Transforming payments in commercial banking

The payment divisions serve as the backbone of commercial banking operations, managing daily transactions and operational needs for business, corporate, and institutional clients. These divisions, which might operate under various names such as Treasury Services, Cash Management, or Transaction Banking, provide essential services such as cash management services, liquidity management solutions, and foreign exchange currency trading, with some divisions extending their services to include supply chain and trade finance.

Corporate clients typically maintain multiple accounts across various subsidiaries and geographical locations, requiring sophisticated coordination and management. To put this complexity into perspective, imagine managing linked bank accounts for extended family members spread across multiple countries, however, scaled to a corporate level. These operations demand meticulous tracking of available funds and receivables while maintaining positive cash flow across numerous stakeholders and jurisdictions.

The strategic importance of payment services within the world’s major transaction banks has grown significantly in recent years. What was previously viewed as a low-margin utility service has transformed into a crucial revenue generator, with the sector producing approximately USD 250 billion in global revenue in the last decade. This transformation has caught the attention of major financial institutions, who have, in recent times, offered innovative digital-only transaction banking solutions to the market, and continue to invest heavily in technology improvements to enhance their payment capabilities and align with industry transformation such as Swift GPI and ISO 20022 adoption.

Such features include more direct payment and inquiry self-service, real-time payment tracking, payment pre-validation and richer more detailed payment insights and structure powered by ISO 20022 formats.

However, the industry faces significant operational challenges, particularly in processing and managing client inquiries. The scale of manual processing remains substantial; regional banks handle around 5,000 manual client inquiries monthly, while global banks may process anywhere to 350,000 a month and beyond. The largest institutions might receive up to 100,000 emails monthly in their wholesale payments groups alone, which highlights the pressing need for modernization and automation.

Digital innovation in wholesale payments presents numerous opportunities for banks to enhance their service offerings. These improvements center around automated client inquiry management, enhanced self-service portals, real-time payment tracking features, streamlined data processing, and integrated system communications.

By embracing technological advancements, banks can better serve their clients while improving operational efficiency and maintaining their competitive edge in an evolving financial landscape.

The following is a list of best practices you can employ when considering a solution for exception management in a commercial bank:

• Understand the difference between Commercial and Retail banking:
  • Commercial banks operate differently from retail banks, with lower volumes of individual transactions (versus retail card or ACH transactions for example) but they do experience higher-touch client interactions on those transactions that do result in an exception.
  • Unlike retail banks, most commercial banks don't have traditional call centers.
• Understand client service operations:
  • Service teams primarily work through email, chat, and phone.
  • Request handling is typically manual.
  • Requests often pass between service teams.
  • There is usually limited formal tracking of request types, bottlenecks, or Service-Level Agreements (SLAs).
  • Routing to specialized teams is a crucial part of their service process
• Understand the terminology:
  • Pay attention to whether the institution uses "client service" or "customer service."
  • Commercial banks often prefer "client" over "customer" (which is seen as a retail term).
• Understand the technology:
  • Wholesale payments prioritize technology integrations.
  • Case Management in Pega is typically more suitable than end-user computing solutions for managing critical commercial bank workflows. Spreadsheets, (for example) lack the robust audit control, client 360° awareness and resilience that major commercial bank work management demands.