While consumer banking has advanced massively in recent years, corporate transaction banking has been slower to embrace change.
In a recent Finextra webinar, 10x Founder and CEO Antony Jenkins joined Wim Grosemans, Head of Payments Product Management, Global Cash Management at BNP Paribas Fortis, and Varun Yadav, Product Lead for Liquidity Management Solutions, Treasury Services at Bank of New York Mellon.
The panel discussed how banks could overhaul their core platforms to deliver true digital transformation, creating a corporate bank of the future. This blog will give you the key takeaways from the webinar, or you can watch the full replay here.
Banks have been layering up technology for decades, adding new systems over time and creating what Antony describes as a museum of technology. Yet, while the underlying tech has advanced, banking processes have changed very little. "We've seen innovation; we've seen very little transformation," says Antony. Much of the focus has been on consumer banking, with transaction banking largely being overlooked despite being an essential source of revenue for banks. However, the advent of the cloud, microservices, and APIs over the past few years, adds Varun, have opened up new opportunities in banking that weren't possible even just ten years ago.
Given the scale of new tech development and connectivity, corporate banks can now move away from the monolithic core banking platforms of old. In their place comes cloud-based core banking systems that allow banks to be more agile and implement change faster.
"In the old days [upgrading your core] was a massive risk because you had to basically operate open heart surgery on the core of your business," says Antony. He says that this would typically be a multi-year project that could cost billions of dollars and end the careers of CEOs if it all went wrong. "Nowadays, these new technologies allow you to break that problem down into manageable, bite-sized chunks that you can do firstly at much lower cost, but also much more quickly, at much lower risk," he says.
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As digital transformation continues to change the world we live in, it's not just expectations that are changing; corporate banking clients are changing too. For example, the needs of digital native businesses are entirely different from traditional brick-and-mortar companies. "The overall commercial space itself has changed… and the banks have had to adjust," says Varun.
According to Wim, corporate banking clients now expect their digital journeys to be smoother, more reliable, and more supportive of their businesses. "The expectations of banking customers are changing, and many environmental aspects are impacting what our clients are asking from us," he says.
The broader digitization of the economy has also increased expectations around real-time services, with clients expecting mobile banking functionality to be instant, says Antony. "What normally happens is it connects to some clunky old mainframe batch-driven system, and so banks have had to add a whole bunch of stuff in the middle to make that work, which is very expensive and very complex to do," he says. Banks that want to deliver real-time payments need a core banking system that can step up to that change. Monolithic and mainframe-based solutions are unlikely to support banks transitioning to instant, real-time settlements.
Banking is all about handling data—but banks handle data in the most inefficient, clumsy ways, says Antony. "What these new technologies allow you to do is handle data much more quickly," he says. Moreover, the cloud makes using these new technologies even easier because it allows banks to adjust their capacity as needed.
"Mainframes are wonderful, but what they're not very good at is scaling up for peaks," says Antony. "They're very good at dealing with load, but you have to build to the max capacity, not the average. Whereas in the whole cloud world, you can scale up and scale down your capacity for peaks and troughs, and you get a much higher degree of flexibility." It also enables banks to get their technology up and running much faster—in some cases instantly. That's a marked departure from the past, where it can take a year to make a brilliant idea happen, says Wim. "By the time you get it, the world has changed," he adds.
"The days of banking on our own software on mainframes are over," says Wim. "I believe in evolution—not so much revolution—when it comes to transformation. Things are changing, slowly but steadily. We are living in an environment where you can't do everything yourself anymore as a bank… and this also requires us as bankers to change the way we work."
Antony concludes that this new approach will require a cultural shift inside banks that recognizes the benefits of being part of a broader cloud-enabled ecosystem that allows banks to deliver much better, faster, and cheaper for their clients.
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