For many years now, banks have approached corporate payment services with a product-centric mindset that has clouded their view of clients and their goals – resulting in an often frustrating client experience. Treasurers and CFOs rightly balk at the disparity between retail and corporate banking services. On the one hand, they are presented with simple options and rapid execution; on the other, an array of complex options, couched in obscure acronyms like BACS, CHAPS, ISO and NACHA.
Clearly, the view from the banks must change. So, what is the better perspective? The answer lies in understanding exactly what clients are trying to achieve with their actions – who are they paying? How are they connected? Why are they paying? Payments to a trusted supplier and an unfamiliar one will require different levels of revocability, for example – and both will differ considerably from a regular salary payment.
Armed with this contextual information, however, banks can recommend which payment method is appropriate for each situation, rather than expecting clients to pore over their product catalogues to work it out themselves.
This is a significant shift of focus for banks. It represents a movement away from focusing solely on execution and towards events surrounding and following the payment itself. In short, it’s a shift to focusing on context. This shift to “contextual banking” not only promises vastly improved customer services, but also greater internal efficiency and even revenue growth.
Optimal route calculation
This smarter, contextual approach to payments hinges on intelligent route calculation. Relevant data is mapped against the available rails between sender and receiver, as well as the client’s revocability, risk, and urgency preferences. Solutions can then be offered automatically – creating a “self-service” model that presents clients with optimal actions that can be executed immediately.
For example, on a given day, a treasurer has a number of outgoing payments. Some are urgent, domestic payments, for which the contextual system suggests same-day ACH payments instead of wires – at a quarter of the cost. Others are made to regular suppliers for which the system recommends irrevocable SEPA credits, as there is no bilateral risk.
These tailored, automatic and optimal recommendations take a huge load off treasurers’ shoulders – enabling them to focus on the key issues. This is particularly valuable in the current climate of payments innovation. SWIFT’s global payments innovation (gpi), for instance, offers a better means of executing cross-border payments – and contextual payments will enable corporates to identify when switching to SWIFT gpi is beneficial, without having to undertake extensive research.
Contextual payments are also highly efficient. While human inputs are always subject to error, intelligent algorithms identify the optimal routes with unyielding consistency. The result is dramatically improved operational efficiency, with unprecedented straight-through-processing rates. With client demands higher than ever and a bevy of competitors snapping at banks’ heels, contextual payments equip them to fight back.
Expanding the service offering
But embracing contextual payments is about more than just staying afloat amid the tide of change. It’s about rising above it – and finding better ways to do business. Indeed, the relationship manager – long overstretched by the competing demands of execution and cross-selling – may just have found his new best friend. By integrating contextual payments with other applications such as the bank’s product catalogue and a digital cash management platform, the contextual system can not only identify and notify clients of the optimal product currently available to them, but potentially offer an even better option that is not yet part of the client’s service agreement.
This represents a huge cross-selling opportunity – providing clients with exactly what they need, exactly when they need it. And best of all, it comes with the authority of a reliable algorithm and without the pestering of a salesperson.
In a time of fierce competition and tightened margins, contextual payments offer a way for banks to thrive – fighting off competitors with a simple customer interface, seamlessly integrated into clients’ everyday processes. The contextual revolution is nigh – and happier customers, greater efficiency and higher revenues are all within banks’ grasp.
About Barry Rhodes:
Barry Rhodes, Head of Payments at iGTB, has been building payments systems around the globe for 35 years. Barry has worked at two global banks and had a long tenure at ACI Worldwide, where he held positions ranging from development through owning the product P&L for both the retail and wholesale business lines.
About iGTB:
Intellect Global Transaction Banking (iGTB) is the organisation behind the worlds first integrated global transaction banking platform, serving more than 100 live installations across 85 countries. iGTB has a comprehensive suite of products, used by seven of the worlds top 10 banks to realise their transaction banking ambitions.
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