Corporate payments have flown somewhat under the radar for many banks in recent years. Underinvesting in this area, however, is no longer an option. Banks need to revamp corporate payment services because:
- Corporations, like retail customers, are becoming more demanding and have demonstrated a willingness to switch providers if unsatisfied.
- With corporates of all sizes increasingly trading and transacting internationally, they expect their banks to also have global capabilities.
Kimberly L. Kacal, Accenture Payment Services
- New regulations at the global, regional and national levels are challenging banks to design and deliver regulatory-compliant products and services.
- Continued industry pressure to move towards faster payments is driving banks to modernize products and adjust processes.
- As the largest banks modernize their platforms, their ability to offer robust payment services to smaller corporations -- a market they previously didn't target -- poses a threat to regional and small banks' market share.
Done right, corporate payments can become a key driver of revenues and more profitable customer relationships. Banks should respond to this changing environment by taking these steps:
1. Focus on Digital.Corporate and retail customers' expectations are converging. Treasurers and CFOs want many of the same capabilities on both their tablets and desktops. As banks refine their channel strategies, the rapid growth of mobile devices and the emerging primacy of the digital channel brings further opportunities for banks to differentiate and increase revenues by exploiting additional access points and enhanced services. New developments include mobile apps -- such as tablet-based dashboards -- for checking liquidity positions on the go.
In trade services, banks use mobile solutions to release payments against documentary collection. Increasingly digital channels and mobile accessibility are supporting core finance roles such as Controllers and Treasurers, and expanding into the physical supply chain such as field inspectors and logistics operators. As a result, banks can make data available and enable real-time decisions on mobile devices more quickly.
Services targeting corporate clients' employees are also emerging. An example is mobile payment provider Luup, which has been adopted by Deutsche Bank to support its corporate customers operating in emerging markets. These customers often employ significant numbers of unbanked expatriate workers who need to remit money to their home countries. To meet this need, the bank provides these corporate clients with a service under which the corporate offers its employees a "virtual" account that they can access -- and make transfers from -- via mobile.
2. Realign Operating Model.To get corporate payments right, banks need to migrate from a product silo mindset to a customer-centric approach which streamlines offerings and simplifies multiple logins. Banks must also focus on developing services which deepen integration with corporate customers' financial systems.
Banks are redesigning their payments operating models for two reasons: 1) to reflect market conditions by servicing corporates in a single, global way across borders, while still complying with local regulations and practices; and 2) to provide a common and consistent customer experience across all payments offerings and channels. One way to ensure that these capabilities are enabled in the back office is by transitioning to a "hub" architecture -- consolidation of payments operations and integrating internal processing through a single platform.
Redesigning the operating model with a "hub" architecture can incrementally eliminate aging platforms, break down existing product silos and offer banks -- and their corporate customers -- a more real-time view of their data. When implemented properly, hubs can cut up to 25-30 percent of technology and operational costs per transaction, increase agility and innovation, and generate higher payments revenues through increased transaction volumes, fees and deposits.
3. Deepen Client Integration.There are growing opportunities for banks to provide corporate customers with seamless, integrated access to data regarding suppliers and business partners. Increased adoption of new operating models will enable corporates to benefit from direct integration and automation of their e-banking cash management directly with their bank's platform, and connectivity to infrastructures such as the SWIFT network.
Banks should consider splitting corporate business into three key operational areas -- payment processing as a base capability; treasury and portfolio management; and financial supply chain integration -- and service these through one integrated cash management platform. By doing so, banks can simultaneously ease operational burdens and provide corporate customers with enhanced services on a modular basis. This approach also opens up additional opportunities such as flexible sourcing for corporate connectivity through service bureaus, or through direct connectivity to customers' ERP systems and shared service centers.
4. Emphasize Talent.With many payments services becoming commoditized, talent and service remain the ultimate differentiator. The payments operating environment at many banks has a legacy of manual and internally focused processing, and isn't fully organized around customer service.
To close this gap, banks should consider organizing payments into logical units, with a shared administrative back-office function supporting specialized teams focused on areas such as standard high-volume payments, specialist complex transactions, transaction compliance and documentary products. This structure will improve service, minimize risks and simplify processes.
For example, a U.K. bank is moving from "payments operations" to a "transaction management service," characterized by skilled and empowered customer-facing teams focused on managing customers' transactions, while routine support activities are automated or outsourced.
As more and more banks seize the growth opportunity in payments by investing in new platforms, structures and service offerings, the bar is rising fast. Those that fail to move quickly with smart, targeted investments risk being left behind.
Matthew Friend and Kimberly L. Kacal are managing directors for Accenture Payment Services.