Corporate, commercial and SME banks need a strong change capability to deliver the next generation of businesses

The corporate and commercial banking sector is being disrupted and banks needs to transform, not just modernize. Preference for, and use of, digital channels are at all-time highs. The consumerization of expectations and experiences means the traditional principles by which banks have served corporate, commercial and SME clients have been forever altered. The products and services banks offer, and how they are delivered, are being questioned. Client demands for more value-adding services and richer experiences require that banks not only provide financing, but act as trusted advisors who provide services and knowledge to meet their customers’ needs, potentially served through integrated ecosystems. Against a background of continued low interest rates, this makes commercial as well as customer service sense.

 A clear vision for success

To respond to these changing expectations, corporate and commercial banks need a clear purpose and vision that everyone understands and can relate to. Banks need to pivot from a reactive, piecemeal approach to thinking ahead to what their business could look like in 2, 5- or 10-years’ time and how they will increase their competitive advantage. It will help them address the ‘duality challenge’ of whether to optimize what you have now versus reimaging your business or parts of it. Their approach to transformation and assessing the capabilities they need depends on this vision.

To enable such fundamental transformation requires a strong and embedded transformation capability aligned to the business’s purpose and strategy. In line with EY’s Transformation Realized methodology we believe organizations should transform businesses through the power of people, tech and innovation:

• Put people at the center of purpose, strategy and everyday business operations to enhance the client and employee experience
• Deploy technology at the speed at which people expect it, the business needs it, and considering today's reality, demand it
• Be part of ecosystems; forge partnerships and alliances to be at the forefront of disruption rather than becoming disrupted

Different banks have organized their transformation functions in different ways. From a horizontal approach, with centralized transformation teams, to responsibility for change within individual businesses. And in some cases, even as part of BAU roles at the other.

What is the right approach?

We observe a trend in the market to a more vertically aligned approach with transformation increasingly aligned to businesses and functions. Whilst some of this may be born out of a desire to cut the costs of central transformation teams, the closer alignment to the businesses and the customers makes sense. However, it may be harder to deliver change that cuts across divisions.

Any change capability should be set according to the bank’s vision. But we believe the following attributes are a good benchmark:

• Focus on the vision and strategy of the bank and delivering a measurable return on investment
• Be customer led
• Set clearly defined metrics and objectives and key results (OKRs) and use data and analytics to track delivery
• Ensure a deep and broad understanding of technology and strong enterprise architecture capability
• Have a well-defined employee value proposition, clear and compelling career paths and promotion of continuous learning
• Ensure a diverse and inclusive team
• Set a structured innovation and ideation approach with a test ground that support failure
• Have a differentiated partnering model for FinTechs and other potential partners

Conclusion

Dynamically applying the right capabilities, processes and enablers will enable banks to succeed in their transformation. By considering agility over predictability, and innovation over strategic planning, banks can lay the guardrails that will provide their people with the knowledge, solutions, data, tools, technology literacy and communities they need to create value.

This publication contains information in summary form and is therefore intended for general guidance only. It is not intended to be a substitute for detailed research or the exercise of professional judgment. Member firms of the global EY organization cannot accept responsibility for loss to any person relying on this article.

EYG no. 003839-21Gbl