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As another year draws
to a close, we take some time to ruminate on what is
in store for us, our clients and the financial
services sector over the next few years.
Sustainability and ESG disclosure will become the
norm, not buzzwords
As the ESG market continues to mature, the
reputational positioning behind it has moved to a
more balanced approach driven by the increasing need
for these financial instruments to deliver
commercially. Regulation will need to accelerate in
order for an even, transparent playing field to
emerge that ensures the sustainability of
sustainable finance into the future.
Over the coming years we see sustainable finance and
ESG criteria being applied to all areas of banks’
loan books with green lending becoming a core
solution. Mandatory disclosure will become part of
reporting for all enterprises and part of loan
applications for corporates.
FX risk management becoming critical for all
businesses
Business FX, the most fragmented and multi-banked
commercial banking product, is set to continue
undergoing the structural change currently
occurring, trending towards more comprehensive risk
management strategies and practices across all
business segments. How providers meet this challenge
and, importantly, how they manage these
relationships to deliver on businesses’ FX and trade
needs will determine who succeeds.
The development of bank-agnostic platforms which
enable corporates to link related accounts will be a
turning point in the industry. Having their trade,
FX and cross border payment accounts available
through one portal will streamline and simplify the
lives of corporate treasurers, CFOs and business
owners everywhere.
Risk & compliance is where businesses want
tech-led improvement
As our first report on fintech and corporates in
2016 predicted China has become the leader in
successful fintech enterprises and the market where
its uptake by corporates is greatest. As fintechs
are coming into their own across numerous developed
countries, we see emerging markets as a key
development ground, particularly those in South East
Asia. Disruption is no longer the name of the game
though with penetration into corporate and
commercial banking more through collaboration and
partnerships, providing a solution to long standing
IT legacy challenges in a far more efficient way,
both in time and cost.
While payments, and to a lesser extent lending,
focused technologies have dominated the financial
landscape, moving forward we see the treasury, cross
border payments and risk & compliance areas as
presenting the biggest opportunity for business and
commercial banking institutions.
Going digital is the only way forward for trade
finance
Internet of Things (IoT), robotics and big data
analytics are at the core of the accelerating
digitalisation of supply chain management, enabling
businesses to better track their goods throughout
the supply chain and improve inventory forecasting.
The use of smart contracts and a single cloud-based
platform will become more widespread as businesses
shift towards paperless trade. How can banks stay
relevant with the current trend towards open source
technologies and vendor-neutral platform?
We will also see the rise of alternative finance, in
particular peer-to-peer (P2P) lending, crowdfunding
and supply chain financing, targeting specifically
the under-serviced small and medium-sized enterprise
(SME) segment.
Banks need to learn to add value to their
corporate customers
Transaction banking – efficient and information-rich
payments services, especially cross-border, along
with managing cash for corporates – will be an
increasingly important function for the banks,
enabling them to enhance their relationships with
their corporate clients and generate a more stable,
capital-light, source of revenue. Considering the
current propensity to change primary transaction
bank, the highest in a decade, banks cannot afford
to be complacent. In addition, non-bank financial
institutes including fintech companies and
specialist providers are all vying for the same
share of the pie.
The questions for banks to ask as they rethink their
role in transaction banking is, how can they add
value to the corporate relationship, grow their
fee-based revenues, link transactional offerings to
their broader value propositions and drive
cross-sell. The lack of cash visibility and the
inability of treasury functions to accurately and
quickly forecast their cross currency holdings
remains a major pain point and opportunity for
providers in 2019.
Data-rich cross border payments
Cross-border payments hold immense opportunity for
financial institutions, as evidenced by over
three-quarters of the total financial supply chain
for Asian businesses being exposed to foreign
exchange risk. The search for fast, secure and
frictionless payment solutions without compromising
on security is very high on the agenda for global
corporates.
Data and business analytics are becoming as
important as the payment transaction itself. More
than half of all large corporates recognise clear
commercial benefits flowing from additional payments
data, such as simplifying the tracking of internal
spending, streamlining reporting and accounting
processes, and more importantly, generating valuable
intelligence.
Card-not-present receivables to continue its
exponential growth
Merchant Payments continues to feel the full
transformative force of digital disruption and
innovation. The current forefront of wearables and
biometric payment types will arguably be eclipsed by
yet to be conceived methods within the next decade
as the rapid proliferation of eCommerce and payment
acceptance methods drives card-not-present
receivables volumes higher. The global eCommerce
market is estimated to exceed US$2.5 trillion
dollars within the next two years, serviced by an
ever-growing array of providers totalling more than
300 individual payment schemes.
Key trends shaping the next generation of successful
merchant acquirers includes instant payments
integration, simplified cross-border payments, real
time fraud and security detection, application
programming interfaces (APIs), open banking data
sharing and digital currencies.
Equipment finance to leave the shadows and stand
as its own specialised product
Corporates face a wave of complexity when
successfully executing new asset purchases.
Balancing cash flow and liquidity concerns against
the need to remain current with new equipment
advances emerges as the most pressing concern for
CFOs and corporate treasurers into 2019 and beyond.
Energy efficient equipment, autonomous vehicles and
the Internet of Things (IoT) are rapidly moving into
enterprises sphere of influence with asset lives
continually stretched beyond originally intended
durations.
The trend towards asset financing as a specialised,
standalone working capital solution as opposed to
the traditional model of a transaction banking
accessory will define the market in the next five
years especially. Incumbent bank providers and
nimble non-bank competitors are both tasked with
navigating oncoming regulatory and technological
challenges with voice of the customer insights at
the heart of new product and service development.
Human touch to define customer experience
Business’ propensity to positively advocate their
bank to friends and colleagues has been profoundly
tested by grave misconduct and reputational damage
over the past few years. Never has it been more
important to closely monitor underlying drivers of
customer satisfaction and brand perception,
particularly at a time when intention to switch
primary provider reaches record highs. Despite the
shift towards digital processes making business
banking faster, simpler and better value for money,
relationship management is in fact defining customer
experience.
In our view successful banks in the coming decade
will be those that successfully augment innovation
with a distinctively human touch. The business of
banking is firmly returning to understanding and
prioritising customers’ individual business and
sector needs. |
