Changes to banks' operational model will transform corporate and transaction banking
A rapid transformation of bank operating models is remaking wholesale banking into a more efficient and much more competitive industry, a new report from Coalition Greenwich suggests. A combination of historically low interest rates, technological innovation and the COVID-19 crisis accelerated the re-engineering of bank operational models and the “next-gen” operational model for corporate and transaction banking is already underway.
To be ready for this profound shift, bankers need to move quickly. The Coalition Greenwich report, 'Future of Corporate & Transaction Banking Operating Models', examines the forces driving this rapid evolution and identifies the defining characteristics of the new operating model emerging from these changes.
"In many ways, high switching costs created by the legacy operational model served as a cornerstone of the wholesale banking model for a generation," says Gaurav Arora, head of APAC & Middle East at Coalition Greenwich and co-author of the report. "This dynamic is about to be turned on its head, with low switching costs and the new open environment ushering in a new era of competition."
In the span of just a few months, the COVID-19 crisis swept away most hesitations among corporate clients about using online tools, as well as any inertia to switch to digital solutions. Using new data analytics capabilities and client segmentation techniques, banks will leave behind one-size-fits-all approaches in favor of “nimble” operating models that calibrate service levels and channels to meet the needs of clients efficiently and at the lowest possible cost.
Perhaps the biggest change will be the transformation of the bank-operating model from a closed system to open architecture, and the elimination of the high switching costs that have defined both client relationships and bank business strategies. The transition to an open environment will create a competitive market and allow companies to rationalise their banking needs and find the optimal allocations of business to receive the highest levels of bank credit, service and support. For their part, wholesale banks will be pushed to lean more heavily on fee-based revenues - with a special focus on new revenue streams from data and data analytic products.
"In this newly competitive environment, technological capabilities will be a powerful driver of bank selection and an increasingly important point of differentiation among banks and bank providers," says Eric Li, head of Transaction Banking Research at Coalition Greenwich, and co-author of the report.
Meanwhile, automation and virtual communications will have profound implications for bank staffing, potentially lowering overall headcounts and forever altering the role of coverage bankers. In addition, the banks’ growing need for technological innovation will fuel the fierce competition for tech talent and evolve the role of fintechs, as both clients and competitors for banks, as well as regulations for disruptors.
GPS and Currencycloud partner on enterprise-grade cross-border payments solution
Global Processing Services (GPS) has announced that it has joined forces with Currencycloud to widen access to cross-border payments for financial institutions and fintechs. The pandemic has accelerated the digitalisation of payments and the move away from cash. People are naturally operating more globally, whether that’s for personal or business travel, to accommodate multiple bases as the world shifts to a more hybrid model of working, or growing e-commerce and global supply chains. As a result, financial institutions and fintechs need to offer customers solutions that satisfy this changing dynamic as people shift to digital-first behaviours for safety and convenience.
Leveraging each other’s expertise, the combined value proposition will deliver a complete, enterprise-grade, off-the-shelf and pre-integrated solution. It will enable businesses to offer customers compliance and regulatory infrastructure, cross-border payments infrastructure, real-time foreign exchange (FX) for overseas card transactions, access to a global banking network, multi-currency accounts, and banking cards.
The partnership enables fintechs to launch multi-currency wallets. Using Currencycloud rates, customers can fund up to 34 foreign currency wallets with real-time wholesale rates, allowing consumers to purchase currencies ahead of travelling and while on the go. The service promises competitive FX rates for 38 currencies, including restricted and non-restricted currencies, nearly 300 currency pairs, and guaranteed weekend FX rates.
When it comes to point-of-sale (POS) FX, cardholders benefit from competitive real-time FX rates when making purchases abroad and can choose to be notified of the amount spent in their domestic currency via push notifications on mobile devices in real time. By securing a guaranteed and real-time FX rate at the point of sale, ensuring it is locked in through to clearing and settlement, cardholders now know exactly what overseas transactions cost at the point of sale.
EBA Clearing announces winners of the R2P ideation contest
EBA Clearing hosted an online event this week in which seven contestants from its R2P and RT1 user community, as well as their technical service providers, pitched their ideas for innovative request to pay end-user solutions. The contest was aimed at sparking inspiration on how to take advantage of the opportunities offered by the new SEPA Request-to-Pay Scheme of the European Payments Council and EBA Clearing's R2P infrastructure service for request to pay messages. The event spotlighted explanatory videos with ideas from Erste Group Bank, ACI Worldwide, FIS, Fundu Technology Oy, PPI AG, PRETA and SIA. Around 200 participants attended the session and were able to vote for winners in three categories.
In the category 'The Biggest Problem-Solver', the winning idea was 'R2P and Smart Cities: The perfect fit for a frictionless journey' by SIA. The idea combines the flexibility and security of request to pay with the unique user experience of the Smart City: it sets forth a single app that is able to geolocate and lead travellers to activities and best deals and reward them with cashbacks. The creation of such an intelligent ecosystem where the payment experience is fulfilling and frictionless and which provides immediate benefits to consumers could help travellers save time, money and stress while being on a city trip.
Erste Group Bank took first place in the category 'The Easiest to Implement' with its idea 'Spot on (Payment on the spot)'. 'Spot on' is conceived as a payment alternative to card and cash payments at the point of sale (POS), where it could be integrated as a new feature in the POS terminal or used in an app-to-app set-up. The solution idea brings together request to pay and instant payments in a ‘pay now’ scenario and could be particularly attractive for micro-enterprises selling to consumers.
In the category 'The Most Creative', ACI Worldwide received the most votes for its idea 'Making Tax Less Taxing'. The idea describes government-to-citizen service opportunities leveraging existing payment rails and the R2P messaging infrastructure for the secure and highly performant transmission of private tax-related data. Value-added services in this space could include e-returns with digital signing and authentication or downloading historical returns.
Surecomp's Marketplace adds trade data solution Coriolis Technologies
Surecomp has announced the addition of Coriolis Technologies to its Marketplace platform. The latest partner to join the company’s trade finance ecosystem platform is a provider of analytics for trade and trade finance.
Founded in 2017, Coriolis Technologies is a source of trade, corporate, geopolitical risk and trade-related economic data globally for the trade finance sector. Coriolis Technology data is collected from multiple sources and uses predictive analytics based on leading edge AI practice.
"We help our clients to understand the impact of what they don’t know as well as the impact of what they do," explained Coriolis Technologies chief executive, Dr Rebecca Harding. "Over the past three years we have grown to be a major player in the trade-tech space. Our reputation is based on the power and success of our data to predict the likelihood of trade wars and our capacity to analyse trade as a major component of national security strategies which is why we are proud to be an accredited Marketplace partner of Surecomp."
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