All parts of the banking industry are under unprecedented pressure in today’s market. I want to discuss the challenges and opportunities for commercial banking.
Lets kick off by looking at some differences and similarities between the two business segments.
Both need to be more agile to respond quickly to opportunities and launch products and services to more demanding customers. They need new products and solutions that add value – in particular by making use of new electronic channels.
In retail banking, automation is key but this has to produce a universal ‘delightful’ experience through branch, mobile, and internet channels to emulate the service customers get from other industries. Providing the right valuable service at the right time will regain customer trust but is difficult to deliver throughout the retail bank , not least between branch and call centre staff and their customers.
In commercial banking the personal customer relationship remains all-important but new channels can automate everyday transactions and activities and drive efficiency. This will result in better services, such as e-invoicing or payments visibility, but it’s also likely result in consistent customer service across payment types and channels.
The new reality of commercial banking: doing more with less
The worst of the post-crisis cost cuts are over but there will be no return to previous spending patterns. Retail and commerical have to offer better personal service with less to spend and fewer people.
Some of this will require spending on technology in the short term to save in the long run. For example, digitalising the customer relationship can improve service and the customer experience.
Banking regulation and risk
Both businesses face significant pressures to control risk, meet regulators’ demands and treat customers fairly to rebuild trust.
In commercial banking – where a single corporate customer can cost $500 million in impairments – there is detailed emphasis on risk profiling and risk mitigation.Regulators are also making banks hold more capital, limiting lending so that banks need to ensure a client’s business is profitable and secure.
The corporate bank requires information slice and dice risk exposure by any dimension to understand to reduce concentration risk in one particular industry or region. And in the retail bank, better, more accurate risk models are needed for risk adjusted pricing at the front end and better information and processes to manage defaults at the back end.
Technology is at the heart of all these themes to improve process and drive efficiency, differentiate by use of information and data, and offer clients better banking.
I’ll develop these themes in further blogs. In the meantime, I’d like to hear what you think about the challenges and opportunities for commercial banking.