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Historically, payments were regarded as a necessary but unglamorous and undifferentiated addition to banks’ other activities. However, times have changed—as has the ability of payments to drive revenues, differentiation and more profitable client relationships.
Today, as banks look to enhance their payments operations, there is no time to lose. As more and more banks seize the growth opportunity in payments by investing in new platforms, structures and service offerings, the bar is rising fast. Those who fail to move quickly with smart, targeted investments risk being left behind.
In this article, we examine the two areas where banks can differentiate themselves and build a competitive edge through corporate payments. In our view, those banks that focus their efforts on these areas will be well placed to be the industry high performers of the future—not just in payments, but across the corporate banking landscape.
Download the full report [PDF, 2.83MB]
Payments services are becoming an increasingly vital source of revenue and customer retention for both retail and corporate banks worldwide. In retail banking, transaction banking is estimated to account for 21 percent of total revenue. In corporate banking, the importance and relevance of transaction banking is even greater, at about 41 percent of global wholesale revenues, of which cash management, payments and trade make up a combined 78 percent.
The rising importance of payments is evident not just among larger corporate customers, but also among small and medium sized enterprises (SMEs), who increasingly trade and transact internationally.
Today, as banks start to examine how to position themselves for renewed growth and rising client activity in the post-recessionary world, payments are attracting more attention and investment.
With the emphasis switching from cost cutting and regulatory compliance to an agenda based around growth, investment and innovation, payments is being positioned at the heart of banks’ strategies. The importance of payments is further underscored by its ability to act as an anchor product supporting the cross-sell and up-sell of other offerings. The prize at stake is the opportunity for banks to use the pivotal role of payments to establish themselves as the primary banking provider to their corporate and SME clients.
In Accenture’s view, the most effective way for banks to seize this opportunity is by taking two main steps: fixing their core operations and differentiating themselves in the market.
The first step is to industrialize payments, separating localized processing from globally common processing and building the capabilities that will enable differentiation in the market. It includes tailoring a bank operating model to new market conditions and identifying opportunities where retail and corporate payments converge—breaking down silos. This will often mean building a “hub” architecture to maximize integration, agility and efficiency.
The second step is to offer value-added products and services that provide economic value. This step includes activities such as:
Delivering an enhanced product proposition, with a clear focus on integrated trade, international payments and cash management offerings.
Providing multichannel payment functionality through mobile and online channels, focusing on real-time transactions and balances, multi-bank applications and analytics.
Differentiating on talent, by empowering and upskilling the people in payments, and fostering a deep commitment to customer service.
Establishing a network model attuned to the needs of the bank’s corporate customers, with an operating model that supports the geographic footprint of its major clients.
Exploiting regulatory initiatives—such as Single Euro Payments Area (SEPA) in Europe—as opportunities not only to achieve compliance, but also to differentiate the bank from competitors in the eyes of customers.
In Accenture’s view, pursuing the payments growth opportunity is a smart strategy. Developments ranging from expanding regulation to the emergence of new trade corridors, and from rising cross-border payments by SMEs to growing usage of mobile services, mean banks need to raise their game in payments. This imperative is amplified by the need for banks to prepare for renewed growth in the post-recession world.
By fixing and industrializing their core payments operations and IT, and simultaneously developing and delivering new offerings to build differentiation with customers, banks can steal a march on their competitors and position themselves as the go-to bank for their corporate clients.
June 26, 2013
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