INNOVATION IN BANKING: DIGITAL BANKING
Corporate banking has always lagged the retail sector when it comes to the adoption of digital technologies, but mobile-banking services are gathering pace—and some visionaries are even contemplating banking services based on wearable technologies.
Once there was Internet banking and the development of banking services accessed via desk-top computers. Next came mobile-banking via smartphones and tablet computers. Now banks are focused on the concept of digital banking, a term that incorporates both of these areas, as well as other electronic delivery channels.
“These days, with the growth of more digital touch points—from smartphones and tablets to the latest smart TVs and wearable technology—digital banking can mean a lot as it is becoming service and platform agnostic,” says Alvin Lim, head of direct channels at HSBC Singapore.
Notable features of the digital banking concept include the use of social media to engage customers, strategic analysis of client behavior and the provision of more-tailored services. As is often the case, retail banking is leading the way, with the development of new functionalities and services. Consumers, accustomed to accessing certain features in their ecommerce and social media interactions, increasingly expect their banking platforms to provide similar features, as well as a similar standard of design and usability.
But although corporate banking services may have historically lagged behind retail banking in terms of sophisticated features, this gap may be narrowing. “Corporate clients’ expectations of digital banking are converging with the expectations they would have from their own personal retail banking,” says Hemant Gada, managing director, channel and enterprise services head, EMEA, Treasury and Trade Solutions at Citi. “The expectation boundaries between retail and transaction banking are becoming blurred. Hence the urgency of adopting digital banking in transaction services.”
DIFFERENT DEGREES OF COMFORT
Lloyd O’Connor, managing director and product executive in the corporate and investment bank at J.P. Morgan, says he is seeing a much greater emphasis on design and usability in corporate banking. “This is no surprise—consumers tend to take their everyday experience into the office and expect a similar client experience,” he comments. “Efficiency and speed are key determinations.”
O’Connor explains that the bank is increasingly spending more time looking at client user groups in order to understand the challenges faced by their corporate customers. “Consumer groups often watch people using their products in order to study usability—they’ve been doing that for decades,” he says. “We work with a broad user group of clients round the world in a similar fashion to see how they use our technology. They challenge us and really are engaged in the process as a means of becoming as efficient as possible.”
The types of functionality being developed for corporate banking services are not identical to those available in retail banking. Alastair Brown, head of eChannels, Global Transaction Services at RBS Bank, argues that while the retail space is seeing a wholesale shift of functionality into the digital space—and particularly the mobile space—corporate banking is characterized more by a focus on specific mobile functionalities, such as the ability to approve payments using a smartphone. “Mobile and tablet solutions are going to complement more-traditional solutions, but they are not going to totally transform the way that corporates do business,” he adds.
Not all corporations are alike, however, and there is significant variation in the degree of comfort that treasurers have with such developments, particularly the use of smartphones and tablet devices to access banking services. While some companies are embracing the mobility offered by cutting-edge digital banking services, others are less comfortable with the prospect of treasury staff using such services while away from the office.
“Most corporate clients are happy with the mobility that banking services over mobile gives them,” says Gada. “Adoption is not 100%, owing to the security policies of corporations or the perception that banking over mobile somehow trivializes the focus—for example, approving a large value payment whilst away from the office without having all the documentary evidence at hand.”
As well as being concerned about user behavior, corporations are also focusing on the security risks associated with the use of mobile devices in corporate banking. “The whole topic of security is ever-present in the consumer world, but super-present for large corporations, which are very protective of their data and user access rights,” says O’Connor. He adds that J.P. Morgan’s mobile platform uses a combination of security measures—a “security cocktail”—comprising voice recognition, finger swipe password and encryption to make it more difficult for an adversary to compromise the device.
|Brown, RBS: Mobile and tablet solutions are going to complement more-traditional solutions.||O'Connor, J.P.Morgan: We work with a broad user group of clients round the world to see how they use our technology|
As digital banking models evolve, banks are continuing to explore new opportunities. Brown says that RBS is increasingly having conversations with corporate clients about how the bank can play a role in delivering services to those clients’ end customers. “As some of our customers are developing new mobile offerings, from airline tickets to the provision of utilities, they are interested in integrating those services with financial capabilities, such as payments,” he says. “This is expanding historical notions of B2B and B2C banking to include a B2B2C model. We are at the very early stages of that, but people are thinking about what innovation will look like in this space.”
Another area of development is the use of social media in providing banking services. Although corporate bankers are unlikely to engage their clients over Twitter, Brown says that banks are beginning to use social media as a means of following industry trends and evaluating new initiatives. “By helping us understand how different commentators and industry speakers are engaging with these initiatives, social media can give us a much more comprehensive and powerful insight into what’s likely to succeed and what’s likely to become the standard in three-to-five years’ time,” he says.
Other applications of social media are beginning to appear in the area of corporate banking. “Citi is leveraging social media technology capability for internal employees to interact seamlessly with colleagues and allow efficient knowledge management and sharing,” explains Gada. The bank is also using social media to facilitate self-service and training-on-demand for clients.”
This is a fast-developing area, and the devices currently used to access banking services are not the end of the story. Lim points out that, although smartphones and tablets have helped to drive adoption of digital banking services, smaller, wearable gadgets such as watches, wristbands and eyewear are mushrooming quickly as a means of making payments in the consumer world—particularly micropayments.
Beyond payments, a broader range of banking services is already beginning to be developed for wearable technology. Ukraine’s PrivatBank, for example, is developing an app which will allow Google Glass users to undertake fund transfers and make payments. Last year Fidelity Labs launched an app allowing investors to obtain quotes from stock indexes using Google Glass. Though the adoption of wearable technology in corporate banking might seem far-fetched, the past few years have shown that the landscape can change rapidly—and so can corporate expectations.