5 minute read 10 May 2019
Construction site

Four key themes from the Wholesale Banking Survey

Authors

Matt Cox

EY Americas Wholesale Banking Advisory Leader

Large-scale transformation leader and strategist focused on Wholesale Credit and Transaction Banking. Husband. Father of two. Nomadic traveler.

Juan Carlos Lopez

EY Americas Wholesale Banking Advisory; Managing Director, Ernst & Young LLP

Strategist and innovator. Global thinker. Passionate about driving change. Father of two. Avid cyclist and race car driver.

David Gagne

EY Americas Wholesale Banking Advisory; Managing Director, Ernst & Young LLP

Passionate about the future of financial services. Helping wholesale banks realize the benefits of strategic transformation. Dad and amateur chef.

5 minute read 10 May 2019

EY Wholesale Transaction Banking & Credit Operations Surveys yielded several key insights and four critical themes.

An industry in transition

The wholesale banking industry is experiencing a period of significant change as banks are finally shifting their focus back to growth. In doing so, many are placing an increased emphasis on client experience and operational efficiency. As banks are outlining their change agenda, it’s become common to ask how they are performing against their peers across key priorities and operational metrics related to wholesale transaction banking and wholesale credit operations.

The two new surveys conducted by Ernst & Young LLP (EY) are designed to determine baselines and leading practices in these areas. The following report provides a summary of both raw data collected and EY’s point-of-view on the results.

You can download the Executive Summary of the surveys here.

EY’s analysis of this comprehensive data set yielded several key insights and four critical themes.

1. Wholesale banks are playing catch up in the digital revolution.

For the past several years, wholesale banks’ capital investments were largely driven by regulatory requirements and as a result their client experience and operational efficiency were neglected. The Survey data illustrates that processes are highly manual and time consuming in both transaction banking and credit operations.

As the spending on regulatory initiatives begins to wane, banks are now re-focusing on efficient growth underpinned by client experience and technologies that focus on dramatically streamlining operations and client/bank interactions. Banks are beginning to allocate the funding to invest in technology innovation initiatives. This is illustrated by the responses to our questions that revolved around highest priority technology initiatives and functions.

However, it is also clear from the operational metrics analyzed that the benefits associated with those initiatives have yet to be realized, as evidenced by almost every statistic around cycle time and by the nature of complaints received from clients.

technology budget allocation

2. Wholesale banks have significant IT platform complexity and integration of automation has been limited.

Despite processes being highly manual, wholesale banks have significant complexity in terms of technology platforms. In transaction banking, our data shows it is common for banks to have several platforms supporting each product and transaction. While in credit, the complexity is illustrated by the number of platforms and processes involved in underwriting and approval. Additional complexity is driven by line of business and industry variations in products and the platforms used to deliver the same services to clients.

As wholesale banks look to improve their client experience and operational efficiency, the consolidation and/or seamless integration of all these platforms will play a key role. Our experience is that banks are taking different approaches to this; while some are embarking on larger re-platforming initiatives aimed at replacing multiple platforms with more modern, comprehensive and integrated solutions, others are focusing on more tactical approaches by integrating disparate systems through automation solutions, such as business process management and robotic process automation.

How each institution chooses to support their wholesale banking transformation will be driven by their ability to undertake and support larger change efforts, their execution risk appetite and their investment capacity. Yet it is clear the status quo is not an option.

average number of technology servicing platforms

3. FTE allocation may stay the same, but roles and responsibilities will likely change.

The percentage of FTEs distributed by primary process step was not overly surprising, and we believe that those proportions may stay the same. However, there is a shift in the type of resources that will fill those roles as a result of client experience expectations.

Many wholesale banks have grown up with a local-market-driven strategy that puts much of the activity in the hands of the front and middle office, resulting in a decentralized manual approach to product set-up, loan originations and other activities. Many banks are undertaking transitions to standardize these processes, which realizes significant benefits from simplification of job roles and functions. The process and role standardizations are also providing a foundational element to enabling technology and automation across the wholesale banking value chain.

The middle and back offices have been in the crosshairs of banks for the past 18 months. Major initiatives such as the implementation of robotic process automation, machine learning and optical character recognition (OCR) are causing job descriptions to change from individuals who were able to execute the required activities to individuals who can help further refine and oversee the algorithms that perform the tasks with the appropriate level of auditability.

Digital influence has yet to permeate the sales function, but that is the next frontier. Advanced analytics will help banks refine go-to-market activities and sales force distribution strategies to be more targeted. The number of relationship managers will likely stay the same or increase while the number of sales assistants/analysts will decline as technology is able to perform more of these functions.

percentage of employees per process step

4. Transaction banking is significantly ahead of credit in understanding process data.

Both surveys were very quantitative in nature and asked for specific time and motion-oriented data. From the results, it was evident that banks have a much better handle on the capture, retention and analysis of their transaction banking data than they do their credit data. Within credit operations, the respondents fell into three categories when asked for specific process data:

transaction banking ahead credit understanding

The growing role of data as a key strategic asset for banks presents both an opportunity and a threat.

We think this should serve as a warning to banks as the growing role of data as a key strategic asset for banks presents both an opportunity and a threat. Banks that develop the capabilities and architecture to manage and harness data, through analytical models and tools like artificial intelligence and machine learning, enhance offerings and streamline operations will create a competitive moat. Banks that retain a follower mentality will be left in the dust.

  • In 2018, Ernst & Young LLP engaged 50 banks, ranging in size from large multi-nationals to smaller regional firms, to gather data on topics related to the operational lifecycle of wholesale transaction banking (WTB) and wholesale credit operations (WCO) by segment. The goal was to address the lack of good benchmarking data for wholesale banks seeking a reliable means to compare current performance to their peers relative to a number of key priorities and metrics. The Survey questions focused on:

    1. Cycle time, full-time employee (FTE) allocation, client onboarding and technology investment statistics agnostic of product
    2. Product-specific data related to high-value and low-value payment processing, liquidity solutions, trade finance, commercial cards and their near-term technology plans

    The Survey respondents included an equal number of:

    • Large/larger banks with assets in excess of US$100 billion
    • Small/smaller banks with assets less than US$100 billion

    All Survey participants received the full 36-page report, which included detailed sections by product, process steps and cycle times, technology budget allocation, distribution of personnel and other factors.

Summary

The banking industry is on the precipice of a new era from a technology perspective, but only banks that truly understand how their organizations function today will be able to invest the appropriate dollars in the right areas to take advantage.

About this article

Authors

Matt Cox

EY Americas Wholesale Banking Advisory Leader

Large-scale transformation leader and strategist focused on Wholesale Credit and Transaction Banking. Husband. Father of two. Nomadic traveler.

Juan Carlos Lopez

EY Americas Wholesale Banking Advisory; Managing Director, Ernst & Young LLP

Strategist and innovator. Global thinker. Passionate about driving change. Father of two. Avid cyclist and race car driver.

David Gagne

EY Americas Wholesale Banking Advisory; Managing Director, Ernst & Young LLP

Passionate about the future of financial services. Helping wholesale banks realize the benefits of strategic transformation. Dad and amateur chef.