Creating a Wholesale 'digital bank'

This article written by Amol Bahuguna was published in Gulf News and Banker Middle East publications. 

As digitalization of banking sector gathers momentum across the globe, with many technological buzzwords like ICO, blockchain, crypto currency, machine learning, artificial intelligence, etc., in the Middle East region, the UAE banks specifically have taken the lead in adopting and implementing world-class digital solutions. Many surveys also rank, the UAE among the top countries to have leading mobile penetration and having easy access to internet, means the country’s potential for embracing digital banking services and expected to become a top market. Disruption at its peak? However, whenever we hear about digital banks or challenger banks, it is synonym to retail or personal banking offering, may it be the capability to onboard the customers digitally or offering any of its services like wealth management, personal loans, cards, et al. Investments on technology has been mostly on the retail banking front.

In the other hand, Wholesale banking has been by far underinvested; hence we find more reliance on the manual processes and paper-based transactions. It is astounding that a very large section still are not able to come to terms on the real value digital transformation could offer to its commercial customers, as they today get underserved, including the bankers who end up spending over 50% of their time on non-core, repetitive and administrative activities, majority of which could be replaced with digitalization. 

As per one of studies of Boston Consulting Group (BCG), there would be paradigm shift to the digital disruption, with new competition from digitally nimble fintechs offering standalone commercial solutions such as low-cost cross border wire or supply chain financing solutions, an accelerating wave of digital innovations on the remittances space or blockchain on KYC and trade finance transactions, as products and services enhancements developed in response to commercial customers’ changing expectations.

The financial stakes are high for commercial banks. Over medium term (say next five years), these new digital platforms and channels will attract 30% of traditional corporate banking revenue. Commercial banks must undertake front-to-back digital transformations to keep up the pace with its customer’s requirements or be ready to get extinct. Banks would still be around but the margins and fee may not be. Markets are dynamic and so are the customer’s expectations, 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 take leapfrog on digital transformation journey. 

The BCG recommends a roadmap for digitization build around four pillars: reinventing the customer journey, discovering the power of data, redefining the operating model and building a digitally driven organization. Here are my top four areas where commercial banks must invest to remain in the race:

1.    CRM and Mobility

A robust CRM platform equipped with bespoke analytic tool to ensure coverage RMs could make an informed decision while managing customer’s portfolio on a day to day basis. One system, which gets accessed by different stakeholders within the bank including product streams like treasury, trade and cash management, so that the customer information can be fed on a real time basis, including the external feed, presenting enriched information on the customer viz., current share of wallet, benchmarking with its competition, credit approvals, latest call reports, pitch books, pipeline, mandates, product utilization, exceptions, et al. All of this, on the go, on a mobile. 

2.    Billing and Pricing

While new ideas such as mobility make the headlines, customer-centricity also refers to how customers are being charged and billed for services. Billing and Pricing is one of an exceptionally critical customer touch points, and most of the commercial banks have rarely invested in the technology, leaving this activity tremendously complex, rigid and prone to errors and many a times a recipe for revenue loss. It’s time that every bank must look to implement the billing and pricing engine, which can help position them for future growth and stability, with robust analytics to optimize every opportunity. The right investment can turn this system into a powerful tool to increase the revenue and adequately controlling risk. 

3.    Credit and Documentation

Gone must be the days when the entire credit process (information seeking, under writing, internal reviews, approval, documentation, disbursement, et al) needed to be handwritten, and performed manually. As a starter, banks could conduct proof of concept for SMEs. Banks can also open APIs to its customers and counter parties to directly feed the information on their performance, documentation, and requests. The entire process can get streamlined and become efficient.

4.    Transaction Banking

Undoubtedly, transaction banking is one of the areas where technology gets discussed more often than any place in the bank. It is because of the agile nature of the business, intense pace due to the rise of digital disruption, and of course customer’s every growing expectations. Continued investment is warranted, as commercial banks cannot survive on their old laurels. Research also suggest that the banks have largely focused on catering to its existing customers, to protect the current share of wallet, without sensing that they may fall short in innovation to maintain the incumbent advantage or acquire new customers. 

"It is inevitable that banks must increase its share of investments in their digital agenda for wholesale banking, before they become commodity or get extinct."