Business-as-usual is no longer enough for corporate customers.
Banks have traditionally treated consumer and corporate businesses as separate entities. Whereas consumer clients typically enjoy more of a ‘human touch’, banking for smaller business customers tends to lack personalised attention.
“Business customers report a dramatically different experience to how they are treated as retail customers by their bank,” says Matt Baker, head of SME Business Solutions, Asia Pacific, at Visa.
Now, however, several major technology trends are converging and transforming digital banking services for businesses. The result is that banks across APAC are waking up to growing competition and the changing demands of their business clients.
First, companies of all sizes across the Asia-Pacific region are embarking on their own digital transformations. Businesses want faster and more convenient methods to transfer funds and analyse their financial data. This means shifting away from manual paper-based processes and adopting electronic, increasingly automated payment processes that also allow more sophisticated, data-driven decisions.
For example, virtual cards and e-payments have skyrocketed in popularity as corporate and business customers seek to automate their internal payables and invoice processing. According to a white paper by Fraedom, a technology company that was recently acquired by Visa, growth in virtual cards has reached triple digits for some issuers, and “banks are now rushing to meet this demand”.
Second, the shift in mobile payment systems on the consumer side has made banks pay more attention to the upcoming threat of digital disruptors on the commercial side, according to Gilles Ubaghs at Aite Group, an international research and advisory consultancy.
He adds that banks need to provide a better, more relevant service, and invest in products that meet the changing customer needs of real-time, mobile, frictionless and simple banking.
In response, banks are embracing the idea of “open banking”, whereby banks open their payments infrastructure and customer data assets to third parties through open APIs (application programming interfaces). This data sharing has fuelled the emergence of new fintechs working to address pain points in value chains of businesses, and challenged traditional thinking.
This shift is fundamentally changing the relationship between businesses and their banks. Banks have been – and will continue to be – critical players in the commercial payments system, but their role should change to partners and trusted advisers, instead of purely providers of banking services, says Baker at Visa.
“A trusted adviser should be able to provide corporate customers with the best independent advice about what their banking solutions should look like, adding value, removing inefficiencies within their businesses and operations, and helping them to thrive,” Baker adds.
One example of this can be seen in the types of banks offering commercial card products. According to Fraedom’s white paper, while the commercial cards market was typically dominated by large national and international issuers, regional banks are now pushing their commercial card services. The white paper attributes this shift to the ability of regional banks to offer a more customer-centric proposition to mid-market corporate and small business players.
“Organisations that do not invest in their commercial card capabilities are likely to see themselves quickly fall behind,” says Ubaghs.
However, not all businesses are aware of the added value that commercial cards can bring and how they can help with changing business needs, such as process automation and smart analytics.
To implement these services, some banks – particularly those with complicated legacy systems and limited resources – are partnering with specialist fintechs such as Fraedom.
“Our technology helps issuing banks power-up their commercial card programs by offering their commercial customers greater visibility and control over business spend – all through using powerful cloud-based software and with mobility in mind,” explains Russell Bennett, chief technology officer at Fraedom.
“From the most basic of features such as digital statements, card management and spend reporting, to more complex, intuitive expense management, advanced invoice and virtual card payments; our solutions have been designed to give businesses greater clarity and control over spend.”
As banks adapt to the growing expectations from their corporate customers and the new opportunities presented by fintechs, a widening competitive gap will emerge between the banks that offer these transformative financial services and those that do not.
