Latest research identifies key challenges and opportunities in open corporate banking writes Sally Clarke, Co-Founder and Chief Revenue Officer, Starfish Digital
From Left to Right: Michael McNeilly, Chief Executive Officer, Metal Tiger PLC, Jumrud Sawangsamud Director-General, The Federation of Thai Industry, Tana Pothikamjorn Chief Executive Officer, Kasikorn Line, Divyesh Vithlani Senior Managing Director, Market Unit Lead – Southeast Asia, Accenture, and Dan Choi, CTO, Starfish Digital at Connect. Smart, Thailand
In 2020, the estimated total Gross Domestic Product (GDP) of the Association of Southeast Asian Nations (ASEAN) amounted to approximately 3.08 trillion U.S. dollars, according to Stastista. The figure is a significant increase from the previous years. In fact, the GDP of the ASEAN region has been skyrocketing for a few years now, reflecting the region’s thriving economy.
ASEAN includes Brunei, Cambodia, Indonesia, Laos, Malaysia, Myanmar, the Philippines, Singapore, Thailand, and Vietnam. Similarly, to countries across the globe, the pandemic has been the catalyst for momentous change in the banking and financial services industry, with the adoption of digital banking accelerating beyond all previous projections, and customer expectations changing rapidly in terms of how, where and when people want to manage their finances.
The demand for digital connectivity in the retail arena is now being seen in corporate banking sector as we are witnessing a shift towards banks opening their infrastructure to allow corporates to share their banking data with Third Party Providers (TPP) in a secure and standardised manner. It is worth noting that uniquely in Asia, joint government and industry partnerships are key to open banking standards.
This report identifies the top ten trends in open corporate banking.
1. Customer demands for digital services will accelerate
Corporates are expecting services to be tailored to their specific needs, which means that established banks have had to re-think how they serve existing clients and target new ones. This has created opportunities for new entrants to enter the market and provide banking and financial services in a modular fashion.
2. Regional banks are behind the global players
Leading regional banks are working on how to solve the challenge of real-time access to legacy core systems while the global players are more advanced and exploring technical onboarding (accessible Application Programming Interfaces (API) connectivity and integration for corporate customers).
3. Lengthy procurement processes will continue to present challenges to meeting customer demands for digital connectivity
In the December 2021 Thailand Open Corporate Banking Survey, undertaken by Starfish Digital, respondents identified complicated and long procurement processes as a key obstacle to digitising corporate banking relationships. For the global banks operating in the country, regulatory and compliance standards were also highlighted as a hurdle to innovation as was integrating modern technology with legacy systems.
4. Fintechs will play an increasingly vital role in the provision of technology solutions
As banks look to accelerate the pace at which they bring new products and services to market, they are increasingly turning to fintechs, according to the survey. Especially in the mid-tier banking sector where their inhouse teams would benefit from access to external expertise. In the near future, top tier banks will continue to drive technology development from their global headquarters, but changes are underway with several European banks pivoting towards Asia to meet the needs of Asian clients demanding real-time data to run their corporate treasury functions. This is particularly true of wealth management banking divisions who are under enormous pressure to meet the demands of Chinese based customers for real-time connectivity.
5. Access to human talent and innovation will continue to attract banks to Fintech providers
To rapidly respond to new opportunities, ASEAN banks will need to partner with fintechs. If not, they will lose out to foreign competitors who have already expanded their capabilities and are offering real-time corporate banking connectivity today.
6. Decreasing margins in the corporate banking owing to lower interest rates, increasing platform costs and rising client complexity
Lower interest rates and competition for transaction processing will continue to put a downward pressure on margins and returns. Additionally, greater regulation and more diverse digital channels will increase “stay in business” fixed costs. Lastly, increasing client complexity is a challenge as banks depend on their corporate customers to transform their own legacy systems, while meeting new requirements across geography, industry, or payment medium.
7. The digitalisation of low value payments will be a primary driver of change
Corporate banks will look to offset lower margins by acquiring new clients and applying data analytics to optimise resource allocation within the bank. Potentially leading to greater opportunities for fintechs operating in the corporate banking space.
8. Banks will look to engage connectivity partners who can support straight-through-processing of their corporate banking product offerings.
Driving the adoption of digital solutions are corporate banking clients. For the Chief Financial Officer, the digitalisation of banking services is a pre-requisite to achieving integrated treasury management. They need to manage multiple banking relationship for real-time access to payments, status inquiry, and account information as well as gain the ability to make dynamic cash management decisions. For Chief Information Officers, API Banking provides a transparent and secure technology means to build that integration between the banks and their treasury systems. Without digital connectivity, integrated treasury management is an impossibility.
9. Corporate banks providing fully automated digital offerings will gain market share.
Companies who have made investments in digital connections to banks, want to see those investments preserved. As with digital integration between finance systems and bank services, corporates have access to better data to reconcile their account balances, transactions, and payments. Those banks that can capture customer data will be able to identify greater value opportunities for cash management, lending, payments, and advisory services.
10. API Banking Connectivity will become a standard.
Digital corporate banking is rapidly evolving with over a trillion USD expected to be redistributed in the next five years. Banks require a solution to repeatably and reliably provide the API onboarding for any client to scale to meet future demands. Similarly, companies require a solution to be flexible to manage any bank they have a relationship with. Corporate clients will no longer accept long onboarding and manual processes which are error prone, slow, and expensive.
About the author
Sally Clarke is Co-Founder and Chief Revenue Officer at Starfish Digital. An entrepreneur with international experience in leading start-ups from early stage development to successful IPO, Sally has held senior global roles at the world's leading financial technology companies - FIS SunGard and IHS Markit. In 2011, she moved from London to Singapore and established the advisory practice at Asia's top-ranked think tank, the Singapore Institute of International Affairs. In 2014, Sally received the LaSalle, Singapore Incubator Fund award for an e-commerce company she founded and later sold in 2017.
Sally graduated from the University of Barcelona with an MA in International Finance and Commerce, holds an MA in Asian Art History from the University of London, and BA (Hons.) majoring in Economics and Politics.