The corporate banking revenue of leading banks in India has largely remained muted or negative during most part of the current financial year. Declining net interest margins on corporate lending is further adding pressure on non-lending banking businesses like transaction services to broaden the revenue base from corporate banking. As a result, banks are revisiting their legacy IT infrastructure as they pursue enhancement in treasury and trade services by expanding ‘as is service’ capabilities to move closer to the value chain of their clients.
At the policy level, the sharp increase in capital expenditure in the Union Budget 2022-23 to fund various infrastructure projects has come as a boon for the corporate banks. In particular, the emphasis on the multi-modal supply chain is bound to bring the focus on transaction and trade services. Accelerated adoption of the cloud, extensive leverage of artificial intelligence, and efficiency in data management are some of the key technologies that will be at the forefront of the connected ecosystem.
“With the stress on economy receding, as indicated by surging Index of Industrial Production (IIP) and Goods and Services Tax (GST) collections, corporate banking is poised to gain momentum in India in the immediate future. Traditionally the corporate banking space in India has been dominated by global banks, however large domestic banks are increasingly gaining market share with aggressive investments in technological and operational capabilities, narrowing the gap with their global competitors,” Ganesh Vasudevan, Research Director, IDC Financial Insights.
International Data Corporation (IDC) reveals predictions for India corporate banking in the latest report IDC FutureScape: Worldwide Corporate Banking 2022 Predictions — India Implications.
Highlighting the key corporate banking predictions that will impact the technology buyers and IT industry in India, the report shows, by 2025, 40% of payments will be optimized using AI-derived routing models.
Transaction banking services in particular will witness increased adoption of AI to improve speed and efficiency of payments in cash and trade services. Implementing AI-optimized payments requires a comprehensive strategy for capturing and leveraging payment data with end-to-end visibility.
Also with CBDC rollouts gaining momentum, by 2025 more than 15% of tier I corporate banks will offer their clients integrated solutions to unlock liquidity from both traditional and digital assets.
With CBDC scheduled to be introduced in FY 2022-23, banks will have to gear up for the changes. They need to evaluate the existing workflow and data structure to identify the processes and systems that require adjustments to support CBDC adoption. Also factor in infrastructural requirement to support custodial and depository services for CBDCs with combination of centralized relational database management systems and distributed ledger technology.
The report also predicts 35% 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.
Increasingly diverse and fragmented channel offerings and the associated complexity will force corporate banks to develop platform capabilities to ensure consistent, scalable, and standardized data exchange across all interfaces. A connectivity platform can help to drive innovation, help financial institutions to get the most out of the present and emerging interfaces, and ensure cost efficiency, quality, and reliability of all connectivity interfaces.