In this period of turmoil, corporate treasurers find it more important than ever to express what products, solutions, and services they want from their banks. Aite Group research finds that to transform the bank-client relationship and to bring corporate banking to the next level, corporate users expect a collaborative approach (i.e., co-creation) with banks and fintech vendors working together to design solutions that fit with each other’s needs. Co-creation is a term increasingly used to describe the collaboration between corporate treasurers, their banks, and technology providers on deciding the priorities, the design, and the development of new digital solutions. This collaborative approach requires a common glossary of definitions and a clear map of the constituting elements of the open banking ecosystem. Corporate treasurers tell Aite Group that they expect banks to clearly communicate their open banking strategy. Banks and fintech vendors must expect co-creation to become a key criterion in future requests for proposals.
Banks can reap the opportunity to turn the concept of co-creation with fintech vendors into a real value proposition by fulfilling their corporate clients’ demand for a better digital experience and easier onboarding to access basic and more sophisticated banking services. These are adjacent capabilities to run a business that a bank can offer to corporate executives that want to handle financial supply chain operations. With ‘start-the-business’ tools and capabilities a bank can help to launch a new business (e.g., incorporation). The corporate client can then be more effective in running daily operations with the bank’s ‘manage-the-business’ products and services (e.g., deal with suppliers and clients; manage to be paid on time; control and anticipate cashflows). Finally, a commercial client will enjoy its bank’s ‘grow-the-business’ supported practices (e.g., enter new markets; use multicurrency solutions; access global trade finance capabilities). The partner bank can also cater to the ‘exit-the-business’ phase of a business lifecycle by offering business evaluation tools in partnership with dedicated service companies.
Financial institutions (FIs) have long been expected to offer solutions rather than products. This will be even more true in the near future, with client s demanding solutions that are much more integrated with the corporate systems and configurable on the fly. Bank relationship managers (RMs) must ask their clients what they want, knowing that the counterpart expects guidance on which technologies (e.g., APIs) to choose and, even more, how to develop tailored solutions without the need for additional (and expensive) work. Bank RMs appear to corporate clients as trusted advisors if they concentrate primarily on educating and informing corporate clients on what to do with banking technologies, explaining how API-based fintech applications can help treasurers restructure treasury department operations, and suggesting APIs that best integrate with corporate ERPs and TMSs.
Corporate clients are looking to bank RMs as experts that can teach them how to create business value from open banking. All that corporate customers want is to move across bank services and applications in a more agile way, being totally agnostic about the system used to run the business. The problem is all on the banks: How can they satisfy the request without losing the client? Although the conundrum appears unsolvable, there is a solution. The likely business model that Aite Group envisions for corporate open banking will be similar to platform-driven models: The platform provider does not own the physical assets but retains the relationship with the client. Considering that the more the banks engage in developing and exposing their open banking products via APIs, the more they will have to give up the direct connection with the client, the option that banks are left with is to create an ecosystem of partnering FIs and fintech vendors and become the curators of the experience that allows the customer to bank with the FI and run business together. In partnership they will streamline operations in process areas such as accounts payable and receivable automation, improve digital experience, insights into the ecosystem to access better information and make sound decisions. It is likely that bank-fintech vendors integrated ecosystems will replace value chains globally and blur the boundaries between retail and commercial banking. A possible use case is a platform that connects buyers and sellers of real estate: through the platform the client who wants to buy a house is able to access all correlated services (e.g., mortgage, insurance, moving services, registration to utilities services) developed and offered by specialized ecosystem constituents that are best connected via APIs to the similarly numerous ecosystems of corporate users, each one with their own specific demand. Ecosystem players must think in terms of processes and with full visibility of the end-to-end journey that generates the user’s needs.
Banks have the opportunity to leverage the “landing page” characteristics that a platform offers to visitors that consume the banks’ services. All banks have a large commercial network in their core market, so a platform represents a significant distribution channel in each local market. This setting offers the possibility for an FI to curate a ‘super-app’ that can be delivered as an e-commerce feature and leverages the contributions of all ecosystem partners. Corporate users tell Aite Group they prefer to work with their bank as technology trusted partner. Banks are—hence—in the privileged position to leverage this level of acquired trust and demonstrate value in the transaction by building marketplace-based opportunities that connect professional services (e.g., small accounting practices) for business-to-business transactions. Corporate users will seek for a fintech alternative only if their bank is not fast enough to correspond to their needs. In its trusted advisory relationship with the corporate client, the bank must be ready and prepared to advise the counterpart on the use and on the business impact of technology innovation. Banks must be aware that when building or joining an ecosystem, the use case will be very diverse depending on the market. FIs must define their own priorities and match them with the cultural set of capabilities that resonate with the demand from ecosystem participants. Not all banks will want to be in every ecosystem, and the cultural fit between the bank and the participating companies represents the key deciding factor. Banks must think what cultural community environment they will encounter and what services they will be asked by the ecosystem community.
The decision must be well pondered because it is a fact that economies of platform make it possible for corporate users to consume cheaper and easier-to-access products and services from the platform rather than in the open market. In a consortium-based platform model the value is presented by the interaction between the customer and the bank services layer. As previously mentioned, banks have an asset they have grown throughout centuries of business relationships: trust.
The question that banks must now answer is how to monetize the value created through the ecosystem and delivered on the platform. The value is represented by the ability given to the customer (i.e., the treasurer, the CFO) to transact with the bank partner in the environment of their choice: e.g., via their ERP/TMS; via the bank’s portal; via the fintech’s partner multi-bank access gateway. These options and added-value interactions can be offered at a premium. Very soon FIs will realize that competition will shift from holding the user interface with the client to servicing the client by delivering API-based products and services that more closely align with its needs. It is a new era for open banking: APIs “dematerialize” the banks and separate the asset (e.g., the bank account number, the payment channel, the loan contract) from the service (respectively, the most rewarding place to hold liquidity, the most efficient and cheapest rail to exchange a payment transaction, the most economic option to access funding). A well-engineered consortium platform architecture offers features and tools that enable visiting consumers to develop their own applications on top of the consortium bank’s APIs. This enables banks—each one adopting its own sales model—to develop and leverage their API catalog to generate new lines of business and to provide a new service that has not existed before. While the producers are the banks and the fintech partners develop programs and applications by accessing the APIs and the tools made available by the consortium, soon banks will be joined by corporate clients.
These corporate producers will be charged a fee because they are accessing a community or a market that will use their solutions to exchange goods and service transactions on the platform. The opportunity and tools to consume APIs to produce new applications that the consortium platform offers to corporate clients may justify the request to apply a charge fee.
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