Can Corporates’ Transaction Banking Wishes be Met?

In its
2015 Banking Outlook
, Deloitte Consulting predicts that banks will have a much sharper focus this year on boosting profitability as they seek to manage balance sheets better, improve security and develop new income streams. This will be amid an environment of increasing regulatory requirements, new leverage standards and low interest rates.


Financial Technology

According to Mehrotra transaction banking is moving to the ‘new normal’, with client optimisation and e-banking here to stay. It’s an environment in which banks are likely to become choosier about who they do business with.

With financial technology (fintech) to enable transaction banking on the rise, he expects that there to be greater collaboration between fintech companies and banks, enabling the latter to manage costs better and deliver targeted services to clients.

While banks may well want to develop new products, actually doing so will prove a challenge given the compliance pressures they face. That’s where the bank’s business model has to evolve to collaboration with fintech firms, which will bring interesting propositions. Banks can collaborate and use these to explore new segments or better serve existing clients.

Data Analytics

The Deloitte report suggests that one main focus area for banks will be strengthening data-enabled capabilities across front-line operations, business units, and functions, including finance, compliance, and risk. It recommends that banks use predictive analytics to anticipate and manage customers’ short-term credit needs.

While data analytics will be important, it may be used differently than expected – as a way to increase staff productivity rather than just to deliver information to clients. Mehrotra believes there will likely be an increasing range of cash management analytics and tools, for example, which will be enablers to generate greater insights and make bankers more productive in delivering high quality advice. Banks will make great efforts to see how they can improve visibility over their clients, optimise relationships, and improve delivery of services for accounting and transactions, as well as payments and receivables

Similarly, software used to help clients do more with electronic payables and receivables can also provide banks with insights from digital data sets giving them greater visibility into how credit lines are being used. A further case in point is banks leveraging on client analytics, in order to redeploy their relationship managers on the next product to sell and which specific conversation to have with the client. Mehrotra expects that usage of analytics – to enhance efficiency and productivity of the bank’s assets so that staff use their time to deliver high quality advice – will be more important than analytics as a paid service.

A Shift in Mobile Usage

A further report recommendation is that banks should extend digital initiatives for consumers to business customers by adding mobile cash management tools.

Whereas mobile for corporates has largely been used to provide insights to large firms and for authorisations, Mehrotra expects it will be used on the corporate and commercial side to build supply chain plays around corporates and as a means to delivery supply change financing.

One example is mobile cash, where there will be greater focus on efficiency and productivity.These services may, however, be delivered by fintech firms more than by banks.

Conclusion

What banks are most likely to see in 2015, then, is opportunities that are liability-centric and those that are fintech-enabled will be critical to their success. Mehrotra cites the leveraging of new digital technology, bringing these technologies to market quickly, the battle for quality and liability-driven plays as likely to be the key themes for the year ahead.

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