Corporate banking is a custom-tailored banking and financing services for corporations. Corporate banking is usually provided by commercial banks and involves all the services which can be extended on a financial level to corporate bodies to ease day-to-day activities. Asset and cash flow management, investments, securities and equities managements, forex, loan operations, mutual funds management, deposits and liquidity management, risk management, cash management, payments ,and trade are just some of the products available in this type of banking.
The main aim of corporate banking is to offer secure and timely financial services that can support sophisticated plans and corporate financial requirements of the medium to large businesses, governments, or other big institutions.
To stay ahead, corporate banks have determined where fintech innovations can provide the greatest top- and bottom-line impact and developed a cohesive strategy for adopting fintech. Consequently, fintech has delivered the following to corporate banking.
1) Specialized Service
Fintechs target certain parts of the value chain. For instance, in payment processing, MineralTree provides a cloud-based online and mobile platform for which it creates customized processes and products. Likewise, within supply chain financing, corporations such as Taulia, MarketInvoice, and Viewpost offer automated electronic payments and invoicing. Beyond providing a good customer experience, those services are less regulated, easier to launch, and highly profitable.
2) Low Cost
The ability to standardize and digitize offerings allows fintech to sell products and services at substantially lower prices. Businesses such as freemarketFX and TransferWise provide international transactions that cost around 75% less than traditional offerings. In addition, companies such as Ripple are using blockchain technologies to speed up processing times for payment settlement and to reduce transaction costs. By using digitalized payments options and blockchain, corporate banks are not only increasing efficiencies in their operations but saving billions of dollars a year.
3) Digitally Enhanced Features
By partnering with fintechs, corporate banks are taking advantage of up-to-date, flexible, and integrated IT architectures to offer real-time interaction, continuous availability, speedy processing, and other appealing customer features. For instance, Kabbage can approve loans of up to $100,000 in as little as seven minutes. BioTrust’s multimodal voice and biometrical recognition features allow access to be more secure and convenient. And Earthport’s platform enables corporate banks to settle international transactions in near real time.
4) Reaching underserved segments
Offerings from Kabbage, Amazon Lending, OnDeck and Lending Club have grown fast by servicing segments that are left out by traditional corporate banking channels—like the small-business subprime category. By adopting technologies of such fintechs, corporate banks are able to apply digital lending models to evaluate the creditworthiness of customers whose financial profiles aren’t conforming to traditional lending processes.
5) Strong Data Analytics
Corporate banks have what is debatably the best source of customer data: customers’ transaction accounts or core investment. By combining the predictive risk modeling methods that fintechs have polished with their own balance sheets and data, corporate banks are offering far better pricing and selection. Also, powerful data-crunching capabilities are helping corporate banks to improve their underwriting practices.
Corporate banks that have not adopted fintech are seeing profit margins coming under increasing pressure—mainly in areas such international transactions, foreign exchange and trade finance, in which fintech offerings not only provide better value and experience but also cost much less.