Corporate banking and lending: technology-based solutions can help build the winning team

Written by Guy Poxon Global Program Lead, Lending
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Digitization in corporate banking is a trend that is taking over the global banking industry. Banks need to adopt technology solutions to stay ahead and meet changing customer expectations. In this article, we examine a survey conducted by Finastra in partnership with East & Partners on the digitization journey of banks and how they are implementing technology solutions.

The survey revealed that the global corporate banking industry is facing challenges like higher interest rates, regulation, and the need to address the ESG agenda. As a result, banks are under pressure to provide superior experiences to customers, particularly as new market entrants and fintechs are providing these experiences at a scale never seen before. The solution for banks is to digitize operations, standardize data, and adopt a platform approach with open APIs to integrate core banking systems with third-party applications.

When asked how many of their customer-facing processes are digitized, the average response for banks globally was just under half (47%). However, there was a noticeably wide spread of responses, with the highest quartile of digitized banks reporting that they had digitized 62% of processes on average. On the other hand, the lower quartile of digitized banks said they had automated just 27% of customer-facing processes.

The survey revealed that banks' progress on digitization is more likely to be behind schedule than ahead, according to Chief Technology Officers (CTOs). Only one in five global bank CTOs say they are ahead of progress on digitization, while 54% say they are behind. The largest proportion of both CTOs (33%) and Heads of Product & Front-Office (41%) report that they are behind schedule on their digitization agenda by more than a year.

The vast majority (84%) of banks are looking to achieve straight-through processing (STP) as a primary focus of digitization and to achieve an almost 60% STP rate across all processes. Three-quarters of global banks intend to connect to an average of three fintechs or service providers within the next 18 months to achieve digitization and STP goals.

The motivations for integrating fintech solutions include cost reduction, cost-effectiveness, access to technology experience, and regulatory compliance. When it comes to prioritizing the fintechs they plan to onboard, banks are most likely to choose partners that can deliver online portals and banking channels, followed by transparency across transactions and end-to-end connectivity/value-add services.

The benefits of adopting a collaborative banking model are well understood by more than half (56%) of global bank CTOs, who plan to integrate third-party fintech apps into a platform of integrated fintech solutions in the future. Buying and integrating solutions is a less popular approach, with 30% of CTOs choosing this route. Building fintech apps in-house is the least likely option, cited by just 14% of CTOs.

To bring everything together, banks need to implement technology solutions to stay ahead and meet the changing expectations of customers. Digitization of operations, standardization of data, and the adoption of a platform approach with open APIs will enable banks to work with real-time or near real-time data, open up systems for corporates to access the data they need for their own treasury analyses, and provide the insights that senior decision-makers need for accurate forecasting and planning. Banks must strive to achieve straight-through processing (STP) as a primary focus of digitization and connect with fintechs or service providers within the next 18 months to achieve digitization and STP goals.

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