How will banks transform to build the next generation of businesses?

Corporate, commercial and SME banking, circa 2030: Seven hypotheses

From widespread self-financing to popular subscription models and ecosystems, to sustainability leadership, the following seven hypotheses describe how corporate, commercial, and SME banks can move from the challenges of 2020 to growth in 2030. They speak to the most compelling opportunities for tomorrow’s market leaders and the biggest challenges for tomorrow’s laggards.

1. As more large companies self-finance operations and offer credit to suppliers, tech giants and large platforms expand their banking services.

Traditional revenue streams and client relationships will be threatened as surplus liquidity and credit proliferate. Clients expect their banks to do more than just provide credit when they ask for it; rather, the best banks will know precisely when and exactly how much credit their clients need, based on a clear understanding of current performance and growth opportunities. Leaders will develop diversified offerings for all types and sizes of businesses and are deeply integrated into their clients’ supply chains. Laggards will lose market share to large self-banking corporates; access to cheaper deposits will be the only thing keeping them in the game.

2. Banks redefine client-centricity in a segment-less world.

Leading banks will adapt their organizational structures and operating models to provide clients with the products and services they choose – with a serious focus on digital offerings – regardless of where they fit within traditional segments. These banks will also solve the age-old SME conundrum with a set of solutions tailored to their lifecycle and rich, seamless experiences for all clients. In comparison, lagging banks will stick with rigid segments based on revenue and employee counts, limiting their ability to react quickly to changing client needs. Their inability to streamline client movement between segments will undercut relationships with fast-growing SMEs that develop more sophisticated needs.

3. Banks evolve to become trusted advisors, leveraging data to play an active role in shaping clients’ future business strategies.

Over time, clients expect their banking providers to understand what they need to advance their business strategies and connect them to growth opportunities. Leaders will respond to that expectation by serving as matchmakers, connecting like-minded and complementary clients, as well as a curated network of third-party service providers (e.g., attorneys, accountants, and real estate professionals). They are able to monitor and track the progress of their clients over their entire lifecycle – it’s just about sales. Lagging players will struggle to predict which products and services their clients might need now or in the future. Thus, they can only react to incoming client requests and remain stuck in their traditional banking lane.

4. In the age of ecosystems, banks organize integrated networks of trusted providers to facilitate client growth.

Many businesses currently maintain relationships with multiple banking providers, because no one bank offers an integrated platform or a comprehensive range of services. In the future, the convenience of a unified experience or a single interface for all banking needs will become a baseline. Tomorrow’s top-performing banks will be integrated, open, and secure at the same time. Leaders win by creating and operating their own platforms or by “going niche” with a differentiated offering integrated with, and delivered through, multiple platforms. Laggards focus on a narrow set of transactions and a shrinking number of client relationships.

5. The subscription revolution comes to commercial banking, as clients pay a set fee to access tailored products and services.

Just as consumers have grown comfortable with subscription models, so too corporate and commercial banking clients want the ability to add or remove products and services quickly. Leading banks will provide customized solutions, comprised of interchangeable products driven by business flows and forecasts, for a set fee based on cost-effective and operationally efficient delivery. Subscription offerings align with clients’ baseline needs and promote add-ons and enhancements. Laggards will struggle to move beyond product bundles, which are less customizable, cumbersome to price, and even harder to deliver cost-efficiently.

6. As banks expand beyond banking, more clients embrace sophisticated corporate treasury, legal, risk management, and other services.

Clients are increasingly looking for help with non-core activities, especially relative to key growth milestones. It’s all about enabling them to focus on the business, bringing legal, advisory, risk management, and other financial management capabilities to clients in a coherent and accessible manner. Leading banks harness the power of ecosystems to develop and launch integrated services, carving out niches in specific areas, such as infrastructure project finance, healthcare, and travel and hospitality. Lagging banks are forced to satisfy larger corporate clients’ ever-rising expectations, even as they try to catch up on supply chain integration. At the same time, they lose market share because of the challenges inherent in providing enhanced services cost-efficiently.

7. Banks provide leadership on sustainability, inclusive capitalism, and other critical issues, creating stronger markets and more interconnected communities.

Reduced trust in financial services is a serious threat. Articulating a clear social purpose is the first step to making a credible and high-profile commitment to helping businesses and communities. Leaders will realize that their performance is tied to sustainability achievements and broader measures of value than traditional financial metrics – particularly in the areas of environmental, social and governance (ESG) matters. Laggards will view ESG and inclusive capitalism like a public relations exercise and struggle to think beyond outdated modes of “corporate social responsibility.”