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Digital Disruption in CIBElectronic Platforms for Corporate Clients in the Multi-Channel approach
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Developing and managing a multi-channel approach has been a key issue in retail banking. But what about Corporate & Investment Banks (CIBs)? Where do they stand in terms of multi-channel for corporate clients? Especially, what are the trends and opportunities in digital channels for them and what are the implications?
For many years, CIBs have been offering electronic platforms for corporate clients to execute transactions and trades online; historically, this has taken the form of multiple separate web banking applications which were specialized per product (cash management, trade finance, forex, …).
The changing environment is currently creating new opportunities for banks to provide cross-asset / cross-business e-platforms and to enrich their multi-channel offering. The combination of three major elements of disruption is accelerating the pace of change: corporate clients’ rising expectations, innovation within leading banks, and new technologies.
First, corporate clients have become more and more demanding regarding what an e-platform should deliver in terms of services and features, ease of use and design, and personalization capabilities. They are looking for simplicity (a single entry point platform), availability (multi-devices, multi-places) and relevant information produced in real-time (see Figure 1). They also expect e-platforms to be collaborative; corporate users want the ability to interact with bank experts or relationship managers at any time via the e-platform. Finally, corporate clients expect full security and require self-service access control for managing user rights and entitlements.
This trend is similar for all corporate clients, with a specific focus on ease of use for Small and Medium Enterprise (SME) clients and sophisticated functionalities and customized requirements for larger corporate clients. Banks must bear in mind that corporate clients are getting savvier and keen to benchmark. Modern e-platforms are a must have in order to retain clients.
The pace of change has also accelerated due to the innovation from leading Banks, specifically: those that have been very creative in services and features development in the past five years - particularly in the fields of cash management, trade finance and foreign exchange - thus raising the bar for their peers.
The third pillar of change is technology that enables the development of efficient client journeys and innovative features. Among them, three types of technologies are key: integration technologies, data visualization solutions and data analytics solutions.
Introduction
Push towards Cross-Product / Cross-Asset Electronic Platforms
Figure 1 - Clients’ demands are getting sharper
CustomerExpectations
Customizable
Connected Data
All in OnePlace
User Friendly
Compliance
Multichannel
Integration technologies allow customers to set-up a single entry point for their different e-banking applications (cash management, trade, etc.) opening client users to a seamless environment. They can also set-up links between different applications or embed functions from one application to the other (i.e. widgets) to create value-added services (e.g. sweeping from cash account to money market funds, navigating from a cash movement to the originating operation), which allows the integration of partner applications, market data feeds, news etc.
Data Visualization tools have also emerged on the market; these tools enable customers to set-up powerful reporting functions with visual data representation (dashboards, charts, maps…) offering the ability to navigate and drill-down into: different asset classes, different geographic locations or different legal entities.
Figure 3 - Data Analytics
The use of Data Analytics on e-banking platforms
ALL PRODUCTS & SERVICES ACCESSIBLE ON ONE PLATFORM
NEW INSIGHTS ACTIVITY FOLLOW UP
DATA ANALYTICS
Many product & services available in one platform
Dashboards
Communication tools
Next best action
Cash optimisation
The best reaction to market
AnticipationBehaviour analysis
Peer group analysis
Market trend analysis
says the Head of Digital Transformation of a European bank.
Finally, Data Analytics has generated a fantastic opportunity to produce more knowledge for the bank about its clients, which generate new insights and to create more value for customers. However, leveraging Data Analytics for e-platforms raises important questions e.g. which insights and options should be pushed directly to clients via the e-platform and which should be pushed to sales (Coverage, Sales, and Relationship managers)? See Figure 3. Some banks are also considering the opportunity to create additional revenue streams by selling data analytics services to clients (e.g. predictive forecast of liquidity, scenario based analysis…).
Conversely, e-platforms represent a tremendous source of new information about clients: what types of transactions or queries clients do, what research do they look at, etc.
• To propose relevant reactions to market evolutions / events leveraging analysis of external market data,
• Optimize their investment strategy through predictive forecast of liquidity, leveraging historical cash profiles, seasonality of positions, etc.,
• Compare client’s activity with their peers and propose best action (avoiding procyclicity),
• Adapt to pricing policy, leveraging algorithmic analysis of price elasticity, etc.
E-platforms are key building blocks to develop a Big Data strategy
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Figure 3 - Maturity curve of e-platform according product coverage
Level ofComplexity
Cash management
E- Statements
Accounts consolidation
Basic Operation
(ACH & RTGS)
Pricing executions
Real time operations
Management of client
interactions
(Trade finance)
Forex and trade finance
Cross-products
Sweeps and pooling
Forecasting tools
Liquiditymanagement
Sofisticated pricing
Innovative products
Loans and desposits
Equities
Commodities
Derivatives
investment products
Time to market
Maturity curve
Despite the changing environment and opportunities, cross-asset e-banking platforms for corporate clients are still under-developed in continental European countries. The latter still rely on dedicated product-specific e-platforms. Major arguments against investing in client-centric cross-asset e-platforms include: lack of request from corporate clients themselves, lack of request from Coverage and/or Sales, question whether such a platform will increase market share, and questions on the ROI of such an investment.
So why did leading banks invest time and money to build cross-assets e-platforms?
The first reason is the ability to increase revenue through cross-selling different products that are all available on the same e-platform (cash management, trade finance, foreign exchange, liquidity solutions, investment products, etc). The second driver is to enhance the customer experience on the e-platform. Finally, they wish to strengthen the bank’s image on the market as a digital player.
says a Senior IT executive in a major European bank.
Overall, it appears efficient e-platforms strongly contribute to the leaders’ continued expansion/stronghold in the Global Transaction Banking market as well as in Forex. On Forex, volume
Digital channels: a clear driver of differentiation for CIBsDifferentiation on e-platforms can be created in four dimensions:
- Wide and rich panel of product offers,
- Integrated platform,
- Consistent services and user experience over different form factors (Web / Tablet / Smartphone),
- Value added functions (data analytics, reporting features, collaborative tools, …)
In that perspective, a number of banks have invested heavily to enlarge their e-product offers and to comply as much as possible with corporate clients’ expectations. The ability to offer a large number of products under one umbrella is a key indicator of maturity (see Figure 3). At this stage, only a few leaders (such as JP Morgan, Citibank, HSBC, UBS, Deutsche Bank, BNP Paribas) are able to deliver a wide and rich panel of products through a user-friendly and integrated platform. Fewer players are able to provide the same on mobile devices (see Figure 4). Overall, most European players are lagging behind their American counterparts.
Source: Capgemini Consulting research
traded on electronic platforms has constantly increased these past years reaching 75% of total volumes, according to a survey by Greenwich Associates. The biggest beneficiaries have been banks with the best electronic platforms.
Being able to provide a customer-centric platform will be a serious competitive advantage in CIB
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TRANSACTION
Transaction initiation
Inter-bank
payments
Cross-
border
transactions
Bill payment FX/CurrencyTransaction
approval/reject
Mobile check
deposit*
Cash pooling
and netting
File upload (view/approve)
Stop Payments
Letter of
credit/Trade
Finance
Collections LockboxAsset and
liquidity mgmt
ACH payment
initiation
Fraud
prevention
ALERTS &
MONITORING
Account
balance
Transaction
summaries
Alerts and
notifications
Transaction
analytics
Cash
forecasting/
projections
Easy search Positive pay Risk analysis
REPORTINGConsolidated
accounts reporting
Document
format
exporting
Dashboards
Controlled
disbursement
reporting
Risk &
compliance
reporting
Audit historyAdaptive
reporting
Archived report
access
ACCESS &
SECURITYPersonalized
access
Multi-factor
authentication
(OTP/Device)
SSL
Protection
SSO across
applications
Biometric
authentication
Mobile device
identification
Authorization
levels
assignment
User delegation
Source: Capgemini Consulting research
Figure 4 Example of best in class services on mobile
Cash management services on mobile are getting more sophisticated Standard offer Best in class Rarely offered
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So banks must decide whether they want to develop full-fledged platforms on their own or whether they want to partner with vendors for certain products or services. Of course, the different approaches don’t allow a bank to differentiate itself in the same way. Two major partnering approaches are seen on the market and can be used in combination: one is to use white label e-platform solutions available on the market; the second is to participate to multi-dealer platforms operated by independent players.
White label e-platform providers offer banks turn-key client portal solutions which must be integrated with the banks’ systems (in order to process the transactions and trade orders in the bank’s back-end systems). Such approaches reduce the costs and time to market for banks, relieving them of the effort to develop their own front-end portal. However, such solutions are not suited for those banks who wish to differentiate themselves on the market with innovative services and a leading user experience. For large banks that have the ability to invest in developing their own e-platform, the challenge will be to make sure their architecture is sufficiently open and flexible to allow the integration of off-the-shelf applications for commoditized capabilities (e.g. a basic cash forecasting module for the SME market clients). This mixed approach will usually require some customization effort for the purchased application to ensure a harmonized user interface through the entire e-platform, including a harmonized logic to promote and access the different applications on the portal (e.g. an app store model).
Multi-Dealer Platform (MDP) is the second trend for banks in partnering with tiers: MDP allow clients to get automatic quotes/prices for a given trade from several banks participating with the MDP. Such platforms focus on highly liquid assets with straight through processing execution such as Forex; they are mostly used by Institutional clients and some medium/large corporate clients looking for the best price. Banks usually still offer the same products on their own e-platform for their direct clients. So MDP are more seen as an additional channel for clients. Here, it is critical for banks to define their strategy, because once a corporate is on-boarded with a MDP, it tends to stay with it. Overall MDP are growing their market share especially for FX trading; today 50% of FX trading amounts worldwide is managed through such platforms, while only 25% goes through individual bank platforms (and 20% by phone) - Source: Les Echos (March 2015).
While large corporate clients can behave like institutional clients, small institutional clients may also have similar needs as corporate ones; hence, Banks should look closely at their client segmentation to capture the cross-selling opportunities and also determine how to do it. Should banks offer distinct e-platforms for Corporate and for Institutional clients (still reusing components or services between the platforms)? Should banks offer one platform serving all client segments (with personalization capabilities)? It is expected that modern and well architectured e-platforms should offer the flexibility to adapt to different client types & segments.
states the head of CIB of a Mutual Group.
Looking at the small business segment (a rather large number of clients), many banks are not offering the specific digital products & services they require. As a result, it is estimated that one-third of them may shift to non-banking challengers (2014 Aite Group Study). See Figure 5.
It is one of the many questions banks need to address before embarking on the journey of cross-asset e-platform development!
E-platforms can even be tailored to the needs of SME clients
Will non-banking challengers transform the market? As few banks offer comprehensive e-platforms, it is estimated that up to one-third of small businesses may shift to non-bank solutions (2014 Aite Group Study).
YODLEE SMALL BUSINESS SOLUTION
Yodlee, a new player in the banking system, has found a vacant place between banks and small businesses. That vacant place represents a very large market segment (e.g. 30 million in the USA) of customers mostly dissatisfied with their Bank (only 25% said to be pleased with their current primary financial institutions).
Yodlee’s core activity is to deliver online banking solutions especially designed for SMEs, but also to provide its services to financial institutions to incorporate the Yodlee solution into their online banking platforms. Yodlee Small Business Solution offers:
- Quick and easy on-boarding of accounts
- Single entry point access to services, and easy to use tools such as accounts receivables, account summary, cash flow, expense management, credit scoring for SMEs, payroll, time management, transactions, qualitative insights, consolidated dashboard with 360-degree view of accounts
- Strict bank-level security and encryption technology.
Figure 5 - Non-banking actors challenging banks
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The implementation of such e-platforms with a true multi-channel approach for customers entails a number of deep organizational and operational transformations.
First, an e-platform alters the relation between Relationship managers, Sales and their clients: indeed the former are able
Reshuffling the bank’s organizational model
Figure 6 - E-platforms raise a number of questions
Client targets (segmentation)
Pricing strategy and incentives
Multi-channel approach
COMMERCIAL STRATEGY
Country specific restrictions
Regulatory procedures
Fraud detection
SECURITY AND COMPLIANCE
Return on investment?
Ability to invest heavily?
Data and platform security
Make or buy
Linking with Big data
New skills
IT
Capital market involvement
Sales force organization
Role of the middle office
International deployment
Transversal team on e-banking
E-platform distribution
GOVERNANCE AND ORGANIZATION
BUSINESS CASE
to spend more time on advisory services, however, they must also provide additional value that the electronic system does not contain.
This raises a number of key questions, such as: should clients be segmented and oriented to the most relevant channel or should they choose by themselves; what value is expected from Coverage, from Sales; is there a need to rationalize the sales force, and should it focus on the product or on the client relationship; should the remuneration system evolve? Etc.
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The CIB industry has definitely entered the multi-channel era with e-platforms becoming cross-asset, mobile device support, data analytics etc. But e-platforms will need to be properly articulated in a global multi-channel approach, also considering contact center models to cater for certain clients both for trading and advisory. Here again, it will require banks to think through their client segmentation to determine which client to direct to which channel and how to adapt their organization. Top-end CIB players have already started down this new journey based on the lessons learned from their retail banking experience.
In addition, e-platforms have a strong impact on the operating model, and in particular on the role of the middle-office which is bound to evolve. Three main options can be envisioned to take advantage of the middle-office current competencies: 1. refocusing on their controlling role, which encompasses both risk and increasingly compliance, 2. a shift towards marketing, with the creation of a Big Data center of excellence, or 3. an evolution towards sales support, leveraging e-platforms monitoring tools.
Thirdly, we see great opportunities to embed security and compliance functions in these platforms to support banking processes. But which technologies can provide the necessary capabilities for Financial Security?
Finally, such development requires a high expertise from IT and the ability to optimize investments. Various options are now available to minimize costs (such as white labeling and licensing software) but all of them require a global view of the competitive landscape as well as a deep understanding of customers’ expectations, which can only be developed through a close partnership between business stakeholders and IT.
Not yet the end game of multi-channel for CIBs
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Special Thanks to:
Kishen Kumar Vice President, Technology Services, USATel: +91 9739914928e-mail: [email protected]
Ari GoldmanSenior Manager, Technology Services, USAe-mail: [email protected]
Authors:
Cécile André Vice President, Financial Services, ParisTel: +33 149674276e-mail: [email protected]
Fabrice Perrier Principal,Financial Services, ParisTel: +33 149674957e-mail: [email protected]
Frédéric Abecassis Principal,Financial Services, SingaporeTel: +33 149673431e-mail: [email protected]
Agathe Leblais Consultant,Financial Services, ParisTel: +33 682896240e-mail: [email protected]
