Technology for the new world
In the ten years since the global financial crisis, financial regulators have tightened banking regulations.
Banks have increased spending on compliance and withdrawn from some markets.
Banks – once at the forefront of new technology and the testing of business models – have become more cautious.
Services, including business banking for companies of all sizes, have fallen behind customers’ needs and technological developments such as real-time data analysis and distributed payment networks such as blockchain.
Fintech companies have disrupted retail banking and corporate banking.
They use technology to improve service, provide better returns of capital than traditional banks and reduce the overheads involved in providing a banking service (for example, bank branches, tens of thousands of employees).
Despite their efforts, many companies are still getting a mediocre banking service.
This is particularly true for SMEs, which contribute more than half of gross domestic product worldwide and more than half of our jobs.
Yet many SMEs are completely ignored by banks, meaning that they’re often forced to rely on family or friends for loans and other types of capital.
SMEs want the same digital experience for their banking that consumers get. They want real-time processing and liquidity management, digital self-service capabilities and innovative trade finance solutions.
If traditional banks don’t provide these services, companies will switch to new companies that do.
How should banks respond?
AI, blockchain and automation
Technology could be part of the solution. Technologies including machine vision (enabling computers to see, identify and process images in the same way as human vision), artificial intelligence (AI) and blockchain (a decentralised, digital ledger that records transactions), can help corporate banks adapt to competition and new customer demands.
Banks are leading the use of blockchain − a collaborative platform that could benefit all banks using it.
Banks are using blockchain with automation technologies to process transactions quicker, save costs (for themselves and their SME customers) and improve data security.
Much of the potential improvements will be in core banking services, for example in payments and cash management.
Today, about 40% of corporations originate payments in six or more currencies. Two in three (66%) of corporates use three or more banks.
Technology can help banks’ business customers better manage their cash.
Santander UK bank recently launched an inter-bank cash management system for its corporate customers.
The service − in partnership with Finacle, part of EdgeVerve Systems, a subsidiary of Infosys − will give Santander’s corporate customers access to a secure cash-management services, through any device.
In India, seven large banks have co-operated to create India Trade Connect, a blockchain-based trade network, for processing trade finance business transactions, including validation of ownership, certification of documents and payments.
Automating data and administrative tasks is only part of the solution, though.
Banks most also use data to understand their customers. Analytics technology can help them do this. Again, though, there is room for improvement in how banks are using the technology.
Many banks are using analytics but usually only after a transaction has happened – for example, after a customer has left a bank branch.
Fintech companies are trying to liberate analytics technology by enabling it to be used online in near real time, such as when a customer is doing some banking on an app, or checking how quickly a transaction is clearing.
Banks can make better use of this customer data by using open-source such technology, such as Hadoop, which enables customers to process and analyse large amounts of data.
Corporate banking is going through its most exciting time for at least 30 years.
Fintechs are disrupting the market and competing with traditional banks.
Companies have more choice than ever for their business banking.
The changes could be good news for traditional banks − if they respond wisely.
By using blockchain, automation and machine vision technologies, corporate banks can modernise their IT, respond to challenges from fintechs, improve service for SMEs, reduce back-office costs and spot gaps in the market.
Business as usual is no longer an option. You can bank on that.
By Rajashekara V. Maiya, VP, global head of business consulting & product strategy, Infosys Finacle
This article is also featured in the November 2018 issue of the Banking Technology magazine.
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