Retail-ization of Corporate Banking

Boston, MA
March 2008

Retail-ization of Corporate Banking

NEW RESEARCH REPORT BY MERCATOR ADVISORY GROUP

This first report from Mercator Advisory Group's Corporate Banking Practice looks at banks using retail strategies to deliver business banking products to corporate customers. The report examines the touch points within corporate banking being used to extend bank markets.

With lessons learned from retail banking, corporate banking product management is repackaging products and services for corporate customers' and their employees, such as direct deposit and convenient online banking, effectively opening up a whole new market. This report looks at WorkPlace Banking, which delivers banking services to employees at their job site. These new services help employers turn payroll and banking services into value added employee benefits. Banks and corporate customers are working together to customize additional value added personal banking programs to attract and retain employees, features such as reduced rates and waived fees. Services include free checking, online banking, health savings accounts and investment guidance. There are rewards programs where banks issue points on debit card dollars to purchase discounts at major retail chains.

Banking is changing and corporate banking is most affected. Large complex corporate financing requires more regulatory documentation. Some banks realize the hidden potential of small and medium enterprise businesses (SME) and they are developing new strategies to capture market share. By broadening their view corporate bankers can offer more complex services to the growing SME segment that want and need them. This report gives the reader a high level overview of small business financial services potential. Banks were the dominant financial services provider to small business through their branch networks. New competition from nonbanks using state-of-the-art web technology has captured the lion share of this marketplace. The next Mercator Advisory Group report on Small Business banking looks at SME acquisition strategies to attract and retain their small business customers.

There is a financial services market revolution happening and it's imperative for banks to keep up. Intense competition from other banks and nonbanks are driving innovation. Banks need to examine their products and services to make sure they are aligned with their market strategies. Are their products competitive and offer value. Business customers are changing; they are web savvy and looking for best of breed solutions. Banks need to change to keep up. Customers are attracted to solutions that meets their needs and there are many choices to select from.

Sarsha Adrian, Senior Research Analyst in Mercator Advisory Group's Corporate Banking practice and author of this report, comments, "This is the first of a series of reports that will put corporate banking and small business banking in perspective. Corporate banking is changing. Corporate banking product managers need to recognize the huge potential selling through existing relationships. Bank corporate relationship can be extended to reach new business markets and banks can play a strategic role in their business customers' future".

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For more information, please call Mercator Advisory Group's main line: 781-419-1700 or send email to [email protected].