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Corporate banking – The bank’s bread and butter got digital!

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Corporate banking – The bank’s bread and butter got digital!

By Rupa Ramamurthy Vice President for corporate banking for Intelenet Global Services

The banking landscape has undergone a seismic shift in the last two decades, and this shows no signs of stagnating. How we view banking now is very different to what it was, or how it is will be in the coming years. The reality is that many banks have focused their-long term strategies around digitisation in retail banking, at the cost of neglecting the profitable segment of corporate banking.

Corporate clients are the bread and butter for banks, representing 56 percent of total annual global revenue. However, nearly half of corporate banking franchises don’t have a digital strategy.

This is surprising, given the revenue generating potential this segment has for banks, and furthermore, it is one which others are eager to fill.

The total credit gap for SMEs is estimated at US$1.2 trillion which is up for grabs![1]The second Payment Services Directive (PSD2)has democratised the banking landscape – competition for the corporate banking revenue pool is intensifying, with fintechs, digital-first challenger banks and tech giants carving out a market niche in payments, trade finance and financial advice.

SMEs are increasingly trusting fintechs to conduct foreign exchange, provide loans, or simply give advice. According to research, 68 percent of SMEs are willing to look elsewhere for financial services, with more than half tempted to switch banks it they don’t get the services they require.[2]

Similar to any business, growth and survival of SMEs is primarily dependent on access to finance. In today’s world, loyalty of small business customers is fickle and relies heavily on experience with a bank – these customers want fast results to support their growth plan, and will not hesitate to look elsewhere if financial services don’t deliver. As it becomes progressively easier for customers to switch accounts and find other providers, banks need to position themselves as a vital component for company growth.

If I were to put myself in their shoes, the first issue that springs to mind for a small to medium sized enterprise is cash flow. SMEs are balancing daily administration with the day-to-day running of the business and so they require quick and easy access to cash. I have spoken to SMEs who find it challenging to track and forecast their cash flow, as they need specialist knowledge to enable effective management of their finances.

To save these lucrative relationships, banks are adopting game-changing technologies to meet the needs of their clients with both speed and efficiency. Citibank is the first to join the UK’s Open Banking framework to provide an aggregated payments collections service for its business clients. It is tapping the application programming interfaces (APIs) of the country’s nine largest banks to allow easy access to payment data without the need to build applications or interfaces to connect to designate banking portals.

We are seeing a number of banks setting goals to better automate their banking processes, which in turn, will streamline client transactions and reduce process complexity. For example, when it comes to on boarding, there is an added level of complexity which can take traditional institutions weeks to overcome. . But with challenger banks, business owners can set up an account in minutes, simply by using their smart phone.

Digitising the banking experience improves client-business relationship, by enabling better flexibility and faster response times. For one international bank, automation reduced errors by 99.98 percent year on year, and improved efficiency by 15 percent.

Small businesses in the UK are diversifying their sources for lending, foreign exchange and fund control. Similar to consumers, business clients are using multiple providers to alleviate the challenge of working with a single bank, such as payment processes, fund control and merchant services.

Banks need to provide a high level of customer satisfaction to become a one-stop-shop for the financial needs of small business clients’. .The next wave of SME fintech can be characterised as consolidating disparate components of the small business experience. Going forward, banks are increasingly integrating invoicing, reconciliation, cash management and financial accounting. The game is not over, as banks are moving quickly to leverage their established customer base, with the aim of offering SMEs a multichannel banking experience.

In order to keep their heads above water and avoid losing revenue to competitors, established banks need to focus on boosting their digital capabilities. Consequently, this will help to shift the mind-set within SMEs and allow them to recognise that banks have the potential to be a single – and excellent – source for all their financial needs.

[1] https://medium.com/wish-finance/fintech-rewrites-the-rules-for-sme-funding-and-everybody-wins-69d718d44ec9

[2] http://info.bcsg.com/the-view-from-inside-banks-lp

Banking

European shares end higher on strong earnings, positive data

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European shares end higher on strong earnings, positive data 1

By Sagarika Jaisinghani and Ambar Warrick

(Reuters) – Euro zone shares rose on Friday, marking a third week of gains, as data showed factory activity in February jumped to a three-year high, while upbeat quarterly earnings boosted confidence in a broader economic recovery.

The euro zone index was up 0.9%, with strong earnings from companies such as Acciona and Hermes brewing some optimism over an eventual economic recovery.

The pan-European STOXX 600 index rose 0.5%, as regional factory activity was seen reaching a three-year high on strong demand for manufactured goods at home and overseas.

Another reading showed the euro zone’s current account surplus widened in December on a rise in trade surplus and a narrower deficit in secondary income.

Still, the STOXX 600 marked small gains for the week, having dropped for the past three sessions as investor concern grew over rising inflation and a rocky COVID-19 vaccine rollout.

But basic resources stocks outpaced their peers this week with a 7% jump, as improving industrial activity across the globe drove up commodity prices.

“This week’s slightly adverse price action has all the hallmarks of a loss of momentum temporarily and not a structural turn,” said Jeffrey Halley, senior market analyst at OANDA.

“There is not a major central bank in the world thinking about taking their foot off the monetary spigot, except perhaps China. (Markets) will remain awash in zero percent central bank money through all of 2021 (and) a lot of that will head to the equity market.”

Minutes of the European Central Bank’s January meeting, released on Thursday, showed policymakers expressed fresh concerns over the euro’s strength but appeared relaxed over the recent rise in government bond yields.

The bank’s relaxed stance was justified by the euro zone economy requiring continued monetary and fiscal support, as evidenced by a contraction in the bloc’s dominant services industry in February.

The STOXX 600 has rebounded more than 50% since crashing to multi-year lows in March 2020, with hopes of a global economic rebound this year sparking demand for sectors such as energy, mining, banks and industrial goods.

London’s FTSE 100 lagged regional bourses on Friday due to a slump in January retail sales and as the pound jumped to its highest against the dollar in nearly three years. [.L] [GBP/]

French carmaker Renault tumbled more than 4% after posting a record annual loss of 8 billion euros ($9.68 billion), while food group Danone and German insurer Allianz rose following upbeat trading forecasts.

(Reporting by Sagarika Jaisinghani in Bengaluru; Editing by Sriraj Kalluvila and Shailesh Kuber)

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Banking

ECB plans closer scrutiny of bank boards

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ECB plans closer scrutiny of bank boards 2

FRANKFURT (Reuters) – The European Central Bank plans to increase scrutiny of bank board directors and will take look more closely at diversity within management bodies, ECB supervisor Edouard Fernandez-Bollo said on Friday.

The ECB already examines the suitability of board candidates in a so-called fit and proper assessment, but rules across the 19 euro zone members vary, so the quality of these checks can be inconsistent.

The ECB plans to ask banks to undertake a suitability assessment before making appointments, and they will put greater emphasis on the candidates’ previous positions and the bank’s specific needs, Fernandez-Bollo said in a speech.

The supervisor also plans more detailed rules on how it will reassess board members once new information emerges, particularly in case of breaches related to anti-money laundering and financing of terrorism, Fernandez-Bollo added.

Fernandez-Bollo did not talk about enforcing diversity quotas, but he argued that diversity, including diversity in gender, backgrounds and experiences, improves efficiency and was thus crucial.

“Supervisors will consider furthermore all of the diversity-related aspects that are most relevant to enhancing the individual and collective leadership of boards,” he said.

“Diversity within a management body is therefore crucial … there is a lot of room for improvement in this area in European banks,” he said.

(Reporting by Balazs Koranyi, editing by Larry King)

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Banking

Where are we with Open Banking, and should we be going further?

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Where are we with Open Banking, and should we be going further? 3

By Mitchel Lenson, Non-Executive Chairman, Exizent

Open Banking has the power to revolutionise the way we manage our money, but most (65%) consumers are still not aware of it, while many financial institutions continue to treat it as an obligation rather than an opportunity.

For Open Banking to truly reach its potential, consumers need to have more trust in its benefits. However, this will only happen if banks and other financial institutions start to embrace it, rather than simply accept it.

Covid-19 has proven to banks that digital banking and open finance innovation is not simply a ‘nice to have’. It is vital for their own survival. With so many challenger banks now coming into the market, many of whom have entirely digital models and therefore invest heavily in technology, banks are starting to become aware that if they don’t embrace it, they’ll get left behind.

So, fuelled by a mixture of competition and Covid-19, banks are starting to realise that Open Banking is not about giving away valuable data, but it is about collaborating with third party fintechs to explore the endless opportunities data sharing can bring – to all sides.

By making open finance easier for developers, banks can not only save time and money by improving their own services but help create useful solutions that add real value for their customers.

Open Banking for all?

There is one, yet untapped area of consumer finance that could be immeasurably improved by Open Banking, and that is estate administration.

Mitchel Lenson

Mitchel Lenson

Recent research from Which? found that many executors contend with delays, errors and poor knowledge from their banks during the probate process. Our own research shows that most legal professionals admit the process does not work as it should, and the time it takes to complete probate is unacceptable.

Like the Which? survey, we found that the main issue is the administration involved, with most legal professionals saying that the time it takes for financial institutions to get back to them with the information they need is the main cause of delays.

Given that the system is not working for consumers, something clearly needs to be done. The good news is that the technology and data is already available – we just need to harness it to create a better system.

That is why we are developing the first ever platform to connect executors, legal professionals, and financial institutions to create a better, quicker, and more secure probate experience for everyone.

Our first release of the platform – a bespoke cloud-based solution to enable legal services firms to integrate directly with financial institutions making information gathering and processing more straightforward – was released in 2020. We are now building on that foundation to accelerate our development work with financial institutions to deliver additional value for all sides.

We also see huge potential in working with banks to utilise the digital financial infrastructure, powered by Open Banking, to improve things even further. But there is one, fairly sizeable issue – currently, Open Banking consent ceases at the point of death.

Is it time for legislative change?

Open Banking is not as open as is should be for those who can give consent, so we are certainly some way off from Open Banking for the deceased.  However, the more that banks acknowledge Open Banking and its potential and are prepared to collaborate with third party fintechs to develop better experiences for consumers, the more likely we are to get to a point where we can tap into that potential to improve things for the bereaved.

Many of the problems – highlighted by Which? – that consumers face when managing someone’s estate could be reduced significantly if open finance continued to apply to the deceased.

Open Banking provides a huge opportunity to speed-up and reduce friction for loved ones faced at some of the hardest moments of their lives, and there is a strong argument here for the current position to be reviewed to enable better access to a deceased person’s assets.

With our current platform, we are showing how technology is playing an incredibly significant role in dealing with the complex, tangled process that is probate and the potential of open finance in radically enhancing what we are already doing cannot be understated.

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