Identifying opportunity in mid-to-large corporate banking (Part 3)

In the first and second part of this series, we’ve explored the rapidly changing needs of mid-to-large corporate customers and the impact on their expectations of a banking partner. In brief, corporate customers feel their banks provide ‘much of a muchness’ in terms of their products and services, with little considerations for the nuances and needs for each type of customer. Furthermore, they feel that their relationship with the bank lacks a foundational sense of trust which is built through meaningful interactions. 

To improve the mid-to-large corporate banking experience, it’s imperative to better understand your client base. Typically, corporate customers have been segmented using more traditional metrics such as turnover, profitability, and industry. However, this structure tends to whitewash customer needs and ignore the valuable difference between customers. For example, the financial needs for a heritage bricks-and-mortar retailer specialising in high-end luxury, such as LVMH, may differ significantly from a digital-driven fast-fashion retailer, such as Boohoo. 

Our mid-to-large corporate customer research also demonstrated that the expectations of their banking partner varied by role – for example, a Procurement Manager for a mid-sized business, was more heavily involved in the banking relationship compared to a similar role in a large corporate who had little direct contact with the bank due to the high levels of systems integration. Most commonly, we found that within medium-sized businesses, there was a greater assimilation of roles where Finance juggled multiple hats from Treasury to Procurement to Accounts Payable, and more frequently relied on their banking partner. In comparison, larger organisations had more disparate, siloed teams with more specialised needs and varying degrees of interaction with the bank. As such, having a deep understanding of your customer base and specifically, their banking needs is foundational to designing the appropriate channel and servicing strategy.

Upon reflection of what we have learned from first and second instalments of this series, its clear that there are several ways in which the mid-to-large corporate banking experience can be improved:

Be more Human – you’re dealing with people not just a business

Corporate customers want to feel understood and that their banks are tailoring their approach to address their specific needs rather than applying broad, blanket products and services:

•    Understand my business: Don’t assume all businesses have the same needs based on traditional segmentation models (e.g., industry sector, turnover). Some corporate customers expect a proactive relationship with their bank where the bank understands the intricacies of their business while others are more functional and expect the bank to just solve problems given to them. If the approach is appropriate for the business type, customers are more receptive to sales advances as there is an underlying comprehension of the products and services that are more relevant to them

•    Trust & transparency: Solidifying a transparent and honest relationship leads to opportunities as customers indicated that they would be more willing to have more difficult and strategic discussions with their Bank and trust the advice offered by them

•    Loyalty: corporate customers expect loyalty in return for loyalty. Where a bank has invested in their relationship with a customer, businesses feel obligated to first approach and consult their banks due to a sense of loyalty with them as they do not want to upset a pre-existing stable relationship that’s taken time to build

•    Advice, an opportunity to stand out and offer added value: As banks are the institutions to hold finance and banking expertise, they can aim to enrich businesses knowledge by going to them to offer advice and new ideas on a regular basis. Banks should not simply rely on the businesses to come to them with problems and suggestions. Customers are more likely to seek advice where their banking partners have demonstrated knowledge that sets them apart from the industry. For example, this could be through the form of reporting and insights or advice and guidance around optimal buy and trade times for foreign exchange or sweeping balances and cash pooling advice.

It’s all about the Relationship Manager (RM), and relationships are based on good communication

Having a personal relationship is the foundation to a successful banking relationship and better understanding customers due to the complexity and varied needs of corporate clients

•    Roles and expectations of the RM: corporate customers expect that their relationship manager is available for more complicated and non-standard requests and that they are empowered to react quickly. As contacting the call centres is seen as a lengthy process where customers are bounced through a variety of people, a named contact with a direct phone number is perceived as more accountable if things go wrong. RMs are often seen as extensions of the bank – a strong RM relationship can be an anchor point to build and strengthen the trust and confidence in the bank as a whole.

•    Establishing a personal relationship: having a personal relationship can sometimes be the deciding factor between joining or maintaining the bank as a provider. There’s a sense that stronger personal relationships are formed when RMs go through the ups and downs of a business over time and that once this relationship is formed, an increase in tailored and bespoke services/offerings that offer value will be made. Developing this personal relationship with the RM is highly dependent upon their personality and skills, such as their ability to demonstrate compassion and proactive problem solving.

•    Bank support for the RM: an RMs success depends on the structure of the bank and its ability to provide relevant support when needed. Freeing up RM time and enabling them to proactively engage customers to drive out maximum value form their services is key. RMs need to be removed from executing low value admin related tasks and be provided with the right tooling, insights and specialists to remove bottlenecks and complicated processes.

•    Businesses don’t always need an RM: Finance Directors (FDs) have an understanding and expectation that RMs are available and ready to help on more complicated matters if the FDs can self-service their simple, non-urgent requests. Given this understanding, Banks should more actively review their operating models and identify low value areas where RM activity can be automated or pushed towards self-service. There is a sense that medium to large corporate services provided outside of the RM should be wrapped and packaged as more premium so as to differentiate from smaller business banking services, due to the amount of revenue that is obtained from these large-scale corporates.

Day-to-day Banking – Getting the basics right

Customer research indicates that clients expect banks to get the basics right first time. This therefore is key for Banks in developing strong customer relationships from the very beginning.

•    Online banking is the norm: customers want things to be easy and do what they want to do for their every-days banking needs. While RM relationships are integral, intuitive and simple self-serve interfaces are expected. These hygiene factors are not considered value-add but a baseline expectation. 

•    Payments and transactions need to work first time and if they don’t, corporate customers want to be told quickly of any issues. As their businesses and reputations can be at stake, payments are a critical focus for customers, and they want these resolved rapidly without having to contact the bank multiple times for repeated issues. Banks should ensure digital visibility, customisable alerts, and proactive approach from RMs towards issue resolution 

•    Lending and access to credit needs to be simple, quick, and specific to the business rather than the complicated, lengthy current processes that required heavy paperwork that takes too long to get approved

•    Foreign exchange (FX) – where customers don’t deal with FX day-to-day and lack the expertise, they felt they were missing out on the best deal. They looked to their banks to provide them a full-service solution (e.g.: providing a full suite of currencies), proactive insight about the best times to trade, and market competitive fees

•    Company and purchasing cards are not streamlined enough as corporate customers struggle with complex system integrations and often corporates have several providers with different product offerings. Insightful reporting, such as information on expenditure trends, can help corporates manage their spending

Tools and platforms – adding value and simplifying interactions

Guiding customers through change by removing the headache from technology maintenance, and by providing value-added tooling through a deeper understanding of their business needs, differentiates a bank from the crowd. 

•    Security is necessary but it must be seamless and simple. Some have cited that excessive and restrictive security processes can slow down their workflow & processes, thereby becoming disruptive. 

•    Integration is hard work that takes a lot of resource from inside the company. A business’ first priority is ensuring their solitary systems are specific to business requirements. If their own existing systems and platforms host a myriad of issues, there’s less of an impetus to look into integration protocols. Therefore, the integration of banking platforms become secondary.

•    Changing or updating accounting platforms, something that is so integrated and vital to the company, is disruptive. Customers want to be educated and guided through the process to build trust.

•    Authorisation and payment thresholds are necessary, but don’t overcomplicate the process. Procurement managers and treasurers understand there is a need to obtain authorisations and don’t see it as a burden. However, the process by which it is done makes a considerable difference. More manual processes (for example, involving wet signatures and paperwork) are cumbersome, unlike direct approval in an integrated platform.

•    Value-added tools such as management, procurement, and treasury tools, are seen as favourable as accessing banking data quickly and seamlessly makes the job easier if done right. However, inaccurate information causes customers to lose faith in their tools and creates a lack of trust.

Multi-bank / International bank – is the complication worth is?

Corporate customers felt banks needed to do more to grow with them, especially when these changes included cross-border growth.

•    Banking overseas added layers of complications such as legal issues and local cultural complexities, which often made onboarding and everyday banking processes more complex when conducting business from a distance

•    Working with international banks aren’t as simple as they say it’s going to be. Some banks claim to have international reach but while partnerships might exist, they are disjointed and customer experiences are often strained. Even with international banks the process is cumbersome, costly and takes time.

In summary, mid-to-large corporate customers are demanding more from their banking and changes in their expectations are rapidly evolving. While the research confirmed our initial hypotheses that most UK corporate banks were not meeting customer expectations, it has also highlighted a number of opportunity areas for institutions servicing the mid-to-large corporate banking segments to change and improve their approach.  

Get in touch for ways to improve your corporate customer relationships and loyalty.