Can you start by sharing a bit of an overview of the current market, what is the current preference for digital at the moment?
It’s an interesting question because when we look at or talk about digital in a lot of our research we tend to focus on the consumer side of things, because that tends to be a lot of where the disruption is being talked about and being seen. Whereas in the commercial space we are seeing a lot more advancements in the use of digital. We are seeing a faster shift to the preference for digital amongst corporates, particularly in things like payments and we talk a lot about the need for digital around cross-border payments, real time payments, transfers, invoicing. It’s a really big part of the proposition banks and nonbank providers are looking at.
I can imagine with businesses continuing to grow cross-border operations they need something that integrates well and remains seamless for them. How does this compare to the past 12-24 months? Have there been any significant changes regionally or on a global scale?
We have seen some changes recently, a lot of the change that we are seeing has been driven out of Asia, and there are a couple of factors for that. What we are seeing in terms of the wider economic climate, in terms of the trade, we have seen the ‘one belt, one road’ initiative which is being driven out of China which has brought a lot more focus on the regional capabilities of banking partners, the corporates are looking to their banking and finance partners which will be further focused on the regional capabilities of these factors. With all these factors, time is of the essence and that has a shift towards the digital aspect as well due to digital providing a much faster solution than we used to see.
Certainly, in the last 12 months we have seen a move towards a preference around digital in our research, that digital banking or online banking is one of the top three reasons sided by the corporates that we speak to across Asia, as a reason why they may be looking to switch a banking relationship in the next 12 months.
How important is it to have a good digital offering? You mention switching, how likely is it that people are switching or how frequent is it that people are looking to switch in order to obtain a better digital offering?
Again, slightly different to the consumer aspect, when you look at corporates their switching rates from a total banking relationship perspective is quite low. They don’t tend to move an entire banking relationship, what we do see is they will very happily open other banking relationships, try other providers, particularly if it is something related to price or a service proposition. So they are happy to hold multiple relationships and what that means is that other players or third party players around fringe products like payments will be able to open up and engage with corporates potentially faster than the banks can and then it becomes a play off between how good is that proposition around a cross-border payment facility or a trade facility for me versus what I can potentially get through my bank where traditionally a lot of those relationships would be done through the relationship manager.
You mention payments as a key factor into considering new banks or financial services companies, what other types of banking tasks do they want to be completing via digital and is there disparities between online versus mobile or is it consistent?
A couple of things that we are seeing out of the research is that in fact, when we talk about digital expectation and digital experience, the shift is almost surpassing internet banking and is moving to tablet or mobile particularly again in Asia and Australia where we are seeing a lot of that relationship shift to a tablet or a mobile banking device. HSBC and Standard Chartered have been quite active in pursuing their digital engagement through the corporate banking sector. It’s not just payments, there are a lot of other things where the customer has a preference to do things digitally, particularly again around trade finance. Lending is something customers are happy to or would like to have some sort of engagement in digital and what we are seeing there is almost a step back to the old school, where customers would like to do things digitally however that relationship with a human element is still important in that lending relationship because it is such a large part of the corporate banking relationship. A company that is taking an interest in that is Judo Capital in Australia, where they are quite deliberately pushing their human element and their RM’s but with a very digitally led proposition creating a nice mix of both the digital side and the human side.
I would imagine corporates all vary in terms of their needs and level of interaction they require but is it possible for banks to offer that completely digitilised service, do you see a time where it will be fully digital in terms of corporate banking or do you think there will always be that need for face to face interaction with relationship managers.
I am probably a traditionalist in this sense, I will always lean towards the fact and certainly from a lot of the research we see, when things get complicated or when things go wrong customers still want some sort of human interaction. There is obviously a huge preference to do things digitally – I think for the banking and financial services institutions playing in this space it’s about getting the balance right, its about having the options and the choice available for their customer. I personally think that there will always be a role for humans, particularly in the corporate banking space or the more complex banking products, particularly around lending and trade, there will always be a human capacity needed there so I don’t think it will go fully digital.
And that reflects some of that consumer data you were sharing earlier about how they are happy to go digital for simple transactions and tasks but for those more complex products they do want to speak to a person or go to a branch and receive that level of reassurance.
Yes that’s right, looking again at the research we see a swing of the pendulum back to the traditional banking relationship, not so much from an RM piece but more from that core banking proposition with a breadth of product and a breadth of relationship. Interestingly, we saw some numbers out of the US recently that were related to a dip in the stock market being driven heavily by the tech side of things, the NASDEQ led the drive down of the stock market. Potentially this suggests that the market has reached a peak in their digital appetite and traders are starting to move away from that. A question may be, have we seen the top of the tree or the top of the hill in terms of that digital engagement and are banks and customers finding an equilibrium around that?
It’s clear that having a good digital offering is very important and that corporates are willing to maybe not switch completely but consider other institutions if they do have some sort of unique offering. When it comes to digital, obviously there is a big investment from these organisations, to what extent does the digital offering actually impact the business KPI’s? What’s the incentive?
There is certainly a need to have a strong digital capability in whatever you are doing and however you are dealing with these corporates because that expectation is there. I think what we need to remember is that corporates are humans as well. They have personal banking relationships, a lot of them have grown up with banking, they have seen the personal banking side move to digital, there is an expectation that they should be able to do things digitally. Everything that we see from our data is, if you have a corporate customer who is happy with your digital engagement, is happy with your digital solutions, they are going to be less likely to switch, they are going to be more loyal, which means that they are more likely to shift their business to you. As I said earlier, customers are happy to have multiple relationships and a lot of that is based around price rather than the speed of the transaction, it’s a pure price play. If you can give them a good digital experience they would prefer to bank with a consolidated set of partners. I think that having a good strong digital offering will create benefits for the long run in terms of customer engagement, growing your customer base and is a defensive play against the likes of TransferWise or Revolut who are coming after that transfer of payments space which is probably the most disrupted piece of the corporate banking relationship. Everything we are seeing from the lending disruption space, whilst there are quite a few online corporate lenders out there, particularly in Australia, I still think that the traditional banking model has a place and a part to play.
Finishing up, do you have any case studies of banks or financial services providers that are really leading the way in terms of digital?
I mentioned Judo before, an interesting case study in Australia, particularly focused around lending but they have been growing out their proposition to further and wider products. They have a very good mix of a digitally led, personable operation. A lot of the people that bring on board are ex bankers, but they support them very well with the digital offering. The banks in Asia in the corporate space, I mentioned HSBC and Standard Chartered, are doing a lot of work around their trade capabilities and digitising that and digitising their RM’s. So, it’s not so much a full digital offering, it’s where we are seeing case studies of either new players or banks really leveraging digital along with their traditional ways of servicing these customers to give them a