Four key actions to drive transformation in corporate, commercial and SME banking

In the recently released EY NextWave banking white paper, “How will banks transform to build the next generation of businesses?”, we share our latest thinking on the coming shifts in the corporate, commercial and small and medium-sized enterprise (CCSB) banking sector, and how banking leaders will need to respond. We think fundamental changes will dramatically reorder the industry by 2030, thanks to a number of major forces and “megatrends.”

Those trends range from global macroeconomic conditions and ongoing low interest rates to technology advancements and changing customer needs. Collectively, these forces have made transformation a strategic imperative for banks. While every bank will undertake a unique transformation journey, the way forward starts with a strong purpose and vision, a clear and client-focused strategy, a strong and flexible operating model, and sophisticated technology.

The following recommended actions represent a significant amount of change for banks, as well as a roadmap for moving forward. In many cases, these steps require uprooting processes and structures that have been built around a core business model that has remained largely the same for 100 years. Strategic planning and business case development are necessary but should not delay action. Indeed, tomorrow’s leaders in CCSB banking will be those that take bold action in the near-term, while simultaneously shaping the right strategies for the long term.

1.      Gear the business strategy for what’s next

Defining a clear strategy and value proposition is critical to future market leadership. Managing change and transformation is not a new imperative for banks. But they must address difficult questions and ensure long-term strategies are supported with sustained execution. The top priorities include:

• Defining the top strategic priorities (e.g., building platforms and ecosystems, owning relationships or developing niche products and services)
• Directing investments toward a long-term vision, with an eye toward incremental improvements (e.g., moving beyond the annual funding cycle)
• Clarifying the value proposition and articulating it clearly to the market

2.      Define client-centricity in a segment-less world

In the future, traditional client segments will no longer apply. All types and sizes of business will expect to access all services and products at different points in their life cycle. Targeting and engagement will be based on understanding client needs, contextual insights and the ability to make the right offer at the right time. Ideally, banks will develop the ability to make compelling offers before clients recognize what they need. Delivering apt client experiences in the future will depend on banks’ capacity to:

• Define a framework and deploy the analytics to understand where clients are in their lifecycle
• Develop solutions aligned to key points and milestones in clients’ journeys
• Enhance client onboarding and product and service delivery
• Develop digital capabilities and automated processes for clients to request, onboard and manage their own products
• Identify and address the barriers for offering and delivering new products and solutions to clients that have not had them before (e.g., treasury services for small businesses)
• Strengthen product management capabilities based on a continuous focus on client needs, and enable ongoing innovation

3.      Future-proof the operating model

To date, most banks’ digital transformation investments have sought to solve current inefficiencies and pain points across the operating model, rather than catalyze holistic change across the entire business. Looking ahead, a bolder and more focused approach will allow banks to:

• Define core capabilities now and for the future
• Break down product silos to offer more fluid and flexible solutions for clients
• Foster innovation through increased collaboration across teams and functions
• Build ecosystems in line with client expectations, then define and launch new features to exceed those expectations
• Define the role of partnerships, alliances and service agreements with FinTechs and niche providers to address non-core capabilities
• Build trust across the ecosystem without compromising speed to market

4.      Invest in data and technology to accelerate transformation and deliver quick wins

There is no doubt that banks need continued investment in data and infrastructure to underpin their long-term transformation strategies, whether the focus is on developing and monetizing application programming interfaces or modernizing infrastructure. However, they should aim to produce tangible near-term value to build momentum. These actions will help banks hit both objectives:

• Design ecosystems for extensive data sharing and in support of open banking principles
• Identify the right partners and make plans to engage them
• Define a plan for broad and accelerated adoption of ecosystems and new offerings
• Develop a plan to monetize data and analytics
• Ensure transformation and infrastructure modernization programs align to a clearly defined future-state vision

Read the full white paper for more about why these steps are necessary, as well as seven future scenarios where they will play out.

The views reflected in this article are the views of the author and do not necessarily reflect the views of the global EY organization or its member firms.