Abstract

While the long-term impact of COVID-19 remains to be seen, some changes are obvious as they will merely accelerate existing trends. This means changes in distribution and servicing models, as physical high-touch relationships models will go digital. This exerts pressure on corporate banks to modernize their channel and connectivity capabilities and to change the way they drive sales. Digital capabilities in areas such as onboarding, Know Your Customer (KYC), and credit decisioning will have to be accelerated to match customer expectations.

However, the elephant in the room is the economic impact of COVID-19, triggering a reduction in global trade, a shrinking of economies around the world, and a massive reshuffling of credit worthiness of corporate customers. Hard-hit industries (such as aviation, hospitality, transport, physical retail, and the SME sector) may see an upsurge in insolvencies resulting in growing loan defaults. Most industries — with very few exceptions such as ecommerce and streaming platforms — have gone into survival mode, focusing on protecting liquidity, maxing out credit lines, and slowing down cash flows. This will mean smaller and less frequent deals and transactions even for large customers, which will adjust funding needs to their revised business plans. This will become a challenge for some corporate banking divisions as management re-evaluates the profitability of various lines of business (LOBs) and shave cost or divest from their corporate banking business in response.

Despite COVID-19, there are still positive developments for the corporate banking sector. Liquidity will be a priority for any customer in the nearby future. This means a growing demand for liquidity/cash management solutions and working capital management. It presents opportunities for banks to position new services such as predictive liquidity management or even treasury as a service. This may also positively affect supply chain finance solutions. However, it is important for banks to strike a careful balance and keep a close eye on their own liquidity positions.

This IDC FutureScape presents the top 10 predictions for the corporate banking industry.

"The corporate banking sector will be among the hardest-hit business lines in the financial services domain, particularly if the crisis drags out and we see multiple waves and more lockdowns. However, this can and should be seen as an opportunity for the industry to drive the digital transformation (DX) of their business forward and to position new products and services to help corporate customers navigate the challenging waters ahead," said Tom Zink, research director at IDC Financial Insights. "We expect a wave of innovation when it comes to experiments with new business models that position corporate banks as trusted advisors. We also expect to see new products and services that leverage data analytics and the emerging treasury ecosystem to help customers achieve better business outcomes."

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