Bouncing back: Could the digital corporate bank be the UK economy’s secret weapon?

by jcp
Editorial & Advertiser disclosure

By: Jayakumar Venkataraman, Partner, Financial Services and Insurance, Infosys Consulting

It’s no secret that SMEs play a significant role in the UK economy. As of 2020, there are 5.9 million SMEs in the UK, contributing about 50% of its GDP. It goes without saying that the pandemic has put SMEs in a precarious position. Empowering them to grow again will be vital to the UK’s recovery – they hold the key to our GDP, the job market and to their communities. But for SMEs to play their part in the nation’s economic recovery, corporate banks will need to play theirs.

While accessing and managing our money has become increasingly easy for individuals, thanks to the retail banking sector’s rapid digitalisation, the same is yet to be seen for corporate banking. Access to credit is a major issue for SMEs, often pushing them towards self-financing or costly other options. This not only leaves a gap in the market for digital disruptors such as eBay to fill, putting banks on the back foot, but critically it also leaves SMEs in the lurch.

Quicker, more efficient access to credit will be the main driver of SME growth – but corporate banks as we know them now simply can’t provide this at the pace the economy needs. Instead, banks need to completely rethink the way they operate, taking a leaf from their retail siblings’ books – and there’s no better time than now.

When the spring uncoils

With restrictions being slowly but surely eased, the UK is on its way back to normality. Most people are desperate to get back to restaurants, shops, and social events. Add this to the build-up of unspent cash due to the lack of socialising, travelling and other leisure expenses, and we have a potential windfall on the horizon, thanks to pent up demand for spending.

It’s useful to picture the economy as a coiled spring, ready to uncoil and exert a significant amount of energy and demand into the banking system in just a matter of weeks. SMEs are looking to capitalise on this growth – creating a very real and even more immediate need for banks to offer them easier and faster access to credit.

This process has traditionally been long-winded. Corporate banks have been digital laggards. However, whether out of necessity or renaissance, the sector is slowly but surely moving in a more efficient, more digital direction.

Digital is the way

Corporate banking has always been a relationships game. The pandemic forced the move from face-to-face, paper-intensive banking to a remote, digitally empowered system – a tough pill to swallow initially. Digital banking features, such as instant transactions and digital signatures, now provide customers with a more efficient customer experience (CX), replacing in-person interaction with speed and simplicity.

Corporate banking needs to move from sluggish to seamless. Currently, many customers are stuck in a digital limbo – with some banking services available online, whilst others continue to demand in-person or telephone appointments. Even before the pandemic, customers preferred the convenience of digital-first service provision – it just wasn’t always an option for corporate customers. Today, however, customers expect the ability to choose from a menu of digital banking options as standard – from credit applications to instant transfers. Corporate banks need to watch and learn from their retail counterparts, where successful CX is entirely joined up and connected, if they want to keep customers satisfied.

Banking that goes further

Each business is unique. It’s vital that banks take the time to understand them, their revenue streams, and their aspirations. However, lenders can’t be expected to recognise the potential, or risk, associated with the many varied and innovative business ideas of today. Corporate banks need to leverage the power of customer data to accurately assess each business’ prospects, needs, and credit risk in a time-efficient manner. Using the understanding gleaned from predictive customer data to actively advise customers is a natural progression and will be a differentiator in the marketplace.

This is especially crucial as many SME customers aren’t getting the personal relationship from their bank that they want and need as the economic springs uncoil. This isn’t the fault of the individual – an account manager typically has 30-40 clients. When spread so thinly, it’s easy for businesses to slip through the net. To avoid this, artificial intelligence and machine learning solutions can help banks to better manage their diverse range and growing volume of customers, especially as more businesses knock on the door. With these technologies on side, customers can gain personalised recommendations on the current opportunities, products, and services best suited to them.

Developing an ecosystem

To really solidify their value in the SME market, corporate banks will need to think outside the box. Anyone who is involved in the running of an SME will know – it’s far from easy. This process is made harder by the long list of separate vendors needed to keep the cogs turning.

From corporate banks for credit, to insurance and pay roll providers, to accountants – there are many moving parts. This inefficiency poses a significant opportunity for the forward-looking corporate bank. Through the power of open banking, and the appropriate authentication, it is possible to consolidate these services. By streamlining business processes, customers can focus on the core of their business – while banks smartly position themselves as the valuable enablers of this ecosystem. Again, this is taking a leaf out of retail banking’s book. But more than that, it’s simply going where customers want and need their bank to go.

The next generation of banking

In this post-COVID era, we’re sure to see the continued emergence of the digital corporate bank. This won’t just be a bank that offers loan applications online and digital documentation, but one that offers seamless CX, a deeper understanding of the customer, proactive, data-driven consultancy, and a connected business ecosystem of products and services to solve every potential problem.

The imminent rise of the digital corporate bank can only be a positive thing – for banks, their customers, and for the wider economy. Going forward, the priority must be reducing friction: if it’s easier to get credit, it’s easier to start or grow a business, and then hire, spend, and offer your services to others. In turn, the UK economy will prosper – and the SMEs that make up its backbone will live to see another day.

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