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Digital Disruption in CIB Electronic Platforms for Corporate Clients in the Multi-Channel approach
Introduction Developing and managing a multi-channel approach has been a key issue in retail banking. But what about Corporate & Investment Banks (CIBs)? Where do they stand in terms of multichannel for corporate clients? Especially, what are the trends and opportunities in digital channels for them and what are the implications? Push towards Cross-Product / Cross-Asset Electronic Platforms For many years, CIBs have been offering electronic platforms for corporate clients to execute transactions and trades online; historically, this has taken the form of multiple separate web banking applications which were specialized per product (cash management, trade finance, forex, …). Figure 1 - Clients’ demands are getting sharper User Friendly The changing environment is currently creating new opportunities for banks to provide cross-asset / cross-business e-platforms and to enrich their multi-channel offering. The combination of three major elements of disruption is accelerating the pace of change: corporate clients’ rising expectations, innovation within leading banks, and new technologies. First, corporate clients have become more and more demanding regarding what an e-platform should deliver in terms of services and features, ease of use and design, and personalization capabilities. They are looking for simplicity (a single entry point platform), availability (multi-devices, multi-places) and relevant information produced in real-time (see Figure 1). They also expect e-platforms to be collaborative; corporate users want the ability to interact with bank experts or relationship managers at any time via the e-platform. Finally, corporate clients expect full security and require self-service access control for managing user rights and entitlements. This trend is similar for all corporate clients, with a specific focus on ease of use for Small and Medium Enterprise (SME) clients and sophisticated functionalities and customized requirements for larger corporate clients. Banks must bear in mind that corporate clients are getting savvier and keen to benchmark. Modern e-platforms are a must have in order to retain clients. The pace of change has also accelerated due to the innovation from leading Banks, specifically: those that have been very creative in services and features development in the past five years - particularly in the fields of cash management, trade finance and foreign exchange - thus raising the bar for their peers. The third pillar of change is technology that enables the development of efficient client journeys and innovative features. Among them, three types of technologies are key: integration technologies, data visualization solutions and data analytics solutions. Compliance All in One Place Customer Expectations Multichannel Connected Data Customizable Integration technologies allow customers to set-up a single entry point for their different e-banking applications (cash management, trade, etc.) opening client users to a seamless environment. They can also set-up links between different applications or embed functions from one application to the other (i.e. widgets) to create value-added services (e.g. sweeping from cash account to money market funds, navigating from a cash movement to the originating operation), which allows the integration of partner applications, market data feeds, news etc. Data Visualization tools have also emerged on the market; these tools enable customers to set-up powerful reporting functions with visual data representation (dashboards, charts, maps…) offering the ability to navigate and drill-down into: different asset classes, different geographic locations or different legal entities. 3
Finally, Data Analytics has generated a fantastic opportunity to produce more knowledge for the bank about its clients, which generate new insights and to create more value for customers. However, leveraging Data Analytics for e-platforms raises important questions e.g. which insights and options should be pushed directly to clients via the e-platform and which should be pushed to sales (Coverage, Sales, and Relationship managers)? See Figure 3. Some banks are also considering the opportunity to create additional revenue streams by selling data analytics services to clients (e.g. predictive forecast of liquidity, scenario based analysis…). E-platforms are key building blocks to develop a Big Data strategy says the Head of Digital Transformation of a European bank. Conversely, e-platforms represent a tremendous source of new information about clients: what types of transactions or queries clients do, what research do they look at, etc. Figure 3 - Data Analytics The use of Data Analytics on e-banking platforms ALL PRODUCTS & SERVICES ACCESSIBLE ON ONE PLATFORM Many product & services available in one platform NEW INSIGHTS ACTIVITY FOLLOW UP Next best action Dashboards Cash optimisation The best reaction to market Anticipation DATA ANALYTICS Communication tools Behaviour analysis Peer group analysis Market trend analysis • To propose relevant reactions to market evolutions / events leveraging analysis of external market data, • Optimize their investment strategy through predictive forecast of liquidity, leveraging historical cash profiles, seasonality of positions, etc., • Compare client’s activity with their peers and propose best action (avoiding procyclicity), • Adapt to pricing policy, leveraging algorithmic analysis of price elasticity, etc. 4
Despite the changing environment and opportunities, cross-asset e-banking platforms for corporate clients are still under-developed in continental European countries. The latter still rely on dedicated product-specific e-platforms. Major arguments against investing in client-centric cross-asset e-platforms include: lack of request from corporate clients themselves, lack of request from Coverage and/or Sales, question whether such a platform will increase market share, and questions on the ROI of such an investment. So why did leading banks invest time and money to build crossassets e-platforms? The first reason is the ability to increase revenue through cross-selling different products that are all available on the same e-platform (cash management, trade finance, foreign exchange, liquidity solutions, investment products, etc). The second driver is to enhance the customer experience on the e-platform. Finally, they wish to strengthen the bank’s image on the market as a digital player. traded on electronic platforms has constantly increased these past years reaching 75% of total volumes, according to a survey by Greenwich Associates. The biggest beneficiaries have been banks with the best electronic platforms. Digital channels: a clear driver of differentiation for CIBs Differentiation on e-platforms can be created in four dimensions: - Wide and rich panel of product offers, - Integrated platform, - Consistent services and user experience over different form factors (Web / Tablet / Smartphone), - Value added functions (data analytics, reporting features, collaborative tools, …) Being able to provide a customercentric platform will be a serious competitive advantage in CIB says a Senior IT executive in a major European bank. Overall, it appears efficient e-platforms strongly contribute to the leaders’ continued expansion/stronghold in the Global Transaction Banking market as well as in Forex. On Forex, volume In that perspective, a number of banks have invested heavily to enlarge their e-product offers and to comply as much as possible with corporate clients’ expectations. The ability to offer a large number of products under one umbrella is a key indicator of maturity (see Figure 3). At this stage, only a few leaders (such as JP Morgan, Citibank, HSBC, UBS, Deutsche Bank, BNP Paribas) are able to deliver a wide and rich panel of products through a user-friendly and integrated platform. Fewer players are able to provide the same on mobile devices (see Figure 4). Overall, most European players are lagging behind their American counterparts. Figure 3 - Maturity curve of e-platform according product coverage Level of Complexity Loans and desposits ve ur c rity tu Ma Forex and trade ﬁnance Cash management E- Statements Accounts consolidation Basic Operation (ACH & RTGS) Liquidity management Soﬁsticated pricing Innovative products investment products Equities Commodities Derivatives Cross-products Sweeps and pooling Forecasting tools Pricing executions Real time operations Management of client interactions (Trade ﬁnance) Source: Capgemini Consulting research Time to market 5
Figure 4 Example of best in class services on mobile Standard offer Cash management services on mobile are getting more sophisticated Best in class Rarely offered Crossborder transactions Bill payment FX/Currency Transaction approval/reject Mobile check deposit* Cash pooling and netting Letter of File upload Stop Payments credit/Trade (view/approve) Finance Collections Lockbox Asset and liquidity mgmt ACH payment initiation Fraud prevention Alerts and notifications Transaction analytics Cash forecasting/ projections Easy search Positive pay Risk analysis Dashboards Controlled disbursement reporting Risk & compliance reporting Audit history Adaptive Archived report access SSL Protection SSO across applications Biometric authentication Mobile device identification Transaction initiation Inter-bank payments TRANSACTION ALERTS & MONITORING Account balance Transaction summaries Consolidated accounts reporting Document REPORTING ACCESS & SECURITY Personalized access Source: Capgemini Consulting research 6 format exporting Multi-factor authentication (OTP/Device) reporting Authorization levels assignment User delegation
So banks must decide whether they want to develop full-fledged platforms on their own or whether they want to partner with vendors for certain products or services. Of course, the different approaches don’t allow a bank to differentiate itself in the same way. Two major partnering approaches are seen on the market and can be used in combination: one is to use white label e-platform solutions available on the market; the second is to participate to multi-dealer platforms operated by independent players. White label e-platform providers offer banks turn-key client portal solutions which must be integrated with the banks’ systems (in order to process the transactions and trade orders in the bank’s back-end systems). Such approaches reduce the costs and time to market for banks, relieving them of the effort to develop their own front-end portal. However, such solutions are not suited for those banks who wish to differentiate themselves on the market with innovative services and a leading user experience. For large banks that have the ability to invest in developing their own e-platform, the challenge will be to make sure their architecture is sufficiently open and flexible to allow the integration of offthe-shelf applications for commoditized capabilities (e.g. a basic cash forecasting module for the SME market clients). This mixed approach will usually require some customization effort for the purchased application to ensure a harmonized user interface through the entire e-platform, including a harmonized logic to promote and access the different applications on the portal (e.g. an app store model). Multi-Dealer Platform (MDP) is the second trend for banks in partnering with tiers: MDP allow clients to get automatic quotes/ prices for a given trade from several banks participating with the MDP. Such platforms focus on highly liquid assets with straight through processing execution such as Forex; they are mostly used by Institutional clients and some medium/large corporate clients looking for the best price. Banks usually still offer the same products on their own e-platform for their direct clients. So MDP are more seen as an additional channel for clients. Here, it is critical for banks to define their strategy, because once a corporate is on-boarded with a MDP, it tends to stay with it. Overall MDP are growing their market share especially for FX trading; today 50% of FX trading amounts worldwide is managed through such platforms, while only 25% goes through individual bank platforms (and 20% by phone) - Source: Les Echos (March 2015). While large corporate clients can behave like institutional clients, small institutional clients may also have similar needs as corporate ones; hence, Banks should look closely at their client segmentation to capture the cross-selling opportunities and also determine how to do it. Should banks offer distinct e-platforms for Corporate and for Institutional clients (still reusing components or services between the platforms)? Should banks offer one platform serving all client segments (with personalization capabilities)? It is expected that modern and well architectured e-platforms should offer the flexibility to adapt to different client types & segments. E-platforms can even be tailored to the needs of SME clients states the head of CIB of a Mutual Group. Looking at the small business segment (a rather large number of clients), many banks are not offering the specific digital products & services they require. As a result, it is estimated that one-third of them may shift to non-banking challengers (2014 Aite Group Study). See Figure 5. It is one of the many questions banks need to address before embarking on the journey of cross-asset e-platform development! 7
Figure 5 - Non-banking actors challenging banks Will non-banking challengers transform the market? As few banks offer comprehensive e-platforms, it is estimated that up to one-third of small businesses may shift to non-bank solutions (2014 Aite Group Study). YODLEE SMALL BUSINESS SOLUTION Yodlee, a new player in the banking system, has found a vacant place between banks and small businesses. That vacant place represents a very large market segment (e.g. 30 million in the USA) of customers mostly dissatisfied with their Bank (only 25% said to be pleased with their current primary financial institutions). Yodlee’s core activity is to deliver online banking solutions especially designed for SMEs, but also to provide its services to financial institutions to incorporate the Yodlee solution into their online banking platforms. Yodlee Small Business Solution offers: - Quick and easy on-boarding of accounts - Single entry point access to services, and easy to use tools such as accounts receivables, account summary, cash flow, expense management, credit scoring for SMEs, payroll, time management, transactions, qualitative insights, consolidated dashboard with 360-degree view of accounts - Strict bank-level security and encryption technology. 8
Reshuffling the bank’s organizational model to spend more time on advisory services, however, they must also provide additional value that the electronic system does not contain. The implementation of such e-platforms with a true multi-channel approach for customers entails a number of deep organizational and operational transformations. First, an e-platform alters the relation between Relationship managers, Sales and their clients: indeed the former are able This raises a number of key questions, such as: should clients be segmented and oriented to the most relevant channel or should they choose by themselves; what value is expected from Coverage, from Sales; is there a need to rationalize the sales force, and should it focus on the product or on the client relationship; should the remuneration system evolve? Etc. Figure 6 - E-platforms raise a number of questions COMMERCIAL STRATEGY Client targets (segmentation) Pricing strategy and incentives Multi-channel approach GOVERNANCE AND ORGANIZATION IT Data and platform security Make or buy Linking with Big data New skills BUSINESS CASE Return on investment? Ability to invest heavily? Capital market involvement Sales force organization Role of the middle ofﬁce International deployment Transversal team on e-banking E-platform distribution SECURITY AND COMPLIANCE Country speciﬁc restrictions Regulatory procedures Fraud detection 9
In addition, e-platforms have a strong impact on the operating model, and in particular on the role of the middle-office which is bound to evolve. Three main options can be envisioned to take advantage of the middle-office current competencies: 1. refocusing on their controlling role, which encompasses both risk and increasingly compliance, 2. a shift towards marketing, with the creation of a Big Data center of excellence, or 3. an evolution towards sales support, leveraging e-platforms monitoring tools. Thirdly, we see great opportunities to embed security and compliance functions in these platforms to support banking processes. But which technologies can provide the necessary capabilities for Financial Security? Finally, such development requires a high expertise from IT and the ability to optimize investments. Various options are now available to minimize costs (such as white labeling and licensing software) but all of them require a global view of the competitive landscape as well as a deep understanding of customers’ expectations, which can only be developed through a close partnership between business stakeholders and IT. Not yet the end game of multi-channel for CIBs The CIB industry has definitely entered the multi-channel era with e-platforms becoming cross-asset, mobile device support, data analytics etc. But e-platforms will need to be properly articulated in a global multi-channel approach, also considering contact center models to cater for certain clients both for trading and advisory. Here again, it will require banks to think through their client segmentation to determine which client to direct to which channel and how to adapt their organization. Top-end CIB players have already started down this new journey based on the lessons learned from their retail banking experience. 10
Authors: Cécile André Vice President, Financial Services, Paris Tel: +33 149674276 e-mail: firstname.lastname@example.org Fabrice Perrier Principal, Financial Services, Paris Tel: +33 149674957 e-mail: email@example.com Special Thanks to: Kishen Kumar Vice President, Technology Services, USA Tel: +91 9739914928 e-mail: firstname.lastname@example.org Ari Goldman Senior Manager, Technology Services, USA e-mail: email@example.com Frédéric Abecassis Principal, Financial Services, Singapore Tel: +33 149673431 e-mail: firstname.lastname@example.org Agathe Leblais Consultant, Financial Services, Paris Tel: +33 682896240 e-mail: email@example.com About Capgemini and the Collaborative Business Experience Capgemini Consulting is the global strategy and transformation consulting organization of the Capgemini Group, specializing in advising and supporting enterprises in significant transformation, from innovative strategy to execution and with an unstinting focus on results. With the new digital economy creating significant disruptions and opportunities, our global team of over 3,600 talented individuals work with leading companies and governments to master Digital Transformation, drawing on our understanding of the digital economy and our leadership in business transformation and organizational change. With almost 145,000 people in over 40 countries, Capgemini is one of the world’s foremost providers of consulting, technology and outsourcing services. The Group reported 2014 global revenues of EUR 10.573 billion. Together with its clients, Capgemini creates and delivers business and technology solutions that fit their needs and drive the results they want. A deeply multicultural organization, Capgemini has developed its own way of working, the Collaborative Business ExperienceTM, and draws on Rightshore®, its worldwide delivery model. Learn more about us at www.capgemini.com. Find out more at: www.capgemini-consulting.com Rightshore® is a trademark belonging to Capgemini Capgemini Consulting is the strategy and transformation consulting brand of Capgemini Group. The information contained in this document is proprietary. © 2015 Capgemini. All rights reserved.