Corporate Banking: In Pursuit of Greater Efficiency

There are a number of key pressures facing the banking sector, forcing senior executives to review their business structure and strategy. Against the backdrop of the struggling economic climate, growing customer dissatisfaction and the emergence of new market entrants, we are in a period of significant change in the industry.

The Independent Commission on Banking (ICB) is, in part, trying to shape this change and it is impacting different parts of the banking sector in varying degrees. Financial stability and competition are at the heart of the ICB’s agenda and the debate goes on as to whether structural reform is necessary. However, while corporate, investment and retail banking remain integrated, the successes and failures of one are felt by the others.

Investment and retail banking have both suffered reputational damage in recent years and their IT teams have been tasked with balancing greater cost efficiency with an infrastructure that supports a powerful customer experience. But what about the corporate banking sector?

How are corporate banking divisions in the world’s largest financial institutions faring through the recession? And what is the role of technology in solving the challenges that the sector faces?

The Drive Towards Greater Efficiency

In recent years, the corporate banking sector has been somewhat sheltered from the decline in back office investment that has impacted retail banking. However, it has not entirely escaped. As is the case for large organisations across the world, there is a continual focus on achieving greater business efficiency in corporate banking.

Corporate banking arms are seeking opportunities to reduce costs and deliver a more consistent level of service. However, the biggest challenge that IT teams face is the implementation of these efficiency drives while also continually improving the client experience and customer trust in banking.

Confidence in the sector is at an all time low, and the lack of trust for retail and investment banking has repercussions for corporate banking divisions too. This is a particularly acute problem owing to the critical requirement for strong relationship-based interactions in corporate banking.

Corporate banking arms must balance the need to become more efficient with the ability to offer a personal service to their customers in order to remain competitive in today’s market. This is a key consideration as banks embark on cost saving IT projects. However, there are some emerging IT trends that corporate teams are following that can both save money and deliver customer benefits.

These include:

  1. Project replication around the world.
  2. Data centre consolidation.
  3. The emergence of corporate commercial centres.
Project replication

Banks are increasingly rolling out new IT implementations in a single region or country and are fully testing their value before embarking on a roll out in other parts of the world.

The benefit that is emerging from this somewhat more measured approach is that those projects that are replicated are obviously the most successful, and therefore a single investment can carry significant value across the global business. However, corporate teams must ensure that innovation is not jeopardised. Many investments tend to be led from the bank’s headquarters at a time when all regions must have the opportunity to introduce new systems and processes to support local needs.

Data centre consolidation

While cloud computing is taking off in other industries, financial institutions are taking a cautious approach that only adopts some of the principles of cloud computing. There is still a huge distrust of public cloud solutions. Security and data governance are cited as the biggest barriers to cloud adoption in a recent Ovum research report, commissioned by Cable&Wireless Worldwide. Yet, the study also found that 45% of multinational organisations are using cloud for at least some elements of their IT services, up from 24% in 2010.

The fact remains however that most financial institutions are yet to switch to cloud computing in its truest form, opting instead for data centre consolidation within their own facilities – effectively a private cloud environment. By taking this approach, corporate banking divisions are reducing costs and IT teams are being charged with maintaining the security and capacity of the infrastructure while delivering a more efficient IT service. While this is delivering some cost savings, banks are still missing out from the true elasticity and on-demand benefits that cloud computing can deliver.

Corporate commercial centres

In addition to data centre consolidation, there is also a significant consolidation happening in the front office. Just as many retail institutions scale back their high street presence, corporate banking is experiencing the opposite trend. Corporate commercial centres (CCC) are opening up on retail and business parks up and down the UK to provide greater access to branch-type services for corporate customers.

There are many factors influencing the emergence of corporate commercial centres. The centralisation of human capital can bring a number of advantages.

Not only do corporate commercial centres offer cost benefits to the bank through a more integrated team using a central IT infrastructure, but they also enable the bank to present a single team of experts across various corporate banking services, from tax to investments. This renewed focus on the face-to-face environment is not surprising given the importance of relationship management to corporate banking arms.

Corporate commercial centres don’t just offer an opportunity for clients to experience more face time with their relationship managers, but they also enable the bank to improve the cross- and up-selling of additional products and services. It is quite common for a bank to own the ongoing corporate banking relationship but miss out on key revenue opportunities when it comes to a large merger or acquisition for example. From the hub of the corporate commercial centre, banks must ensure they have an adequate IT infrastructure to support a joined up banking approach, empowering different team members to hold relevant conversations with the client.

Opportunities to Focus on the Customer

‘Doing more with less’ is a worn out phrase but one that is still very relevant in today’s corporate banking landscape. Using a combination of phased project roll out, data centre consolidation and improved corporate customer services will help banks to rationalise their investments while retaining a focus on client service.

Similar to retail banking, corporate arms face competition over fees and charges. However, if you scratch below the surface, corporate customers also highly value a good customer experience. Achieving this balance in today’s market is only possible by ensuring the bank is supported with the best IT and network infrastructure to power more intelligent and insightful customer decisions.

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