Navigating the Future of Business Banking Part 2: Bridging the Gap

In our last post, we identified the growing demand on banks from corporate clients to innovate and keep pace with their needs, meeting them when and where they manage other aspects of their business, whether that be in the enterprise resource management platform (ERP), accounting software or treasury management software. Understanding the new demands of corporate banking customers is the first step toward a successful future. 

In this post, we’ll dive into the various ways in which banks can accomplish this through:

• The role of APIs and Open Banking
• Creating and offering data-driven products
• How two way client data feeds can bring it all to life

The Role of APIs & Open Banking

As APIs continue to open up and unbundle the banking process, banks need to take a strategic approach to managing the available third-party solutions. With the right API services management, banks can more easily deploy solutions to business banking customers that enable them to keep pace with changes in regulation, consumer behaviour and expectations, and technology innovation. 

Creating and Offering Data Driven Products

Banking is quickly moving toward a more collaborative state known as Open Banking, where bank data is shared in order to provide enhanced capabilities and applications to the wider marketplace. This approach comes with some significant benefits, including new revenue streams, better customer experiences and more sustainable service models for underserved markets (think server message block [SMB] banking). However, these potential benefits also come with higher risk for banks. If they don’t take advantage of Open Banking for themselves, they may be pushed down the value chain by FinTechs who can do it faster and cheaper.

The availability of advanced financial products and services via APIs is driving a more open future for banking. With the onset of Open Banking reforms, consumers now hold the power to control their banking data and how it’s shared with third parties and banks. The spillover of this trend will continue to grow throughout the business banking realm. 

How Can Banks Take Action?

It’s easy to be motivated and excited by APIs, but that energy can quickly be deflated by internal factors such as lack of in-house resources, time or budgetary constraints.

But there are ways to take action that don’t require banks to shoulder all the heavy lifting themselves.

• Leverage the experience of other non- competitive financial institutions or non-bank providers to gain insight into successful strategies for your bank
• Seek out third-party platforms with an expertise in API-driven strategies to drive efficiencies
• Look at relationships with FinTechs as an opportunity, and take advantage of their ability to solve pain points for your business banking customers
  
  

Not convinced it’s time yet to take action? Here’s a quick look at how Open Banking has evolved since 2016:

2016:

• Open Banking Standard published by the Open Banking Working Group (OBWG) 

2017:

• The U.K.’s largest banks are ordered to release and make open data available through an open API
• Open Banking Directory enrollment starts 

2018:

• Open Banking goes live in the U.K. via the revised Payment Services Directive (PSD2)
• The Open Banking Standard, version 3.1, is published based on community feedback

2019:

• Open Banking goes global, with regions like the U.S. and China moving toward Open Banking standards 

Delivering data-driven products

Corporate banking clients expect banks to use advanced technologies and deep customer insights to help them create value and streamline their own operations. Banks can leverage data analytics to achieve these standards and improve the offerings and experiences for their corporate clients.

Artificial Intelligence (AI) is one of the most disruptive tooks banks can use to drive real value for clients. From advanced fraud detection to process automation, AI-based solutions are transforming business activities and supporting beneficial data-driven processes. AI has the potential to allow a bank to automatically qualify a business for credit based on real-time financial data connection. The technology also could identify a company’s increased risk exposure to a foreign currency based on invoices and purchase orders within its accounting system.

Realizing the True Benefits of AI-Driven Offerings Hinges on Two Factors:

1. Strategic, data centric products that drive value
2. Rich and robust data connections between banks and their clients

The right platform integration can accomplish both. Automated Straight Through Processing (STP) represents the holy grail of channel experience. STP increases the efficiency of almost any transactional banking process while opening the door for banks to offer new data products. It also removes many of the pain points corporations experience when trying to access new products and features offered by their banks.

Establishing an ERP Connection

Banking and accounting services are converging at a rapid pace. Businesses are increasingly moving their payments and cash management offerings into accounting applications to maximize operational efficiencies and decrease riskier, paper-driven manual processes.

For financial institutions to expand B2B product options, they must

start by ensuring connectivity to their clients’ ERP, accounting and treasury management systems. With near-real-time connections in place, banks can deliver next-level business benefits, including improved information reporting, automated payment requests and increased reconciliation success.

Banks who are ahead of the curve have taken notice, and are actively putting the right ERP connections and financial services in place. Financial leaders such as JPMorgan Chase, Citi and CIBC are establishing partnerships with innovative FinTechs and supporting integrations that drive greater connectivity. From cash forecasting and extended payment capabilities to frictionless treasury experiences and real-time bank reporting, banks are using ERPs as the business banking channel of the future to meet evolving customer expectations. 

Preparing for the Business Banking Future

Forward-thinking financial institutions are building the future instead of waiting to see how it all plays out. While North America has yet to move forward with any regulatory requirements surrounding Open Banking, the industry is still readying for change.

To stay ahead of the business banking curve, banks are using tools and technologies to:

• Deeply integrate bank services with the applications clients use to run their businesses
• Identify a portfolio of strategies to meet the needs of different client segments (SME vs. corporates)
• Collaborate with more FinTech services and pursue strategic partnerships
• Build out more products through APIs and improve product interoperability
• Leverage customer trust to encourage new data sharing products
• Go beyond supplier status and become a financial services partner

How Banks Can Win

Despite changes in the financial landscape and mounting pressure from FinTechs and non-bank providers, banks are still likely to win. But to get there, they need the right support. With better tools and technologies in place, banks can deliver digitally-driven products and services, while also massively expanding their business banking client base.

If you’re a bank who is interested in getting ahead of these trends and innovating without the overhead of doing it all yourself, contact us today for your own personalized demo.