How will corporate banking predictions affect technology buyers?

By Puja Sharma

Most of the recent financial year has seen muted or negative corporate banking revenue for leading banks in India. Increasing competition from non-lending banking businesses like transaction services is also being driven by declining net interest margins on corporate lending.

The result is that banks are revisiting their legacy IT infrastructure to provide enhanced treasury and trade services by expanding as-is capabilities to move closer to their client’s value chain, according to the report by IDC.

Capital expenditures for various infrastructure projects have increased sharply in the Union Budget 2022-23, which has been beneficial for corporate banks. Multimodal supply chains will inevitably put more emphasis on trade and transaction services. In the connected ecosystem, cloud adoption will be accelerated, artificial intelligence will be extensively leveraged, and data management will be more efficient.

In India, the following are some of the key corporate banking predictions that will have a meaningful impact on technology buyers and the IT industry:

Payments derived from AI will account for 40% of payment routing by 2025: In particular, transaction banking services will adopt AI to improve the speed and efficiency of payments. Payment data must be captured and leveraged with end-to-end visibility as part of an AI-optimized payments strategy.

By 2025, over 15% of tier I corporate banks will offer their clients integrated solutions to unlock liquidity from traditional and digital assets as CBDC rollouts gain momentum. Banking institutions will need to prepare for CBDC’s introduction in FY 2022-23. They need to evaluate the existing workflow and data structure to identify the processes and systems that require adjustments to support CBDC adoption. Also, factor in infrastructural requirements to support custodial and depository services for CBDCs with a combination of centralized relational database management systems and distributed ledger technology.

To deal with the growing fragmentation of channels, 35% of corporate banks will platformise connectivity by 2023. Additionally, this will facilitate proactive alerts and data services that can be used to take action.

Corporate banks will be forced to develop platform capabilities to ensure consistent, scalable, and standardized data exchange across all interfaces due to an increase in fragmented channel offerings and the associated complexity. Financial institutions can benefit from a connectivity platform by driving innovation, getting the best results from present and emerging interfaces, and ensuring the cost efficiency, quality, and reliability of all connectivity interfaces.

At the GFF 2022 event, Mr. Amitabh Chaudhry, CEO, of Axis Bank highlighted the six major trends in the future of banking. “The first one is the emergence of customer-specific banks. Second is, as distribution becomes more and more digital, as more avenues to reach customers open, products and customization will become very important. The third trend will be the compounding effect of the Indian stack. The fourth trend will be saturation i.e. offering the services in bit sizes and how banks can make money out of it. The fifth trend would be hyper-personalisation. And the sixth trend is the emergence of partnerships,” Mr. Chaudhry said.

Talking about innovation in banking, he added, “New technologies (like Blockchain and Metaverse) are providing refined solutions for the customer at minimum prices. These technologies reduce cost and the future of banking is moving in that direction.”