The Digitization and Trends in Wholesale Banking

The global wholesale banking industry is evolving at an unprecedented pace, driven by technological advances and a more demanding customer base. Fortunately, new technology not only enables a customer experience that is more closely aligned with expectations but also helps bank back offices enjoy greater automation, efficiency, and cost savings. True digital transformation will not take place if banks focus only on the client-facing front-end systems and ignore dated legacy technologies on the back end: Front-to-back technology replacements are needed to accommodate today’s challenging times.

When it comes to digitization, wholesale banking has traditionally lagged behind retail banking. Yet, several factors over the years have spurred a greater focus on innovation and digital transformation in this space. Ever since the 2008 banking crisis, there has been far more emphasis on minimizing NPA's (Non Performing Asset) through a stricter regulatory framework. A growing breed of fintech's has brought in new, innovative offerings that have added to the competition – putting pressure on both topline and bottom-line growth for traditional banks. A difficult macro-economic environment has added strain.

On the other hand, with the proliferation of technology across enterprises of all sizes and sectors, wholesale banking customers have been vocal in their push for more convenience, smoother transactions, and a better experience overall. They demand and expect their banks to provide the same experience that they are now accustomed to in their retail banking transactions.

In the last few months, the COVID-19 pandemic has added a greater sense of urgency to this transformation effort as enterprises grapple with a completely new environment with social distancing becoming the new normal. As businesses come to terms with the quantum of change and limp back towards normalcy, banks have a unique opportunity to support their customers and ease their pain.

Wholesale banking will undergo a restructuring of product developments, a new approach to customer interaction, and the employment of digitized practices to increase efficiency. Trends predicted for wholesale banking include a new approach to addressing customer needs so that services will work in accordance with businesses goals. New opportunities arise for merchant banks to reinvent their roles in financial matters with businesses, particularly now that fintech providers are a competitive presence in the market.

A recent study by Boston Consulting Group (BCG), also predicts a paradigm shift in digital disruption, with new competition from digitally nimble fintech's offering stand-alone commercial solutions such as low-cost cross border wire transfers or supply chain financing solutions. This is expected to fuel an accelerated wave of digital innovation in the remittance space, blockchain and trade finance transactions, as products and services get enhanced in response to commercial customers’ changing expectations.

The financial stakes are high for commercial banks. In the medium term, namely, in the next five years, these new digital platforms and channels are expected to attract 30 percent of traditional corporate banking revenue. Commercial banks must undertake comprehensive end-to-end digital transformations to keep pace with customer requirements or run the risk of becoming extinct. Banks may still exist in the future, but high margins and fees will not. Markets are dynamic and so are customer’s expectations, and hence there is no place for slow or lazy banks. The technology is available like never before and to the advantage of commercial banks, which can help them jumpstart their digital transformation journey. The BCG recommends a road map for digitization built around: reinventing the customer journey, discovering the power of data, redefining the operating model and building a digitally-driven organization. Here are my recommendations on the 8 areas where wholesale banks must invest to remain in the race:

1. CRM & Mobility

2. Billing and Pricing

3. Credit and Documentation

4. Transaction Banking

5. Banking Services With APIs

6. Enabling paperless onboarding and processing

7. AI/ML Enablement

8. Cybersecurity

Wholesale Banking uses Digital Transformation for increasing Customer experience

Digital transformation is helping Wholesale banks to improve operating efficiency, drive

transparency, simplify client experience and reduce risk.

The traditional lending process is cumbersome and time-intensive (with underwriting

decisions often taking two to three months), and commercial banks are looking to effective digital transformation to automate different aspects of decision-making.

  • Enabling paperless onboarding and processing will be a prime focus.

  • Wholesale/Commercial banks are augmenting digital capabilities to identify plausible early loan losses and to mitigate risk through real-time monitoring, thereby providing greater transparency.

As banking margins continue to contract, the corporate bank of the future will focus

on a broad presence in various digital channels and strong relationship management

with customers.

• Embarking upon a digitized journey will help banks augment customer experience,

streamline processes, and increase cross-selling opportunities

• Through effective digitization, wholesale banks have a chance to reduce operating costs, improve revenue streams, build strong client relations, and compete with non-traditional firms that prioritize the customer experience.

AI use on the Wholesale Banks

More and more Wholesale banks are leveraging artificial intelligence and robust data-mining capabilities to streamline processes and to improve customer service and risk-management activities.

Over the last few years, there has been a substantial increase in the amount of structured

data collected and used by banks. The use of unstructured and structured data has been driving both operational and strategic banking business decisions, and machine learning (ML) and artificial intelligence (AI) are playing vital differentiating roles.

Wholesale banks are beefing up efforts to streamline corporate clients accounts

receivable and payable processes.

1. Banks are using AI for front-end activities, to secure customer identities, mimic bank

employees, deepen digital interactions and engage customers.

2. AI is enabling banks to streamline processes and provide corporate clients

frictionless onboarding.

3. For back-office activities, banks are using AI to detect fraud and money laundering.

4. AI can help Wholesale banks identify new opportunities across clients and markets and

increase conversion rates.

5. By combining external and internal data, AI creates a revenue-driving synergy.

• AI-based virtual assistants will start with standard reporting and answers to basic questions, and it progresses to provide insights and enable payment initiation.

• AML and fraud detection have presented complex and persistent challenges for commercial banks, and now AI will help banks to enhance their risk profiles while simultaneously reducing costs.

Wholesale Banks are increasing their Investments in Cybersecurity

As banking increasingly embraces digital, it also increases the risks and vulnerabilities of breaches and data theft. • Banks have begun to prioritize customer trust as a key business objective and are investing in cyber-security to retain client confidence. • Emerging technologies are improving the assessment of risk profiles and fraud prevention processes.

A common problem faced by banks has been to understand the real financial impact of a

cyber-attack and any compromises on customer data can badly dent banks reputation.

• Generally, complying with regulations has been the primary reason for investing in

cybersecurity, but wholesale banks will need to prioritize cybersecurity strategies, to

thwart growing cyber threats.

• Banks will need strong governance and operational planning focused on cyber-risk activities to prepare for cyber threat mitigation.

Banks are leveraging technologies such as machine learning and data analytics to combat security issues in wholesale banking. ––These technologies add multiple layers of security to detect potentially fraudulent activities. ––Banks are also hardening up the defense strategies through new techniques and tools such as strong identity and access management programs. • Wholesale banks have begun to focus on data recoverability by implementing secondary systems to sustain operations during a cybersecurity breach.


AI becomes a reality beyond fraud prevention: Simply shouting AI in marketing materials is no longer sufficient, and AI development is increasingly critical in terms of product development and back-office efficiencies. Partnerships and talent development will remain critical for everyone.

Cloud adoption continues: The cloud allows Wholesale banks of all sizes to experience greater flexibility, quicker speed to market, and operational efficiencies. Banks that are not exploring the value of the cloud will find themselves at a competitive disadvantage as technology solutions become more accessible to even the smallest banks.

It is inevitable that banks must increase their share of investments in the digital arena for wholesale banking before they become marginalized or extinct.

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