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Top-10 Trends in Commercial Banking: 2019

Unlike retail bank customers who rely on a single firm to handle most financial needs, corporate clients maintain relationships with several banks. The result is intense competition as commercial firms vie for wallet share. As the expectations of commercial banking customers grow, technology proliferates, and agile newcomers (FinTechs and other challenger banks) threaten to grab the most profitable aspects of commercial banking, it is a critical time for banks to invest in digital transformation and to fundamentally improve the way they serve corporate clients. The ability to retain and grow business and increase profitability is on the line.
Many commercial banks have begun to integrate their systems with that of their clients to extract deep customer insights and leverage AI and machine learning capabilities to streamline processes. Inefficiencies within important value chain areas such as payments and trade finance have been prioritized for transformation, and emerging technologies such as Distributed Ledger Technology or Internet of Things are being leveraged.
The open banking API-led economy, collaboration between banks and FinTechs, and data aggregation are all fostering improvements in services. However third-party data sharing and increased digitalization have also put a focus on data security and data-driven regulatory compliance.
To remain competitive commercial banks must stay alert to industry developments. This report aims to unpack and analyze 2019’s leading trends for commercial banks.

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Top-10 Trends in Commercial Banking: 2019

  1. 1. 1© Capgemini 2018. All rights reserved | Commercial Banking Trends 2019 | November 2018 © 2018 Capgemini. All rights reserved. Top-10 Trends in Commercial Banking: 2019 Capgemini, December 2018
  2. 2. 2© Capgemini 2018. All rights reserved | Commercial Banking Trends 2019 | November 2018 © 2018 Capgemini. All rights reserved. Top-10 Trends in Commercial Banking: 2019 Digital Experiences and the Transformation of Commercial Banking Collaborating with corporates to become more interlinked with their value chain Artificial Intelligence in Corporate Banking Cyber Security Transforming Trade Finance Real-Time Corporate Payments Processing Driving better margins with enhanced focus on non-lending services Bank-FinTech Collaboration API - Led Open Banking Economy Marketplace Lending 1 2 3 10 4 5 6 7 8 9
  3. 3. 3© Capgemini 2018. All rights reserved | Commercial Banking Trends 2019 | November 2018 © 2018 Capgemini. All rights reserved. Commercial Banking Digital Transformation to Revitalize Customer Experience Source: Capgemini Financial Services Analysis, 2018 Automated Processes Product Innovation New Revenue Streams Cost Savings Increased Customer Experience Digital Transformation Benefits
  4. 4. 4© Capgemini 2018. All rights reserved | Commercial Banking Trends 2019 | November 2018 © 2018 Capgemini. All rights reserved. Source: Capgemini Financial Services Analysis, 2018; Capgemini’s World Retail Banking Report 2018 Benefits Enhanced Efficiency and Cost Savings More Personalized and Customized Offerings Drive Towards Innovation and Platformification Increased scope of cross-selling and value added services Real-time View of Financials Lesser Scope of Errors Banks to Become More Interlinked with Clients’ Value Chain Source: Capgemini Financial Services Analysis 2018
  5. 5. 5© Capgemini 2018. All rights reserved | Commercial Banking Trends 2019 | November 2018 © 2018 Capgemini. All rights reserved. Use Cases AI Use on the Rise at Commercial Banks Source: Capgemini Financial Services Analysis 2018; Squirro, "The sky is the limit for artificial intelligence in financial services," January 8, 2018 Banking executives say that it would be highly impactful if an AI engine could spot relevant events that led to engaging with a client and closing a deal 87% AML/Fraud Detection Personalized Offerings Customer Engagement (Chatbots / Virtual Assistants) Streamline Processing Increase Operational Efficiency - RPA
  6. 6. 6© Capgemini 2018. All rights reserved | Commercial Banking Trends 2019 | November 2018 © 2018 Capgemini. All rights reserved. Source: Capgemini Financial Services Analysis, 2018; Capgemini’s World Retail Banking Report 2018 Leveraging Emerging Technologies, Banks are Transforming Trade Finance Operations • Minimize the efforts to track goods and documents • Enables event-based triggers such as releasing payment • Intelligent character recognition helps in digitizing paper-based processes • Reduction in manual efforts with better completeness checks • Reduces need of multiple records and cross-checking • Enhances efficiency • Enhances transparency • Reduction in operational costs • Leverage it to personalize solutions • Intelligent automation • Ensure compliance by identifying suspicious activities Distributed Ledger Technology Internet of Things Artificial Intelligence Text Recognition Source: Capgemini Financial Services Analysis 2018
  7. 7. 7© Capgemini 2018. All rights reserved | Commercial Banking Trends 2019 | November 2018 © 2018 Capgemini. All rights reserved. Banks are Streamlining Corporate Payment Services Bank Initiatives 42% US corporate finance and treasury respondents view real time payments having a potential for positive change 34% US corporate finance and treasury respondents view access as an important feature of real- time payments 30% US corporate finance and treasury respondents view real-time messaging as an important feature of real- time payments Digitally transforming payments services by upgrading their underlying payments infrastructure Through virtual accounts, banks are automating collections and reconciliation Partnering with FinTech firms to offer more streamlined corporate payment services Improving cross border payments for corporates Source: Capgemini Financial Services Analysis 2018; Finextra, “Real-Time payments are at the heart of the new global payments landscape: 10 Trends in 2018,” Barry Kislingbury, February 16, 2018, https://www.finextra.com/blogposting/15035/real-time-payments-are-at-the-heart-of-the-new-global-payments-landscape-10-trends-in-2018
  8. 8. 8© Capgemini 2018. All rights reserved | Commercial Banking Trends 2019 | November 2018 © 2018 Capgemini. All rights reserved. Source: Capgemini Financial Services Analysis, 2018; Capgemini’s World Retail Banking Report 2018Source: Capgemini Financial Services Analysis 2018 Irrespective of interest-rate changes, fee-based income provides less volatile source of revenues With niche, non-lending offerings, FinTechs are targeting commercial banks margins Access to data and technology is enabling banks to provide custom offerings and advisory Implications Banks Aim to Improve Margins through Non-Lending, Fee-Based Activities Drivers Banks will leverage technology to develop new solutions that derive tangible benefits for clients Banks of all sizes will aim to provide differentiated services to profitable clients Revenue mix of banks may undergo a change
  9. 9. 9© Capgemini 2018. All rights reserved | Commercial Banking Trends 2019 | November 2018 © 2018 Capgemini. All rights reserved. FinTech Collaboration Gains Momentum Source: Capgemini Financial Services Analysis, 2018 Complementary Strengths of Banks and FinTechs Commercial Banks Vast Customer Base Credit Underwriting Capabilities Risk Management Existing Client Relationships FinTechs Higher Risk Propensity Less Regulatory Oversight Leaner Operations Customer Analytics (Through Alternate Data)
  10. 10. 10© Capgemini 2018. All rights reserved | Commercial Banking Trends 2019 | November 2018 © 2018 Capgemini. All rights reserved. Source: Capgemini Financial Services Analysis 2018 API-Led Open Banking Economy Driving Commercial Banks' Future Growth Partnering with FinTechs to Drive Innovation Push from Government and Regulators Need for Agile Time-to-Market Provide Improved Products and Services Increased Acceptance of Cloud Services Open API Drivers Approaches for Banks APIs for Banking Innovation Using Developer Portals APIs for Banking as a Platform Leveraging the Banking License APIs for Client Connectivity – Real-Time Straight Through Processing APIs for Integration
  11. 11. 11© Capgemini 2018. All rights reserved | Commercial Banking Trends 2019 | November 2018 © 2018 Capgemini. All rights reserved. Marketplace Models Impact Traditional Lending 15.7% Expected CAGR for global crowdlending segment from 2018 to 2022 ~ US$ 15k Average funding per campaign in crowdlending (business) segment Crowdlending (Business) US$ 8.0 Billion Investment in the marketplace lending sector in 2017 US$ 4.8 Billion Investment in the marketplace lending sector in H1 2018 Investments in Marketplace Lending Source: Capgemini Financial Services Analysis, 2018; FinTech Global, "Global Marketplace Lending investment on track to surpass funding levels from last year," September 19, 2018, http://fintech.global/global-marketplace- lending-investment-on-track-to-surpass-funding-levels-from-last-year; Statista, https://www.statista.com/outlook/334/100/crowdlending--business-/worldwide, Accessed September 26, 2018
  12. 12. 12© Capgemini 2018. All rights reserved | Commercial Banking Trends 2019 | November 2018 © 2018 Capgemini. All rights reserved. Banks Heighten Cyber Security Investments 87% FS firm executives have become more concerned about cyber-risks, when compared with 2017 85% FS Firms has spent more on tackling cyber risks, when compared with 2017 45% Business leaders said that they will not increase their digital banking use because of security reasons RisingCybercrimeFears 78% Firms have been targets of payments fraud in 2017 Source: Capgemini Financial Services Analysis, 2017; Finextra, “FS firms ramp up cybersecurity investment,” May 7, 2018, https://www.finextra.com/newsarticle/32063/fs-firms-ramp-up-cybersecurity-investment; Payments Journal, “Corporate Banking Customers List Cybersecurity as the Reason They Are Sticking with Checks,” Steve Murphy, July 23, 2018, http://paymentsjournal.com/corporate-banking-customers-list-cybersecurity-as- the-reason-they-are-sticking-with-checks/; JPMC website, “2018 AFP Payments Fraud and Control Survey Report,” https://commercial.jpmorganchase.com/pages/commercial-banking/services/2018-AFP-Survey
  13. 13. 13© Capgemini 2018. All rights reserved | Commercial Banking Trends 2019 | November 2018 © 2018 Capgemini. All rights reserved. A global leader in consulting, technology services and digital transformation, Capgemini is at the forefront of innovation to address the entire breadth of clients’ opportunities in the evolving world of cloud, digital and platforms. Building on its strong 50-year heritage and deep industry-specific expertise, Capgemini enables organizations to realize their business ambitions through an array of services from strategy to operations. Capgemini is driven by the conviction that the business value of technology comes from and through people. It is a multicultural company of 200,000 team members in over 40 countries. The Group reported 2017 global revenues of EUR 12.8 billion. About Capgemini Learn more about us at www.capgemini.com This message contains information that may be privileged or confidential and is the property of the Capgemini Group. Copyright © 2018 Capgemini. All rights reserved. People matter, results count.

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