Intelligent Engagement in Commercial Banking

The Digital Transformation Imperative

The digital transformation imperative is galvanizing enterprises in all sectors to focus intensely on accelerating growth, speeding time to market, and fostering innovation. For banks, the most urgent imperative is to put the customer at the center of their digital transformation agendas, especially if they expect to win in the emerging financial services ecosystem of the future.

Banks face an increasingly open and competitive environment, with lower barriers to entry, lower switching costs, and more customer choices and empowerment. The traditional banking business model – the one that relied more on physical distribution, geography-based scale, friction and inertia – is breaking down. The fight for primary ownership of the customer relationship is the higher-order competition banks are engaged in, and the stakes are very high.

The winners will be determined by how well they use digital technologies to engage deeply with their customers and translate their information advantage into competitive advantage. The smartest banks – not just the biggest – can win, because digital leaders in all sectors are proving that speed and agility matter most.

Primary Ownership of the Customer Relationship

What does “primary ownership of the customer relationship” mean? It means the ability to build a brand; to engage customers at the level that matters most to them, which is the overall experience and not the transaction; to be the financial services partner who knows the customer best and is the best source of advice – the place where they concentrate their assets and buy more services. Most important for the future, it means a unified view of the relationship and the data that can drive deeper insights, engagement and loyalty.

Like many industries, in banking the lion’s share of profits and the highest margins go to the provider who has primary ownership of the customer relationship. Historically, banks have provided basic services – loans and deposits – at lower cost in an effort to establish customer relationships. They generate much higher profits and returns by cross-selling additional services into those relationships, especially through their role as the leading gateway to payments and cash management services. If banks were to lose their primary ownership of the transaction data needed to understand their customers and cross-sell additional services, their services would be further commoditized and their shareholder returns would erode.

This is the primary challenge in commercial banking today.

Emerging Threats in Commercial Banking

Banks face a lot of emerging threats. More than 100 new, digital-first and digital-only “challenger banks” have launched in the past few years. Early-stage, fast-moving fintechs are coming to market with innovative offerings and strong value propositions. The customer relationship is at risk of getting unbundled along product lines, with the biggest sources of profit under attack.

But the biggest threat is from other “platform companies” with superior customer experiences and finely tuned data, analytics and customer engagement skills – who may gain control of the relationship and play the role of intermediaries and orchestrators in the emerging financial services ecosystem.

Change and emerging threats are often foreshadowed in the consumer banking segment; but banks need to position themselves to fight this battle at the customer engagement level in commercial and corporate banking.

Unified and Seamless Customer Experience

Banks’ business customers are frustrated by excessive complexity, fragmentation and friction. There is a strong need for a value-added digital intermediary -- a partner that can provide a seamless, unified digital experience and has a rich understanding of their needs and interests. This need is even more compelling as “digital disruption and disintermediation” cause a proliferation of new products and choices – any one of which may be great, but the net effect of which is actually more fragmentation and complexity.

Banks can play this role and win, but it demands new skills and capabilities – and even a different mindset, one that embraces openness, competition and collaboration, and puts the customer at the center of digital transformation.

Intelligent Systems of Engagement

Systems that simply record information and execute transactions are rapidly becoming commoditized and replaced – or, at the very least, marginalized – by systems that do a better job of meeting customers’ growing expectations for simplicity and usability over features and functionality.

Payments, for example, are increasingly viewed by progressive competitors as a means to an end rather than an end in themselves; they are embedded in larger experiences and richer value propositions. Just think about Uber, which has essentially embedded the payment in the overall business of transforming the transportation experience. Which piece has higher value? The execution of the payment or the transformation of the end-to-end experience?

Banks now fully recognize they are competing on customer experience, and many have embraced the concept of “innovating around payments” – transforming payments and cash management – the means to the end -- into a customer engagement platform.

But – The market moves fast and technology moves even faster. The next level is intelligent systems of engagement. Moving from mass market, generic or segmented user experiences to “experiences of one” – experiences that are personalized, tailored, insightful and engaging – and to systems that continuously learn through embedded intelligence to deliver descriptive, predictive and prescriptive analytics.

Intelligent systems of engagement empower banks to win the battle for primary ownership of the customer relationship – with solutions that enable them to engage more intelligently throughout the customer lifecycle.

Customer-Centric Banking Systems

Rising customer expectations for simple and frictionless experiences are forcing banks to tear down silos. Today, a fully integrated commercial banking and payments platform must provide a seamless, end-to-end journey from the inception of a customer relationship, across any channel, through every product- and service-interaction.

These systems are anchored in world-class payments and cash management solutions, which are at the core of deep and profitable relationships between a bank and its business customers.

Digital transformation initiatives should also combine a single, 360-degree view of customer relationships with targeted, actionable insights powered by machine learning and augmented by internal and external data sources. Additionally, any customer-centric banking system must embed risk management capabilities that help mitigate and manage fraud – and that are carefully implemented to protect the customer experience.

Collaboration is becoming increasingly important to banks, as they seek to move faster and partner with 3rd parties to deliver the full benefits of innovation to their customers. Standard APIs and open banking capabilities will enable banks to operate with more flexibility and agility to collaborate more effectively with 3rd parties.

Primary Engagement Platform

Smart banks require much more than a traditional banking or cash management platform; an intelligent system of engagement functions as the Primary Engagement Platform for commercial and corporate banking – the system banks put at the center of their digital transformation agendas.

The Primary Engagement Platform need exists because other systems are failing to deliver – especially in commercial and corporate banking. The key to success as an intermediary and trusted partner is a deep understanding of your customers. Banks do not know their customers as well as they should, and they don’t translate the knowledge they do have into pro-active insights that would inspire confidence and deepen customer loyalty.

Relationships and Insights

Insights drive relationships. Banks need to invest heavily – and smartly – in systems and capabilities that truly deliver deeper, more relevant and more actionable insights. Those that are successful in translating their latent information advantage into competitive advantage will win the fight for the customer relationship.

Integrating commercial banking intelligence through analytics and insights enables banks to gain a deeper understanding of customers and their needs and preferences. Delivering portfolio-level benchmarking and actionable insights directly to banks and bankers, helps them drive retention and cross-sell, relationship growth and profitability, primary bank share, and long-term franchise value.

Smart Banks Can Win

Intelligent systems enable banks to engage with customers – from the inception of the customer journey – to deliver insights at every stage of the relationship lifecycle; to anchor relationships securely in world-class payments and cash management; and to connect with others in the open and integrated network environment of the future.

Smart banks can win, and intelligent engagement is the key to winning the battle for primary ownership of the customer relationship.