Businesses across all industries have focused more on digital innovation since the start of the pandemic. A recent PYMNTS survey found that over 70% of middle-market U.S. companies have accelerated digital transformation efforts since late 2019. 
This trend will only grow more pronounced in the coming months as the less certain economic outlook pushes firms to reduce operating costs and improve margins.
The quickly evolving state of digital finance means that corporate banking clients expect more support from their financial institutions (FIs), including better tools for digital payments and embedded finance. Commercial banks who fail to take the lead and deliver on digital for their corporate clients will quickly lose customers to FinTechs and other innovation leaders.
In the June edition of the Next-Gen Commercial Banking Tracker®, PYMNTS explores the digital landscape for corporate banking, focusing on what businesses want from their banks, and how these FIs can stay competitive.
Around the Corporate Banking Space
A new study shows that neobanks are gaining significant popularity among smaller companies. It found that neobanks are now the main financial services provider for 16% of U.S. businesses with annual revenue under $20 million, nearly matching regional banks at 18%, though large national banks have a dominant lead at 60%. Neobanks are most popular with firms that have under $1 million in yearly sales, with 24% using the alternative FIs as their main providers. The study also reveals that small businesses are less-than-satisfied with their financial services providers in general. 
A survey of executives at traditional banks underscores the threat that commercial banks feel from FinTechs and neobanks: 70% of the respondents worry that their data capabilities are losing competitiveness.
Other industry research shows that corporate clients will be cutting their bank balances in response to the changing economic conditions. Sixty percent of bankers surveyed as part of the study forecast that overall corporate balances will decrease in 2022. Many of these respondents indicated that at least half of the rise in deposits since the pandemic began were due to temporary “surge” conditions, such as greater desire for liquidity and the effect of government stimulus. This will make the corporate banking landscape even more competitive than it is today.
For more on these and other stories, visit the Tracker’s News and Trends.
U.S. Bank on Meeting Businesses’ Digital Needs
Digitization in the corporate banking space is not just about gaining back-office efficiency and reducing transaction and processing costs. Much of today’s business innovation is being driven by sophisticated digital banking tools, according to Rich Erario, executive vice president and head of global treasury management at U.S. Bank.
FIs must educate their business customers on what new tools are available and how the clients can employ them in specific use cases, he explained, making transparency and collaboration between banks and business customers critical. Application programming interfaces (APIs) are one of the key areas in which banks need to take the lead by demonstrating to corporate clients what these powerful tools can do, and then by facilitating API implementation.
To learn more about how commercial banks can meet the growing digital needs of their clients, visit the Tracker’s Feature Story.
PYMNTS Intelligence: What Corporate Banking Clients Want
Businesses increasingly expect their FIs to deliver seamless access to advanced digital tools and to be able to engage their banks fully within digital channels, rather than by phone or in-person. These may sound like basic demands in 2022, but many commercial banks are way behind the curve. A new report found that over two-thirds of small- to medium-sized businesses (SMBs) want to handle all banking and finance issues digitally, but 38% feel unsatisfied with their current FI in this area. One especially important tool is embedded finance, a relatively new development but one that industry research has found could capture over 25% of worldwide SMB banking revenue.
To learn more about the digital demands of corporate banking clients, visit the Tracker’s PYMNTS Intelligence.
About the Tracker
The Next-Gen Commercial Banking Tracker®, a PYMNTS and FISPAN collaboration, examines the latest developments at the intersection of corporate banking and financial technology, including how FIs can drive digital innovation to better serve their customers and the importance of embedded finance.