Transaction Processing Not Enough to Succeed In Commercial Banking

Banks will need to move away from the transaction processing model to become the advisers of choice for their corporates.

As technology advances continue to make the world a smaller place and business becomes increasingly global, the face of financial services is changing. Nowhere is the upheaval more evident than in commercial banking, where margins are thinning as products become commoditized and corporate clients become more-demanding customers.

To thrive in this new environment, banks need to approach the business of business banking in a new light, according to experts. It's no longer enough to simply be a transaction factory -- the corporate bank of today and tomorrow must be a partner and adviser that helps guide its clients, both large and small, through a more-turbulent world. Having the right tools and the right attitude will make all the difference in their success.

Michael Knorr is Managing Director of the Global Payments division at Citi. Photo by Jean-Christian Bourcart

Michael Fossaceca, large corporate treasury executive for North America with Charlotte, N.C.-based Bank of America's ($1.3 trillion in assets) global treasury services division, says the transformation to trusted adviser and business partner is the overriding theme in corporate banking these days. "With a lot of corporates, it's about transforming the way their back office works -- payments, treasury, trade and securities," he relates. "They want to leverage their investments in ERP [enterprise resource planning] systems to achieve straight-through processing."

Meanwhile, as part of the push toward achieving straight-through processing, corporates are paring down the number of their banking relationships. "You're seeing corporate treasury operations become more centralized with fewer banking relationships," observes Michael Knorr, managing director, global payments, with New York-based Citi ($1.8 trillion in assets). "Banks are starting to recognize that corporates don't want to support so many interfaces because it gets expensive. They want more standards."

At the same time corporates are shunning some banks, they're also seeking to strengthen the banking relationships they do maintain. This has increased the need for banks to take on an advisory role, Knorr notes. "Our clients are looking for a lot more guidance from the bank to help them figure things out," he says.