Sustainability expectations vary between banks and corporate clients, study shows

By Puja Sharma

Research into global corporate banking by digital business and IT services leader NTT DATA has found that sustainability presents the largest mismatch in investment expectations between banks and their corporate clients. This is particularly true for the retail sector, where 55% of retail organisations are demanding investment into sustainable products and services whilst only 41% of banks are investing in these areas.

NTT DATA’s report, Global Research into Corporate Banking’s Future 2022, surveyed banking respondents across the globe and examined the state of corporate banking following the COVID-19 pandemic. The report focused in particular on areas of corporate demand in the retail sector, which has vastly changed over the last decade, with consumer demand for sustainably sourced clothing and products soaring. As such, retailers have become increasingly keen to associate themselves with a sustainable image, meaning banks must support retailers with their green initiatives.

After the 2008 financial crisis, banks underwent a period of consolidation where they rebuilt capital, mended fences with regulators, realised efficiencies in back-office functions, and invested in digitisation. By 2019-2020, banks were safer, more predictable, and better capitalised.

This meant the shock of COVID-19 in 2020-2022 was well-weathered by the banks. But while the traditional banks were battening down the hatches and weathering the storm, the FinTech and big techs were going to work.

Corporate banking has permanently changed as we look forward to 2022 and beyond. Clients are no longer at their office desks, and the face-to-face relationships that the business development managers had nurtured have been replaced by multiple touchpoints. Phone interactions are increasingly being replaced by digital platforms and interfaces. Clients demand an omnichannel experience, seamlessly switching between channels to create a frictionless banking environment.

Banks have become increasingly required to customise their services to meet the needs and demands of corporate clients due to the speed at which corporate banking has accelerated. Meanwhile, technology stacks are becoming integrated into corporate systems, replacing manual effort and elevating AI into a key decision-making tool.

Banks with traditional corporate structures find themselves in a bind. Getting up to speed has been challenging, and many have been overwhelmed by the velocity of change. That urgency is well-founded: about two-thirds of the value created during an economic recovery cycle is created during the first two years after the crisis. Getting to work now will set them up for long-term prosperity.

While 55% of retail corporations are demanding investment in sustainable products and services, only 41% of banks are investing in this area. Likewise, banks are failing to match the demand for Sustainable Certification on Activity, with only 41% investing in this area while 52% of corporations in retail are demanding investment.

Miguel Mas Palacios, Director of Global Corporate Banking at NTT DATA, said, “We discovered disparities between expectations from businesses and the investment coming from banks. Take sustainability: banks aren’t matching the demand from clients yet. Corporates are looking for banks to join up their channels, and yet omnichannel investment isn’t fully meeting that either. Work is required.”

Key highlights

• 3x of corporate clients report they want to communicate through APIs compared to those wishing to primarily communicate face to face or via email. Corporates increasingly choose machine-to-machine communication over person-to-person.
• Around 70% of construction companies report their demand for an omnichannel corporate lending solution is unmet compared to only 30% in professional services. Corporates are looking for industry expertise from their banks with the research demonstrating strong differences in demand between industries.
• Over 85% of banks are working on rationalising their portals. The main reasons revolved around client-centricity: 57% say the driver behind portal rationalisation was to improve the client experience and 53% say it’s to allow staff to improve the servicing of clients.
• About 57% of banks are using AI to enhance their KYC and AML processing. Globally, banks are investing in streamlining and digitising client-onboarding processes.
• Approx 61% of banks choose to build a cash forecasting solution in-house versus 39% that buy a third-party solution. LATAM is the region most likely to buy an off-the-shelf solution.