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Defining the future of the space: Why banks struggle to digitize commercial banking processes

As the lines between office hours and off-time blurred in the midst of the pandemic, consumers demanded safer, more convenient, more digital ways of doing business. Top banks swiftly adapted to these digital demands, and many of the changes are here to stay.

Commercial banking has received far less attention. Typically, banks save their digital innovation budgets for personal banking, a segment that’s easier to serve, at least on the surface. This leaves commercial banking customers stuck with the status quo: paper and legacy processes. But commercial banking clients expect more, and as they continue to be underserved by traditional banks, they’re getting the attention of nimble, digital companies.

As challenger banks set their sights on the growing small business and corporate markets, commercial customers are ripe for the picking, making them a contingent that banks can no longer ignore.

Read on to learn why commercial banking customers have been largely overlooked on the digitization front, and why the banks who prioritize this segment will define the future of the space. 

 

Commercial clients can be tough customers

Corporate banking is a high-stakes game. Since multinational financial service firms often operate in many jurisdictions, this makes for complex—and often conflicting—regulatory rules. There are also serious concerns about data privacy, security, compliance, and data storage and protection. These complexities bleed into day-to-day commercial lending workflows and slow down processing times.

For example, if a commercial customer wants to get a business credit card, they often need to provide supporting documentation to apply, and wait for AML and KYC checks to be completed. And, the process can be different depending on which channel the customer uses.

These intricacies, along with internal bank processes and their outdated technology stacks, can make for a poor customer experience, leaving customers frustrated. 

At the end of the day, commercial banking customers are also personal banking customers. They expect to get the same tailored digital experience as they do for personal banking transactions—and they may be willing to switch to another institution to get it.

Solving complex processes can be a hard sell

Beyond the obvious inefficiencies, solving complex processes can cause additional internal challenges. Even if a commercial banking process is directly tied to revenue, internal teams struggle to justify solving a process that isn’t deemed as high of a priority as personal lending. Navigating the technology landscape can also be difficult.

Without the right technology, solving complex commercial banking processes can be costly and resource-intensive and isn’t guaranteed to yield a high ROI.  

With traditional vendor solutions, banks often need to rip and replace technology to make way for a solution that may only solve a few limited use cases. When banks uproot existing technology, complex and core processes are disrupted down the line, preventing them from realizing a return on their investment.

However, commercial customers expect a digital banking experience, and savvy upstarts are eager to deliver one. 

Defining the future of the space    

According to Arcady Lapiro, Forbes contributor and banking industry leader: “Challenger banks and traditional banks will both need to figure out the best mix of products and services to grow over the next decade. The winners will be those that best meet three standards: Is it relevant to the customer? Are the fees transparent and fair? Is the user experience simple and ubiquitous?”

“Simple and ubiquitous” sounds easy enough. But without the right technology, simple and ubiquitous can quickly turn into bulky and burdensome. 

Traditional vendor solutions are limited in their ability to solve complex commercial banking processes, but low-code technology offers a viable, cost-effective solution.

Unlike high-priced vendor solutions, low-code technology allows you to rapidly solve complex commercial banking processes without a large upfront investment. Daylight’s platform doesn't require you to rip and replace your existing technology; it simply settles on top and augments your tech stack. 

And, instead of getting saddled with hundreds of technologies and software solutions that are incompatible with your other systems, low-code technology offers central management for IT and guardrails for business users. This eases the burden on IT and makes the technology easy for everyone to adopt and use.

Take BMO Financial Group (BMO), a top North American bank, for example. Prior to adopting Daylight’s low-code platform, BMO had no digital offering for its small business credit card customers. With challenger banks and traditional competitors hot on its heels, BMO knew it needed to offer a digital experience to both commercial and consumer banking customers.

With Daylight, BMO turned its error-prone, paper-based small business credit card application process into an intuitive digital experience in a matter of weeks.

By offering a personalized digital experience to commercial customers, BMO saw a 300% increase in credit card applications and a 90% reduction in errors.

Bridging the digital divide


When banks fully embrace digitization across their commercial and consumer processes, they can reduce internal inefficiencies and better serve a larger customer base. In the realm of commercial banking, delivering a tailored digital experience is what will separate the laggards from the leaders defining the future of the space—and the right technology can help banks get there, faster.  

 BMO built an end-to-end digital experience for its commercial credit card process in just two weeks. Read the case study.

 

Sources and credits

International Banker: Corporate Banking is Going Digital and is in Search of Solutions

Finextra: The Digital Future of Commercial Banking