According to new research commissioned by Luxembourg headquartered payments bank, Banking Circle, banks want to deliver core and non-core services for business customers – it’s a fundamental to growing revenue and profitability. But how to adapt, innovate and deliver across all product sets at once? Collective consensus says that collaboration is no longer a novelty; the new wave of specialists can help banks exceed customer expectations.
Taking stock of the barriers
In November 2020, Banking Circle spoke to 300 C-Suite decision makers at banks across the UK, DACH (Germany, Austria and Switzerland) and Benelux (Belgium, The Netherlands and Luxembourg) to discover the specific challenges they face in future-proofing their organisations and enhancing customer propositions.
Soon to be published in a white paper, , the research reveals that existing IT infrastructure is the biggest internal challenge holding banks back from achieving their business objectives. High customer expectations are the most common external focused difficulty faced by banks with 39% saying this was one of their top three challenges.
Banks have big ambitions; as Banking Circle research revealed in 2020[1], most already had digitalisation plans in place, pre-COVID. However, having been built in very different times, with vastly different technology available, not to mention almost unrecognisable customer requirements, banks now face a multitude of challenges in future-proofing their offering.
COVID: motivation for innovation
The coronavirus crisis caused many businesses to move quickly, adapt to changing demands and provide their customers with what they needed. They clearly demonstrated their versatility, creativity and tenacity. While banks may have found themselves held back from similar levels of rapid innovation by regulation and legacy infrastructure, they responded by rapidly changing their digital trajectory – 58% of the banks we surveyed said the pandemic caused them to change their IT infrastructure plans. And to get new solutions to their customers quickly, more banks than ever saw the valuable opportunity of third-party collaboration.
The challenge now is to ensure the innovation and collaboration that became necessities in 2020 become the norm, not a passing phase or memory.
Together with fintechs and specialist providers, banks have been able to deliver new digital accessible solutions to meet the needs of their retail and corporate customers. The challenge now is to ensure the innovation and collaboration that became necessities in 2020 become the norm, not a passing phase or memory.
The cross-border angle
70% of the banks we surveyed consider cross-border payment provision to be a core banking service. Yet payments have long been one of the biggest pain points for businesses, especially across borders.
Even within the Euro area, cross-border payment is far from frictionless; each country still has its own payment systems, plus there are additional fees and delays when trading with some of the biggest players in global trade – including the US and China. This all puts unnecessary limits on the potential of businesses.
As global trade levels begin to pick back up to pre-COVID levels, banks must be ready to support businesses in their bounce-back efforts. Access to affordable, friction-free cross-border payments will be essential to that recovery, and banks able to provide this can empower even the smallest merchant to serve customers in any geography. Not only will this help small businesses and start-ups to thrive post-COVID; it will also bolster international economies at a time when they are in great need.
To see how the banking industry stepped up and responded to the coronavirus crisis from the early days of 2020 was truly inspirational.
Working with specialist partners can reduce, or even remove, pain points in payments. Such collaboration brings the benefits of focused expertise and scalable solutions that are fast to market, yet cost far less than building in-house. Using a partner for services such as cross-border payments and local clearing and settlement can deliver significant advantages for banks.
2021 and beyond
To see how the banking industry stepped up and responded to the coronavirus crisis from the early days of 2020 was truly inspirational. Priorities and budgets shifted overnight, and digitalisation plans were dramatically fast-tracked. It wasn’t easy, but the pandemic helped banks find the motivation they needed to future-proof their processes and solutions through collaboration.
To meet rapidly evolving business needs and benefit the entire financial services sector, collaboration must be embraced long-term. Through partnerships with specialist providers, banks gain the agility and innovation of a fintech, while fintechs gain compliance and security processes, enabling them to focus on building strong customer relationships. The customer gains better solutions that are flexible, affordable and accessible.
Working together, the industry can bring about a 2020 legacy of better business banking.
[1] Source: Banking Circle white paper “”