easy to blame the regulators but the bottom line is that most banks are investing in components of onboarding to check off the compliance box and in some cases, are actually adding friction to the onboarding experience for clients rather than removing it.
But there is hope. The current generation of KYC industry utilities, document management technology, business process management platforms, and digital channels presents an opportunity for banks to reduce friction in customer onboarding. The fundamental question is with so many opportunities for improvement, how should banks prioritize? Well, let's get back to our imaginary corporate treasurer. How would she prioritize? What would she say if we asked how the onboarding process could be improved so that instead of frustration at the start of the relationship, there is a sense of confidence that she's chosen the right bank? Clients have experience working with several or many different transaction banks, and just as they compare the different digital channels and service quality of the banking solutions they use, they also can offer a view of how a bank’s onboarding capabilities stack up against its competitors. Corporate treasurers indicate that more self-service capability, shortened timeframes, better coordination across the bank, and enhanced visibility are all high priorities for clients.
We think that banks need to have two guiding principles for enhancing the onboarding process:
- enabling both internal and external visibility to eliminate the onboarding “black hole,” to reinforce accountability of all parties, and to allow for more effective collaboration
- focusing on improvements with direct client impact, for example, reduced number of interactions, reduced requests for information already on file, digitization, consistency across geographies wherever possible, clear and concise documentation, and aggressive SLAs for onboarding
There are a few banks that get it: they not only ask for client feedback about onboarding but they listen and adapt. They make it a high priority because they recognize that the "digital journey" isn't just about retail banking anymore. If anything, the digital experience is even more critical for corporate clients who look to their transaction banking partners to enhance the efficiency of their treasury operations through digitization. If you can't demonstrate your commitment to innovation by offering a client-centric digital experience during the onboarding process, then your are selling your investments in digital banking solutions short. And that's putting your foot in it for sure!
This week I’m in Singapore, which provides a beautiful backdrop for Sibos 2015, the annual conference that brings together thousands of business leaders, decision makers and topic experts from a range of financial institutions, market infrastructures, multinational corporations and technology partners.
This year’s conference theme is connect, debate and collaborate and takes place at a time of increasing headwinds from a slowing global economy, higher compliance costs, increasingly global corporates, and competition from both banks and nonbanks alike. I spent the past few months taking a deep dive into corporate banking performance over the past 10 years–a period of both tremendous growth and unprecedented upheaval. As expected, corporate banking operating income and customer deposit balances have experienced healthy growth rates over the past 10 years. But surprisingly, despite increases in customer deposits, corporate banking income was largely stagnant over the past few years.
Corporate banking plays a dominant role for the largest global banks. In 2014, corporate banking was responsible for 33% of overall operating income and 38% of customer deposits across the 20 banks included in this analysis.
As outlined in the new Celent report, Corporate Banking: Driving Growth in the Face of Increasing Headwinds, this critical banking sector is shaped by four external forces: economic conditions, the regulatory environment, business demographics, and financial technology. These same factors are slowing corporate banking growth and creating an environment in which banks are overhauling client offerings in the face of regulatory pressure, re-evaluating geographic footprints in response to shifting trade flows, and investing in technologies to ensure a consistent, integrated customer experience.
Much of the discussion at Sibos is on exploring transformation in the face of disruption. As they look to an unsettled future, corporate banks that are flexible, adaptable, and creative will be the ones that succeed. Changing time-tested ways of doing business is painful, but critical for future success.
• Digital and Omnichannel • Innovation and Emerging Technologies • Legacy and Ecosystem TransformationIf you have feedback on additional top corporate banking trends we should be covering, I would love to hear your ideas.
- Juggling 5 case studies from banks in 4 different countries for our upcoming Model Bank awards, including the “container” that 4 of them will be published in a paper commissioned by a client, trying to incorporate the ideas that they’d like to explore, but whilst making sure that I’m truly independent.
- Preparing two presentations for upcoming webinars with clients.
- Writing this blog post.
- And consulting at various stages – one answering last few questions from the deliverables, another designing the agenda for a strategy day, and handful of others at various stages of proposals. It’s very much consulting with a small “c” – we’re applying our expertise and experience, rather than throwing lots of “bright young things” at a project. In fact, most projects are usually a single analyst.