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Corporate Banking: Innovation in the Digital Age


by Claudio Zara, SDA Professor of Financial Intermediation and Insurance.

One of the most recent fads to help corporate banking business evolve into this digital age sees big data and data analytics take center stage. The mantra repeated by its supporters looks at both revenue and costs. As regards revenue, the main actions involve lead generation, meaning the ability to attract interest towards a business offer, the growth of the share of wallet from the client by increasing the cross selling rate, especially on the most marginal clients in every relationship banker’s portfolio, and a drastic reduction of a client’s waiting time while the bank decides whether to finance or not. As regards costs, the advantages would include rationalizing the productive processes – especially plain products – the distribution model, and, highly debatable, a progressive automation of credit decisions and the relative pricing of loans. A recent McKinsey report (2015) estimates a higher impact on costs (savings of around 20%) but also a significant benefit on the volume of revenues (+10%).

Are we talking about yet another chimera or is this digital push inevitable in corporate banking? I think the answer lies in between. On one hand it’s undeniable that we must digitalize certain production and client service processes. On the other hand, digitalization often means standardizing, and this runs the risk of triggering a dangerous drift towards retail banking, crowding an already busy competitive arena even more, while at the same time overly “simplifying” an activity that, by nature, is often not simple at all. I believe that a key point, which isn’t given due consideration, is a better knowledge of the market of the corporate clients so as to identify clusters of homogeneous clients with different financial needs, and those are the potential developments of the business. To innovate we should first of all consider the client segmentation techniques (Zara and Feltrinelli, 2005). Today, when we talk about corporate client segmentation, we still talk about the “magical” and obsolete labels: large corporate, SMEs, small business. These show that we’re stuck in the 1990s: we still think that size explains all, or almost all, of the financial behavior and needs of companies. This is the first over-simplification, mother of all simplifications, even in digitalization.

Corporate business is probably the most difficult and complex of all businesses within a bank. If done well, however, it can generate a lot of revenue (56% according to the McKinsey report mentioned above),with just as much profit and economic results that are significantly independent from retail (Zara and Cerrato, 2015), contributing to diversifying and stabilizing banking results. This is why at SDA Bocconi we have been paying a lot of attention to the topic for years, researching, publishing papers and creating dedicated courses in our Executive Open Program. Learning how to get to know the clients better and give them what they need, not what the bank’s budget needs, is fundamental to do a satisfying job in this business, while contributing to big data and data analytics so as to trigger long-lasting long-term innovation in the business, not flawed short-term actions, like fads usually do.

SDA Bocconi School of Management

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