The dislocation caused by Covid-19 and the corresponding technology-driven shift has made seismic changes in an otherwise quite conservative corporate banking space in the Asia Pacific region.
The declining margins and increasing competition are further driving regional corporate banks to break new grounds to compete effectively with global banks at the vanguard of technology as well as fintech players.
Against this backdrop, IDC expects that corporate banks in the region will accelerate their modernization projects for systems and services with multiple initiatives like moving to the cloud, advanced analytics, and aligning ESG priorities with their growth strategy.
Ganesh Vasudevan, research director, IDC Financial Insights, noted that while regional corporations have been traditionally turning to the global banks for their corporate banking needs, large domestic banks are increasingly gaining ground in the corporate banking arena by deploying cutting-edge technologies and capabilities.
"Whether it be accelerated adoption of cloud or pivoting their ESG priorities, corporate banks in the region will delve further into technology to reinvent their strategy and deliver value to corporate clients," he continued.
IDC says the Asia Pacific region dominates the global banking landscape, and with the regions’ GDP projected to grow at the rate of around 5%, the corporate clients are looking at their banks for comprehensive, customised, and integrated solutions aligned to a digital economy.
To succeed, corporate banks in the region can be expected to significantly increase their technology iteration as they evolve and innovate corporate banking offerings to get closer to their clients.
IDC’s top 10 corporate banking predictions in 2022 include
Prediction 1: Trade finance modernization - The massive change brought by current and upcoming SWIFT releases will force legacy replacement of trade finance systems, 75% of which will be cloud-based by 2026.
Prediction 2: Cloud lending - By 2025, the use of shared industry cloud data will improve decisioning time on commercial loans by 40%.
Prediction 3: XaaS offering - By 2026, 50% of corporate banks will offer treasury as a service to corporate customers.
Prediction 4: AI in Payments - By 2026, 35% of payments will be optimized using AI-derived routing models.
Prediction 5: Fintech Enrichment of Bank Value Prop - By 2026, 40% of accounting software providers targeting SMEs will seek a bank license to provide financing options and payment support directly to customers.
Prediction 6: CBDC Impact on Cash Management - With CBDC rollouts gaining momentum, by 2025 more than 30% of tier I corporate banks will offer their clients integrated solutions to unlock liquidity from both traditional and digital assets.
Prediction 7: AML Investment for Social Good - As a regulator and social pressures increase, 50% of banks will implement AI-based AML models to better detect patterns of human trafficking and other illicit activity with high social impacts by 2025.
Prediction 8: SME Cash Management - By 2024, 60% of APEJ corporate banks will offer accounting and cash management tools targeted toward small businesses.
Prediction 9: Sustainable Finance - By 2026, 70% of APEJ corporate banks will reduce or be forced to reduce the carbon footprint of their lending activities by 40%.
Prediction 10: Connectivity Platforms - 40% of corporate banks will platformize connectivity by 2023 to deal with the growing channel fragmentation. As an added benefit, this will be the basis for actionable, proactive alerts and data services.
"Digitalisation of the market ecosystem at large is creating new frontiers to expand transaction services and increase the prospect of end-to-end automation of corporate client engagements. Akin to open banking initiative in retail banking, corporate banks will expand collaborations and partnerships with trusted third-party organisations to integrate more closely with their corporate clients as banks seek to embed their products and services with business lifecycle," Vasudevan concluded.
