The working relationship between corporates and banks
Different drivers for different stakeholders
A recent study from Finastra and East & Partners indicates a widening gap between corporate expectations and the services offered by their banking partners. This has contributed to a rise in alternative sources of funding. Particularly telling is the percentage of corporates that don’t trust their banks to deliver the technology services or products they need. To retain relevance to their corporate clients, financial service providers need to partner with technology companies to deliver the services these clients require, in a future-proof manner that is conducive to low costs.
To retain relevance to their corporate clients, financial service providers need to partner with technology companies to deliver the services these clients require, in a future-proof manner that is conducive to low costs.
Most banks and corporates are either already working with fintechs, trade networks or other third-party technology vendors, or are planning to do so, to achieve the innovation needed in working capital finance. What’s needed to meet both the requirements of banks and the expectations of corporates is a single solution that covers the full suite of working capital finance solutions, with integrated compliance capabilities and the ability to harness the platforms and technologies of the future.
By providing services in this way, banks can ultimately reduce the cost of supporting transactions across the lifecycle of the relationship, unlock new revenues and capture market share that has previously been unattainable.
How technology can help meet the needs of the industry
The trade finance sector has long embraced the value of digitization and automation. Wholesale industry adoption, however, has so far been slowed by immature technologies, the number of parties involved and the numerous interpretations of the rules.
While solutions for electronic trade documents have been available for decades, rulebooks and technologies that were not interoperable created “digital islands.” Transactions often subsequently defaulted to paper due to one or more participants not being part of the relevant electronic ecosystem. Even with emerging technologies and networks, there is a danger that these digital islands will be recreated unless interoperability is achieved on standards, formats and assets.
Paving a path from paper-bound to automation
According to some observers, global trade banks could save more than US$2.5 billion and increase revenues by about 10% by adopting an integrated digital solution that incorporates intelligent automation, collaborative digitization and future technology solutions.
Despite the excitement around distributed ledger technologies, regulatory and cultural factors will keep the industry operating in a hybrid world of paper, digitized and digitalized, for the foreseeable future.
“Despite the excitement around distributed ledger technologies, regulatory and cultural factors will keep the industry operating in a hybrid world of paper, digitized and digitalized, for the foreseeable future.”
To alleviate the cost and risk of manual processing, banks will need to harness technologies such as optical character recognition (OCR) to extract data from documents, automate sanctions and compliance screening, and populate the relevant fields in processing systems. These solutions will sit in parallel with digital channels and emerging networks, which will consolidate data across the ecosystem to support effective decision-making through analytics.
Regardless of whether a transaction is paper-based, digital or a combination of the two, banks will want to maintain a single source of records to support a standard operating model and process. Doing so will mitigate any impact on the user experience for the corporate as new initiatives and ways of doing business emerge. To respond to changing market forces and the needs of their corporate customers, banks will have to future-proof their landscape through the use of an open application programming interface (API)-based architecture and platform model.
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