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In the age of digitalisation, Herber de Ruijter, Head of Digital for Transaction Banking at iGTB, argues that banks can stay ahead of the curve–using client transaction data to bring about new, automated, “contextual” services.With a focus on client convenience, these could enrich client relationships, open new revenue streams,and future proof bank business models

Herber de Ruijter, Head of Digital for Transaction Banking at iGTB

Herber de Ruijter, Head of Digital for Transaction Banking at iGTB

With tech-savvy clients, ever-increasing regulatory pressures and innovative market entrants – it isn’t news that digital transformation is an imperative for transaction banks.Yet, despite the need for action, fixed mindsets and tight budgets mean that many banks are adopting defensive stances, wary of taking undue risks. By doing so they could be missing out on a huge opportunity, and may even get left behind as a new era of banking dawns.

To take full advantage and maintain – or increase – market share, banks must leverage client data to adopt truly client-centric business models, develop “contextual” products and services that understand the full business situation behind transactions, and deliver convenient, intuitive user experiences.

Open banking on the horizon

With regulations such as PSD2 in Europerequiring banks to offer third-party providers access to their clients’ account information and payment services through APIs by early 2018, the banking landscape is set for a seismic shift. For banks, determining how they will retain and grow market share in the new API economy is paramount.

Aside from compliance, there is a huge opportunityfor banks to embrace the possibilities of open banking and pursue strategies aimed at carving out a leading role in the future.APIs can provide banks with enriched client data on know your customer information,payment profiles, transaction history, and so on – all of which can be used toenhance product offerings, improve efficiency and develop new services.

A proactive approach to open API business models can enable banks to move beyond being “white-label” service providers, and evolve into trusted advisors to clients, within new client-centric banking models.

The shift to realtime

There are further opportunities at hand, particularly as the move to real-time, “instant” banking matures in tandem with the growth of APIs.For example, open APIs transmitting real-time data among financial institutions could enable corporate banks to connect trade finance, cash management and supplier acquisition with a much wider range of services from partners such as e-invoicing companies, inspection companies and tax authorities, in a far more integrated and seamless way than is currently possible.

Transaction banks also have an opportunity to leverage innovative payment solutions to drive value for their corporate customers. With liquidity events happening in real-time, rather than on a daily basis, corporates will need to react immediately to intra-day developments, and this is an area where banks can offer new tools. In-the-moment invoice factoring, instant overdrafts, automatic FX hedging, and dynamic account limits are just some possibilities.Ultimately, real time will change banks’ relationship with their corporate clients, potentially placing them at the heart of their clients’ supply chains.

Design the best products, with the best client experience

Newproducts and services, however,must strive to keep the end user in mind – ensuring simplicity and intuitive design wherever possible. Self-service products are currently a leading use case, but unwieldy interfaces have often limited adoption andimposed costs on banks. Banks who will succeed in this space will base their strategies around customer value, and their tactics around customer adoption.Optimisations in the “last mile” between corporates and banks, ensuring straight-through processing and enhancing user experience, areall leading to higher adoption of digital channels for self-service and lowering the costs of servicing clients.These factors will surely play a similar role in driving adoption across the range of API-enabled services.

A number of leading banks have already picked up on this design trend.In July last year, France’s second largest bank, Groupe BPCE, acquired the innovative German fintech, Fidor, which provides a unique online user experience. Spanish bank BBVA has also made a string of acquisitions in recent years,including online user-experience start-up Simple, Finnish online-only SME bank Holvi, and Mexican B2B payments platform Openpay, in a move to position themselves as leaders in digital, customer-centric banking. Indeed,Shamir Karkal, CFO and co-founder of Simple, is now leading BBVA’s open API platform – another indicator of how banks are beginning to embrace new technologies.

As digitalisation becomes the norm, banks must also ensure that their clients aren’t alienated from the relationship-based aspect of banking, and maintain a regular, constructive dialogue with clients. New, API-enabled, real-time services must incorporate clients’ operating models, business contexts and priorities to ensure that recommendations, advisory services and cross-selling opportunities are relevant and in line with wider corporate objectives. Harnessing enriched client data, using this to offer clients new and improved products and services in line with their needs, and ensuring seamless user experiences will place banks in the driving seat as the digitalisation of corporate banking continues.

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