The newly released, inaugural edition of the Corporate Banking Innovation Survey report and accompanying webinar, highlighted top-of-mind corporate banking trends and forward-looking perspectives from a global assembly of industry leaders.
The report — sponsored by Red Hat and Infosys Finacle (Finacle), and produced in conjunction with Strategic Treasurer — presents an overview of an industry engaged with and responding to current customer demands and competitive challenges, while also focusing on the future.
Red Hat is the world's leading provider of open source solutions, powering innovation in app development, infrastructure, cloud, storage, middleware, server OS and virtualization.
Finacle is an industry-leading digital banking solution suite that helps traditional and emerging financial institutions speed their digital transformation efforts.
Strategic Treasurer includes an experienced team of financial specialists widely recognized for expertise in treasury technology, risk management and working capital, especially in cash management and banking operations.
Report context and selected highlights
The summary report features insights from a worldwide roster of over 125 leading banks and financial services companies, with senior corporate executives candidly supplying feedback on a variety of topics, illuminating:
Factors that banks consider to be their key competitive differentiators
How business models are changing, both in type and magnitude
Organizational focus on innovation, including plans and investments
The state and trajectory of digital transformation plans
These queries are especially relevant due to the nature of the industry itself, with ongoing challenges including:
The "consumerization" of banking
Strict regulatory and privacy requirements
The paramount need for security
The ability to support legacy systems while continually adapting
Vincent Caldeira — Chief Technologist, Financial Services Industry, Red Hat — said, "In recent years, corporate banking customers have come to expect the same level of digital experiences for their business accounts as in their daily life. As a result, financial institutions have had to invest in building differentiated end-to-end customer engagement in their digital offering, while supporting corporate customers in reducing costs, improving their straight-through processing and building more resilient systems to counter business and operational risk."
Here we’ll discuss two of the survey’s more significant findings.
Digital transformation in core banking is well underway — but challenges remain
Over 45% of respondents picked open APIs, mobility and advanced analytics as technologies essential to their organizations. They also cited that modern technologies, such as artificial intelligence (62%) and robotic process automation (52%), are very important in achieving their desired business outcomes. Cloud computing, conversational banking and blockchain are not far behind (45%).
Despite recognizing the role of modernized technologies, financial institutions still face challenges in their deployment. Corporate banks have lagged behind other industries in successfully adopting these technologies, perhaps reflecting the industry’s generally cautious approach and the existence of established legacy deployments.
Top obstacles include:
Legacy technology and system integration challenges (64%)
Time/cost required from concept to reality (56%)
Risk/compliance concerns (46%)
Lack of right talent and skills (41%)
Budget constraints (39%)
Platforms are shifting from the universal banking model to open ecosystems
Universal banking combines the services of a commercial bank and an investment bank, providing all services from within a single entity. These services, which exist presently, generally fulfill traditional roles, and can include deposit accounts, a variety of investment services, and possibly insurance services.
Looking to the future, an ecosystem approach — which opens banking platforms to external partners to extend capabilities, functionality and services provided — allows banks not only to host their own products such as corporate loans, but also enables customer access to complementary partner products which could include insurance, as well as joint products like syndicated loans, blockchain-based digital ecosystems and placement of third-party competing products.
Most corporate banks are universal players today, but a glimpse into the future predicts a 42% shift towards the platform business model between now and 2026, with corporate banks looking more towards orchestrating ecosystems and exploring partnerships.
Open platforms and partnering is expected to rise from 30% today to 72% over the next five years. Those considered "universal players" will drop from 68% to 43%.
The survey report indicates that as a bank’s role shifts to become an aggregator offering both financial and non-financial products and services, it has the potential to adapt its platform approach towards specialization, recommending contextual offerings built to suit the needs of the industry segments in which its corporate clients operate. It could further explore utilizing expertise within narrower specialized secondary niches, such as a category leader, a manufacturing leader, or a distribution player.
To truly realize this future ecosystem platform vision, banks will need to elevate and advance their technology strategies from present levels, including developing a suite of APIs that enable data sharing and collaboration with customers and ecosystem partners. They will also need to further accelerate innovation by enabling the technology behind their banking services and platforms to be more closely aligned and compatible with the systems used by other corporate enterprises in newly formed ecosystems.
Vincent Caldeira echoed these points, "The report findings underscore the growing importance of modern technology, from cloud computing and open APIs to artificial intelligence, in helping banks overcome challenges to innovation and digital transformation. At Red Hat, we believe that open source technology is at the core of this new digital age and helps to provide the powerful foundation that corporate banks need to fuel the next generation of digital banking services."
Concluding remarks and more information
In today’s fast-moving corporate banking landscape, banks need to remain focused on reimagining their customer journeys, pursuing operational excellence, adopting modern technologies and forming strategic partnerships. Respondents to this survey echoed these priorities, reflecting the needs of the banking industry in particular and the technology landscape in general.
If you would like to learn more about enterprise open source in the financial industry, read the full Corporate Banking Innovation report or watch the webinar that includes a comprehensive discussion of banking innovation, digital transformation plans and key differentiators.
Interested in how Red Hat enables open source solutions in the financial services sector? Much more information is available here.
About the author
John has extensive experience guiding organizations to success via innovative architecture of products, digital strategy, and customer and user experiences - particularly in online and mobile marketing, e-commerce, product management, web analytics and interactive content development.