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Amid Shrinking Profits, Corporate Banks Must Turn to DigitalNEW YORK, March 19, 2018 (GLOBE NEWSWIRE) -- Digital disruption has finally come to corporate banking—with a vengeance— and senior management teams are under substantial pressure to act or risk the viability of their core businesses, according to a new report by The Boston Consulting Group (BCG). The report, titled Global Corporate Banking 2018: Unlocking Success Through Digital, is being released today. The report, which examines the overall state of the corporate banking industry and explores key trends, says that banks are entering a second wave of digitization that will require a coherent strategy and holistic digital-transformation programs. Executives need to envision how their institutions will evolve, explore new business models, define the role that their banks will play in the new digital environment, and invest accordingly. The report also provides a four-step action agenda to help banks put themselves on the right trajectory for the future. “The financial stakes are very high for corporate banks,” says Carsten Baumgärtner, global leader of BCG’s corporate banking segment and a coauthor of the report. “Over the next five years, we expect 30% of traditional corporate banking revenues to be accessible solely through digital channels.” Some bankers are waking up to the current challenges, the report says. In BCG’s Corporate Banking Executive Survey, which gauged senior management views on digitization, a large majority of respondents (86%) said that digital will change both the competitive landscape and the economics of their businesses. However, less than half (43%) stated that they have an explicit digital strategy. Only 19% believe that their organizations have market-leading digital capabilities. A Struggle to Create Value Moreover, nearly half of corporate banking divisions surveyed had returns on capital below the hurdle rate, despite a mostly benign macroeconomic environment. Across regions, the challenge has been especially tough for large corporate banking divisions, whose median pretax returns fell below the hurdle rate of 16%. Midmarket divisions fared much better in North America and emerging markets. A Roadmap for the Future
“Digital is forcing sweeping changes in corporate banking, and institutions will need to adapt or see their competitiveness and market share steadily spiral down over the next few years,” says BCG’s Carsten Baumgärtner. “Now is the time to develop a more coherent digital strategy to decide where to play and how to invest.” A copy of the report can be downloaded at http://on.bcg.com/2G1LWDd. To arrange an interview with one of the authors, please contact Eric Gregoire at +1 617 850 3783 or [email protected]. About The Boston Consulting Group |