Sustainability disclosures will become the norm for corporates and banks over the next few years, while FX risk management becomes increasingly critical, trade finance goes digital and alternative finance gathers momentum. These are some of the directions that financial services will take in the coming years, as outlined in a research note published by corporate and banking research specialists East & Partners. The research says that businesses will require more tech-led solutions for compliance, with treasury, cross border payments and risk & compliance presenting the biggest opportunities for technology innovation.
Here are 10 of the future developments discussed in the research note:
1. Sustainability disclosure becomes the norm
According to the research, mandatory disclosure of sustainability and ESG data will become a given part of reporting for all enterprises and part of loan applications for corporates. It notes: “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.”
2. Increased importance of FX risk management
East & Partners says that business FX – “the most fragmented and multi-banked commercial banking product” – will continue to be absorbed into more comprehensive risk management strategies, while bank-agnostic platforms will drive crucial change in the industry, as they enable corporates to link related accounts. The research adds: “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.”
3. Tech to improve risk & compliance
South East Asia is a key development ground for fintech and most markets are seeing more fintech-bank collaboration rather than disruption. The research adds that in the next few years, treasury, cross-border payments and risk & compliance are areas that will hold the biggest opportunities for business and commercial-banking institutions.
4. Supply chain embraces digital
From smart contracts and the Internet of Things (IoT) to robotics and big data, companies are more able than ever to track the goods and payments moving through their supply chains. East & Partners predicts that smart contracts will become more prevalent, as well single cloud-based platforms. Importantly, businesses are shifting towards paperless trade.
5. Alternative finance on the rise
Alternative finance, in particular peer-to-peer (P2P) lending, crowdfunding and supply chain financing, will become more common and will specifically target the under-serviced small and medium-sized enterprise (SME) segment, according to the research note.
6. Bank value for corporate
With competition from non-bank financial institutes including fintech companies and specialist providers, banks may have to rethink their role in transaction banking. According to the research, banks should ask themselves how they can add value to the corporate relationship, grow their fee-based revenues, link transactional offerings to their broader value propositions and drive cross-sell. It adds: “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.”
7. Data-rich cross-border payments
According to the research, the search for fast, secure and frictionless payment solutions without compromising on security is very high on the agenda for global corporates. It notes: “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.”
8. E-commerce exponential growth
The global e-commerce market is estimated to exceed US$2.5 trillion dollars within the next two years and, according to the research, some of the key trends shaping the next generation of successful merchant acquirers include: instant payments integration, simplified cross-border payments, real time fraud and security detection, application programming interfaces (APIs), open banking data sharing and digital currencies.
9. Renewed focus on equipment finance
East & Partners see that balancing cash flow and liquidity needs with the requirements for new equipment will be a huge concern for CFOs and corporate treasurers in 2019 and beyond. It adds: “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.”
10. Banks must work on relationships
The research notes that the numbers of corporates switching their primary banking provider is at a record high and that, despite the adoption of digital processes, banks must put relationship management at the fore. East & Partners adds: “In our view successful banks in the coming decade will be those that successfully augment innovation with a distinctively human touch.”
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- This item appears in the following sections:
- Bank Relations & KYC
- Evaluating Banks’ Overall Performance
- Cash & Liquidity Management
- Global Cash Visibility
- Environment, Social, Governance
- Green Corporate Treasury Department
- Sustainable Business Models
- FX Management & Crypto
- Buying & Selling FX
- Control & Compliance in Operations
- Payments - Disbursements
- International Payments
- Risk Management
- FX Hedging & Risk Management
- Working Capital Management
- Total Working Capital