Corporate and commercial banks: Harnessing technology to play catch-up

Yet banking is an industry that tends to move slowly—very slowly. And in this highly regulated environment, corporate and commercial banks move even slower than their more scaled and scalable peers, retail banks. There’s no denying that corporate and commercial banks have their work cut out to harness the power of technology. So, what must they do to catch up with their retail counterparts and fully leverage the opportunities this innovation poses?

Corporate versus retail banking

To understand the challenges corporate and commercial banks face—and how to combat them—it is first important to consider why there is such disparity between these two realms of banking. Businesses, as opposed to consumers, have a more complex range of banking requirements, internal governance and hierarchies, which vary significantly depending on the type and size of the business. This, in turn, requires a more complex, less standardised operating model than retail banking. Changing corporate and commercial banks, therefore, tends to be more costly, and the rewards, in terms of return on investment and customer satisfaction, are harder to realise.

As a result, corporate and commercial banks have tended to be late in the cycle, following retail banks several years later in key areas such as digitisation, personalisation and risk management. Banks that offer both retail and commercial banking often prioritise injecting investment dollars into their retail-banking divisions, where scale and simplicity lead to more bang per investment buck, creating an ever-increasing gap between the two. At the same time, there has been a trend of banks extending their retail models to the smallest ends of their business-customer bases, leading many business banking units to be incorporated into the retail divisions. We’ve seen this at Wells Fargo, Santander and Rabobank in recent years.

Opportunities offered by GenAI

However, rapid technological advances, particularly GenAI, represent the largest opportunity since the digital era began for corporate and commercial banks to transform their products and services and do so at a faster pace than ever before—an example is the chance to move beyond traditional finance and banking to become the portal for all of a business’s treasury and finance requirements. For banks willing to take the plunge and invest in technology to empower frontline staff and provide clients with unprecedented levels of data-driven insights and convenience, the prize is significant.

The next few years will change this traditional banking discipline beyond recognition, rewarding those who convert the technological opportunity over those who stick with the tried-and-tested approach. In short, there has rarely been a better time to get ahead of the competition. But to do so will require bravery, vision, innovation and execution excellence—not to mention getting the guardrails in place early to ensure that the technology is harnessed safely and effectively.

Laying the foundations

To capitalise on the opportunities of GenAI and data science, it is critical that corporate and commercial banks invest upfront in getting the foundations right, including the following key areas:

• Develop an understanding at the leadership level of what GenAI can do for the business—its potential and limitations.
• Ensure the sustainable, ethical, legal and regulatory compliance of GenAI applications and outputs, and address potential bias, transparency, accountability and privacy issues.
• Bring the organisation on a cultural-change journey, and ensure the alignment and collaboration of different stakeholders, such as relationship managers (RMs), specialist sales teams, product managers, IT (information technology) specialists and regulators.
• Enhance the skills and competencies of RMs and other front-, middle- and back-office staff to leverage GenAI applications and outputs whilst complementing them with their human expertise, judgment and knowledge of their clients.
• Develop the technical capabilities and infrastructure to support GenAI applications with a clear path to the production playbook.
• Minimise AI-hallucination risks through complete and representative data along with robust data management and monitoring disciplines.

Supercharging the relationship manager

With these cornerstones in place, GenAI can give the traditional fulcrum of the corporate and commercial bank—the relationship manager—the opportunity to become better informed and more relevant to clients than ever before. It offers banks a new layer of client insight and the ability to streamline burdensome operational activities at the points where humans and technology intersect. GenAI can enable a deeper understanding of clients’ liquidity, working capital and finance requirements, allowing frontline sales and coverage professionals to become super responsive and construct more holistic propositions better tailored to client needs.

Forward-thinking banks are already actively exploring leveraging big tech LLM (large language model) capabilities through the likes of Microsoft Copilot to enhance the effectiveness of RMs and specialist sales teams. They are also developing solutions to generate personalised insights and recommendations based on data on their clients’ businesses, financial performances, industry dynamics and risk profiles. GenAI can help RMs identify multiple client needs, suggest optimal pricing or terms, and propose relevant solutions or alternatives for their clients’ pain points or goals. It can also enhance and streamline the processes of developing pitch books, RFP (request for proposal) responses and reports—freeing up more time to engage directly with clients.

Interestingly, some have argued that the RM’s role will soon be redundant and rendered obsolete by digitisation and data. But let’s not forget that businesses’ banking and finance requirements remain complex—and for the more complex (typically larger) businesses, having an individual who deeply understands the client’s business will remain an important component of most corporate and commercial banks’ models. Rather, technology has the potential to transform RMs’ role from one that covers sales and operations to a more consultative position, whereby the insights they deliver enable them to become trusted advisors to business clients.

Consumerisation of banking

Indeed, the finance and treasury managers with whom RMs engage increasingly expect the same level of convenience and personalisation from their corporate and commercial banks as they experience from retail banks. They want their banks to provide fast, convenient and seamless services, as well as personalised, proactive and value-added solutions and advice. PA Consulting’s “Vision for banking” report found that 66 percent of business leaders believed that finance providers would survive only if they offered products tailored to customers’ specific needs. Traditional banking boundaries have also been blurring, with even smaller businesses expecting their banking and accounting information to be available on a single digital platform, for example.

Nonetheless, given the complexities of the bank-to-business relationship, most banks struggle to balance personalised touch with digital convenience for clients. Powered by data, technology and a detailed understanding of these complex customer journeys, the end destination is the provision of an omnichannel finance and banking service experience for businesses—where clients can choose whether to self-serve digitally (supported by chatbots or AI-powered virtual assistants when needed) or engage with a specialist—and can move seamlessly from one channel to another.

There is also a rush to identify long lists of use cases that technologies such as GenAI can help unlock. But corporate and commercial banks should recognise that prioritising the hundreds of potential use cases is essential to ensuring that limited resources are channelled into the areas that will drive the greatest impacts in the shortest timeframes. Use cases must be measured by business and customer relevance, reusability, the total cost of ownership and, ultimately, the return on investment (ROI).

GenAI offers the clearest opportunity in recent decades for corporate and commercial banks to close the technology and CX (customer experience) gap with retail banking. The technology can enable RMs to become more insightful and useful to clients than ever before, meeting ever-increasing client demands for more personalised and seamless services. But, crucially, banks must get the foundations in place first. In their enthusiasm to harness technology to drive a step change in digitisation and data, banks must not forget to invest in the groundwork, which spans from regulatory compliance to cultural change and technical infrastructure.

This article was first published in International Banker.