Commercial and corporate-banking operations are well behind the curve when it comes to digital transformation, a sharp contrast to retail-banking businesses that are increasingly using technology to embrace modern consumer preferences and to analyze behavior.
The lag may be due, in part, to the behind-the-scenes nature of the commercial business where customers can’t immediately see or feel the impact of a digital change. Banks often just don’t have the same level of focus on the customer experience in corporate/commercial as they do in retail.
No matter the reason, Novantas believes that commercial businesses must step up their investments in technology or face significant business risks — from a loss of customers to an inflated cost structure that can be significantly reduced through automation.
Commercial banks face significant challenges in using old-fashioned technology when introducing new customers to their products and services. Such laborious introductions can easily taint customer relationships before they are even established.
Consider the lockbox, one of the most classic cash-management tools for wholesale customers. It is also one of the most manual services to put in place, requiring technical staff, sales teams, and a cumbersome manual documentation and validation process.
By the time it’s all over, it can take up to 90 days for a lockbox implementation to go live — and that doesn’t even include the potential for errors that can be introduced when a bank employee manually enters customer information. Compare that with the retail credit-card experience in which a customer can apply online, receive a decision within minutes, get authorized for immediate use of the card and get a physical card the next day.
In tracking cycle times across a range of cash management solutions, Novantas has found banks that have invested in digitizing the implementation experience have significantly reduced the amount of customer effort and time involved (Exhibit 1). That said, there is certainly room for improvement.
CUSTOMERS SEEK EASE
The disparity with retail banking will become increasingly apparent to business customers, who are likely to see technological shifts in their daily lives that are far beyond their commercial-banking experiences. Hotel chains like Marriott have introduced electronic room keys that eliminate the need for a customer to check in at the front desk. Many business travelers like the experience and the cost savings are expected to be compelling to providers. The Marriott example delivers on something that commercial customers crave: elimination of effort. More than anything else, commercial customers are looking for providers that make it easy to do business with them. It isn’t difficult to imagine customers being wooed by more nimble bank competitors, as well as fintech firms that, like hotel chains and others, have perfected the customer experience and ease of adoption and use.
Fintech provider Taulia, for example, says that “by turning every invoice into a revenue opportunity, (it) enables organizations to strengthen supplier relationships while adding millions to the bottom line.” The San Francisco-based company, which provides software to help companies manage their supply chain, counts Pfizer, Hallmark and John Deere among its customers.
There’s no reason why banks, too, can’t provide such services, but business leaders must take the steps to make the right investments, priorities and complex decisions. Technology solutions for commercial banking may be more complex than the high-volume transactions that are common for retail, but they are just as significant.
THE RELATIONSHIP MANAGER’S ROLE
The RM also plays an important role in this shift. Just because automation may replace some manual processes doesn’t mean the RM goes away. In fact, the RM can be considered even more important because he/she can serve as the thread that connects the new technology and the customer.
Technology will allow the customer to engage in more self-service activities, but the RM should also take advantage of analytic tools to deepen relationships with the customer and deliver advice in multiple channels based on the customer’s preferences regarding digital vs. in-person interaction.
SPEND TO SAVE
Novantas’ work with commercial banks focuses on a range of revenue and profitability drivers. It is well-known that pricing is a very tangible way for banks to generate value. Digitization, on the other hand, can be difficult to quantify and is less tangible; digitization initiatives may not be obvious, making their value to banks appear less certain.
Nonetheless, Novantas contends that the financial impact of digitization extends beyond revenue acceleration, and FTE reduction through the automation of a range of manual processes. It also creates an optimal experience for the customer that drives retention, cross-sell and wallet penetration.
Our analysis indicates 55% of revenue opportunity and cost savings from a digital transformation engagement comes from customer cross-sell and retention (Exhibit 2).
Digitization initiatives within corporate and commercial operations are tricky for banks as they often involve things that customers cannot see. Before contemplating how digitization can transform the overall experience, corporate and commercial banks must first view the journey from the customer perspective.
Novantas has identified four distinct stages of the customer experience in which banks can pursue digital opportunities (Exhibit 3). In the Acquire stage, for example, initiatives include shopper enablement, marketing analytics, customer management tools, and market data/analytics to help sales teams deliver more insights and advice. Digitization in the Engage stage is essential to improve account opening and implementations as in the example presented above, as well as onboarding new customer relationships.
In the Use and Improve stages, digitization initiatives include omni-channel enablement such as customer portals, digital self-service, case management tools, and the ability to provide relevant service data to internal teams.
The stages of the customer journey don’t necessarily reflect the stages of the bank’s investment needs, however. Although digitization can certainly be a part of the customer’s Acquire process (using technology to identify that a customer needs a solution based on past transaction history), banks should first plow investment dollars into the Use and Improve stages to develop efficient products and provide support for them. From there, banks can add investments into the Engage and Acquire stages.
For now, customers may not have expectations of same-day implementations for a product like lockbox with file transmission. Still, a growing number of companies in other industries provide highly-engineered products with customer-centric onboarding. Tesla has dedicated delivery centers that are separate from sales and service centers. Onboarding begins before car delivery, and buyers can access an app on their smartphones to receive status updates on a new car from production to delivery. Once the car is delivered, onboarding content for new owners is included on a large tablet-style screen in the cockpit. The “my Tesla” portion of the car maker’s web site enables buyers to sign electronic paperwork, upload copies of driver’s licenses as well as proof of insurance.
The Tesla example can be adopted for digitization initiatives within corporate and commercial banks, focusing on four themes that transform the customer experience. They include eliminating customer effort, delivering against expectations, minimizing uncertainty, and creating value.
If adopted and implemented correctly, digitization not only provides immediate, quantifiable revenue and cost savings, but gives customers a more consistent and simple way to interact with the bank, purchase new solutions, and resolve current issues. Why wait?
Director, New York