How to bank corporates in the next 10 years

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By:
Mark Baker
Published on:

In a decade of tech developments, don’t forget that insight and experience will trump any app

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Helping companies conduct their business is pretty much the nub of corporate banking. Banks can do it in myriad ways: lending money most obviously, but also helping them manage their cash and payments, and finance themselves through the capital markets.

Euromoney’s conversations during the awards process have once again shed light on the evolution of skills needed in these areas. Treating every business as if it were an advisory franchise is a common refrain – ultimately, almost everything banks do is in some way advisory. If that is not how your firm looks at it, there is something seriously wrong with your priorities.

For all businesses, but especially in areas like trade finance, an intimate knowledge of the clients’ clients is crucial. For M&A practices, knowing the enemy – for which read activist investors – and being able to provide insight into their motivation is increasingly called upon. The phenomenal speed of growth of small tech companies into global giants means that no bank can now neglect apparent minnows. And whomever you are advising, the bait and switch of a senior banker pitching and then handing over to a junior team for execution is guaranteed to leave a sour taste more than ever.

Next, do not assume you can cover clients from their headquarters. This is where the few banks that still have a genuinely global footprint have an obvious advantage over their regional rivals. The talk at such firms is all about subsidiary banking – following the international offshoots of your multinational clients wherever it takes you. 

But the increasing demands that corporates make of banks in this regard can offer some opportunities to nimble, smaller players. If you are in that bracket, you can do worse than show some funky innovation or local expertise to a subsidiary or two, particularly if you can find ones that are neglected by bigger players. Get it right and the door to work for the HQ may well open. 

All that being said, the elephant in the room is clearly tech. Corporate treasurers are increasingly intolerant of platforms that appear to lag far behind the gizmos they use in their daily lives. Many of the more internationally minded find it hard to understand why they can shift their personal cash from one jurisdiction to another with one swipe on their smartphone or execute FX transactions at the click of a button, but often cannot manage their cross-border corporate liquidity with the same ease. In 10 years’ time, their demands for up-to-date options will be even greater.

Many big US corporates present an anomaly here – banks regularly note that their take-up of snazzy integrated platforms is lower than in other regions. It is already not true of smaller entities in the country, however, and it will surely change in the next decade at the big firms, too. 

The best banks have already latched onto this – those with retail arms have cottoned onto the fact that the investments they have made in the retail arena are often neatly transferable to corporates. Anyone still neglecting this, or struggling to make sense of the jumbled mess of their own systems, is going to be left way behind.

There are two bad ways of jumping onto this bandwagon. The first is to make it all about you – it isn’t. Having smooth processes and tidying up your legacy mess is necessary, but it is only the start. The second is to take a scattergun approach to development: internal teams running in all directions with new platform ideas, while also trying to catch up with the snazzy stuff the fintechs are knocking up in coffee shops. Better by far to be focused: co-develop a solution with a client, with an architecture that makes it portable to others.

It is easy to see why banks get excited by the possibilities. Getting clients hooked on new tech can cut long-term costs and increase efficiency. But the golden rule of corporate banking will only become more important as the tech revolution sweeps across banking: don’t neglect the personal touch. Time and again, corporate clients say that the differentiator at their best banks is the human factor. 

It’s not that they don’t want all things digital – many do. But they want them as a means to a couple of ends. One is to generate efficiency, but the other is to free up time and resources for strategic thinking. That is where bankers come in, yet again. And it’s not just for the most obvious strategic situations where tech cannot replace insight and experience. The need for value-added client-focused, solutions-led approaches (to use the insufferable jargon of the moment) isn’t just the preserve of the M&A teams. 

It extends to the nuts and bolts of payments, for example, too. By all means do all the funky onboarding you like. But if your idea of efficiency in the 21st century is to dump a client onto a platform and then just call them a couple of times a year to check they can log on, then you’re likely to find your way out of their contacts book quicker than it takes a distributed ledger to create a new block.