It is surprising how a small thing like a virus can halt the entire world in its place, reminding us all how very fragile everything around us is. However, another lesson this pandemic has taught me personally is how resilient human race is. This being said, the pandemic has made a dramatic impact on all the sectors of the economy, corporate banking not being the least of them. Below I’ve turned up the major ways pandemic has and will impact the corporate banking sector.
Digitization will gain priority
One prominent reason we have been better equipped to live life as “normal” as possible despite being right in the middle of the pandemic is digital technology. From ecommerce stores getting us our home essentials to digital payment for services and products, digitization has helped us all a great deal in maintaining the smooth flow of daily life. In a way, pandemic has substantiated the necessity of digital transformation of businesses like nothing ever has done before. Thus, it is certain, more businesses will now expect more services from their respective banks to be made available in their digitized form.
Focus will realign towards SMEs
Small and medium scale businesses have regained their share of attention during the pandemic. The reduction in the purchasing power of people has made them realize the importance of supporting local businesses. Furthermore, the awakening of sense of responsibility too has strengthened the general feeling of support for small businesses. Governments and non-profit organizations have also renewed their efforts for taking these small businesses to the global levels. Not to mention, the burgeoning of start-ups in the wake of recent wave of recession too has increased the business potential for corporate banks in that area. As such offering bespoke services in FX and simplifying the loan processes for smaller amounts may become a new normal for corporate banks.
Interest rates will have to go down
World economy has taken a major hit, there’s no doubt about that. In fact, if we were to believe the reports by IMF, the situations are as bad as they were during the great depression of 1930s! Businesses around the globe have lost revenues, and simply do not have enough funds to make do with the previously set rate of interests on loans. Many economies have already reduced the interest rates, offering moratorium even in the payment of monthly installments. This clarifies that corporate banks will have to follow the suit and reduce their loan interest rates to stay afloat in the turbulent market.
Cross selling will take the forefront
With interest rates going down, cross selling of financial products and services will take the forefront in earning revenues for corporate banks. Even if the rates do not change as much, the opportunities brought in by the pandemic, incentivize the focus on cross-selling of insurances. Furthermore, the innovation trends of the century like business intelligence and data insights, which despite the gloomy situations have maintained a steady pace, also creates motivation for corporate banks to expand their services further and cross-sell more offerings.
Insurance and investments will get redefined
Many corporate insurers are already on the way of creating products that would be required in the new normal world, where such outbreaks aren’t considered an anomaly rather a foreseeable yet unpreventable catastrophes. These insurances will be very highly priced as for them there would not be any precedence to minimize the cost of loss. Similarly investments too have taken major turn. At present, the market is in the hands of volatility, but soon afterwards, things may not become clear soon. Last time we witnessed such fluctuations in market was when recession had hit the USA in 2008. But this time, entire globe is in turmoil, therefore, markets in intangible as well as tangible products will remain highly volatile.
