ShareIntegrated Banking at the Crossroads
Today, banks of all sizes are feeling the consequences of globalization. Cross–border banking, mergers and acquisitions, proliferation of non–banking financial institutions and online and mobile banking providers have all been contributing to the heavy competition - to grab the maximum wallet share from the customer.
If there is anything that binds corporations, it is their wholesale banking needs – cash management, trade finance, foreign exchange, payments, commercial lending and corporate trust and custody – they need them all and preferably ‘all–in–one’. But this is easier said than done. Most banks operate their wholesale banking divisions such as cash, trade, payments, etc., as individual silos and autonomous business units ‘one-for-all’ - in other words, integration seems to be a distant dream.
As more and more banks begin to understand the value that integration can provide – such as new revenue generating opportunities, enhanced cross–selling options and improved customer service – all the while recognizing the intense cost pressures, new regulatory requirements and higher customer expectations, they are preparing to go the whole hog by upgrading technology and supporting infrastructure to make themselves more customer–centric and market–driven. In short, to meet the challenges facing them today, banks are more than willing to take a customer–centric approach rather than a product–centric one. This has led to the emergence of a new business line called ‘Global Transaction Banking’ (GTB). GTB brings products from cash management, payments, trade finance and investments around the world into a single business line. Corporations can operate this business line to satisfy the entire spectrum of their needs in wholesale banking.
But experts believe that this is only work half done. The truth is that ‘siloed’, product–centric systems in their IT infrastructure continue to restrict banks from harnessing the full potential of GTB for its corporate customers.
A solution doing the rounds for this challenge is to put in place another core processing system for the GTB. But, needless to say, this adds another product–centric platform to the infrastructure, increasing the complexity and of course, defeating the premise.
In GTB, as you would agree, the basic products continue to remain the same; only, the existing base products are used to create new integrated offerings here. So, in this case, the GTB needs a wrapper around the streamlined core processing systems for individual product lines, that enables the banks to create packages or integrate multiple products from the diverse product lines. This would, in turn, allow the banks to provide integrated offerings like working capital management and supply chain financing.
Automating and centralizing the pricing and billing practices across the wholesale banking functions that essentially constitutes the wrapper assumes prominence at this juncture. Most banks have the pricing and billing functions embedded in their product platforms. These systems are either manual or semi–automated, and are inflexible and prone to errors. Therefore, the banks need to extricate pricing from disparate product platforms/core systems and centralize the pricing and billing functions across wholesale banking, which can interact with all product processors like trade system, payment hub, treasury system, etc.
The appetizer benefit of such a centralized pricing and billing system is the banks' ability to make available integrated offerings that include products from different product lines and get a complete (single) view of the customer's business with them. It also helps the banks to provide dynamic pricing, differential pricing based on various parameters related to the customer, global price list accommodating regional variations, single global statement, price modeling, etc., to their demanding corporate customers. In short, a centralized pricing and billing platform could be the springboard to future for banking corporations.
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