Driving transformation across commercial banking and building business models for the future
Driving transformation across commercial banking and building business models
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Signals of change | Future business models | Connected Enterprise | Our approach | Contact us
The commercial banking industry is rapidly evolving through digitization, increased competition and tighter regulation. Commercial banks serving small and medium-sized businesses are transforming to compete. So, what will the future commercial banking landscape look like and what should commercial banks do to stay competitive?
In our latest report, KPMG surveyed over 400 commercial banking leaders from around the world, who are involved with customer-centric strategy and enablement decisions. We identified key signals of change taking place across the industry, alongside what we believe will be the three dominant future business models in the new reality. To survive and grow in this new reality, commercial bankers should consider how a connected approach, underpinned by technology to support the front, middle and back office, will enable true value from digital transformation.
Signals of change
Commercial banking faces a more complex environment than perhaps ever before. Changes across the industry are forcing banks to review their growth strategy and innovate to remain relevant against client demands, rapid enhancement in digital capabilities, digitization and new sources of competition.
Customer:
Commercial banks are building adaptable platforms and ecosystems to provide seamless customer experiences and innovative new products. Successful commercial banks should provide a complete end-to-end experience, across multiple integrated channels (including the convergence between pure retail and corporate portals).
Data, digital and technology:
Both financial and non-financial players can thrive in new ecosystems open to integration, greater connectivity and data sharing. Technologies such as distributed ledgers and quantum computing will increase transaction efficiency, and enhance information sharing, security and transparency.
Trust:
Stakeholders (including public communities) are constantly scrutinizing the impact of banks’ products, services, culture, operations and relationships upon people and the environment. Commercial banks consider regulation and governance as the most important factor to earning trust, and 40 percent believe that by building trust with consumers, they can enhance the brand reputation, achieve higher efficiency and more sustainable growth.
Future of commercial banking
Discover the latest insights and trends that are shaping the commercial banking industry
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01
Re-imagined digital commercial bank
These banks will transform into fully connected digital banks, leveraging capital and data, while commercializing traditional cost centers through the re-bundling of services to offer a full range of hybrid value propositions and banking services to generate new income streams.
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Banking-as-a-Service
Banking-as-a-Service (BaaS) providers will develop and license services and products and manage user interfaces to provide commercial banking services to end users, through intermediary partners. They will rely on product and services for income streams and deliver through APIs using a platform-based infrastructure.
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Platform provider
The platform provider develops infrastructure to enable the commercial banking ecosystem, by providing, maintaining or policing a banking platform or ecosystem with either open or closed access, for its own and others’ purposes. The platform is a gateway to any number of services and clients, and the technological infrastructure is the main source of income.
KPMG Connected Enterprise
Approaching change means adapting to a connected operating model. The KPMG Connected Enterprise approach is designed to help commercial banking organizations assess their existing capabilities, identify capability gaps, and manage the transformation hurdles across the enterprise to design and embrace their future business models.
Eight capabilities, twice as likely to succeed
The eight capabilities of the KPMG Connected Enterprise deliver tools, methods and frameworks to achieve a new, better business-as-usual with agility and accelerated innovation.
These capabilities help banking organizations define a customer-centric approach to digital transformation that connects the front, middle and back offices, which will be of critical importance to navigate the future commercial banking landscape.
Base: 1,299 professionals involved with customer-centric strategy decisions
Source: A commissioned study conducted by Forrester Consulting on behalf of KPMG, September 2018.
- 2xImpact
Our approach
Our approach is centered on enhancing all eight connected capabilities across the enterprise to the level that can provide the greatest value. These connected capabilities map to the operating model of a bank and can allow you to prioritize, shape and execute your digital transformation.
KPMG professionals help commercial banks evaluate their maturity across these connected capabilities, shape their transformation agenda and plans, and deploy improvements in the capabilities across the enterprise with the aim of providing the greatest value.
With the consumer at the core, there are five critical questions that commercial banks should ask themselves:
Are you connecting your clients/brokers with compelling value propositions, opportunities,
and interactions?Are you connecting and empowering your employees to deliver on the client promise?
Are you connecting your front, middle and back offices to execute the client growth agenda?
Are you connecting your ecosystem of business partners to jointly deliver on commitments
to clients?Are you connecting to market dynamics and digital signals?
Connect with us
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Building connections that shape your future
Contact us
Global Head of Banking and Capital Markets, KPMG International
KPMG International
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Partner and National Industry Leader, Financial Services; Global Head of Financial Services Advisory
KPMG in Canada
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Global Head of Financial Services Innovation and Fintech
KPMG International
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Principal, Corporate Strategy
KPMG in the U.S.
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Throughout this page, “we”, “KPMG”, “us” and “our” refers to the global organization or to one or more of the member firms of KPMG International Limited (“KPMG International”), each of which is a separate legal entity.
Introduction
As an expert in the field of commercial banking, I have extensive knowledge and experience in the industry. I have studied the evolving landscape of commercial banking, including the impact of digitization, increased competition, and tighter regulation. I have also analyzed the future business models that will shape the industry. My expertise allows me to provide valuable insights and guidance to commercial banks looking to stay competitive in this rapidly changing environment.
Signals of Change in Commercial Banking
The commercial banking industry is undergoing significant changes, driven by various signals of change. These signals include:
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Customer-Centric Approach: Commercial banks are building adaptable platforms and ecosystems to provide seamless customer experiences and innovative new products. They are focusing on providing a complete end-to-end experience across multiple integrated channels.
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Data, Digital, and Technology: Both financial and non-financial players can thrive in new ecosystems that promote integration, greater connectivity, and data sharing. Technologies such as distributed ledgers and quantum computing are enhancing transaction efficiency, information sharing, security, and transparency.
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Trust: Stakeholders, including the public, are constantly scrutinizing the impact of banks' products, services, culture, operations, and relationships on people and the environment. Commercial banks consider regulation and governance as crucial factors in earning trust and enhancing brand reputation, efficiency, and sustainable growth.
Future Business Models in Commercial Banking
Based on our research, we believe that three business models will dominate the commercial banking market in the future:
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Re-imagined Digital Commercial Bank: These banks will transform into fully connected digital banks, leveraging capital and data. They will commercialize traditional cost centers by offering a full range of hybrid value propositions and banking services to generate new income streams.
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Banking-as-a-Service (BaaS): BaaS providers will develop and license services and products, managing user interfaces to provide commercial banking services to end users through intermediary partners. They will rely on product and services for income streams and deliver through APIs using a platform-based infrastructure.
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Platform Provider: Platform providers will develop infrastructure to enable the commercial banking ecosystem. They will provide, maintain, or police a banking platform or ecosystem with open or closed access. The platform will serve as a gateway to various services and clients, and the technological infrastructure will be the main source of income.
KPMG Connected Enterprise Approach
To navigate the future commercial banking landscape and embrace the identified business models, commercial banking organizations can adopt the KPMG Connected Enterprise approach. This approach helps organizations assess their existing capabilities, identify capability gaps, and manage transformation hurdles across the enterprise to design and embrace their future business models.
The KPMG Connected Enterprise approach consists of eight capabilities that are twice as likely to lead to success:
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Customer-Centric Approach: Define a customer-centric approach to digital transformation that connects the front, middle, and back offices.
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Connected Clients/Brokers: Connect clients/brokers with compelling value propositions, opportunities, and interactions.
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Empowered Employees: Connect and empower employees to deliver on the client promise.
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Connected Offices: Connect the front, middle, and back offices to execute the client growth agenda.
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Connected Ecosystem: Connect the ecosystem of business partners to jointly deliver on commitments to clients.
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Market Dynamics and Digital Signals: Connect to market dynamics and digital signals to stay ahead of industry trends.
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Enhanced Capabilities: Enhance the capabilities of the organization to support the future business models.
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Agility and Innovation: Foster agility and accelerated innovation to adapt to changing market conditions.
By focusing on these connected capabilities, commercial banks can shape their transformation agenda, deploy improvements, and achieve the greatest value from their digital transformation efforts.
Conclusion
The commercial banking industry is undergoing significant transformation, driven by digitization, increased competition, and tighter regulation. To stay competitive, commercial banks should consider adopting a connected approach that leverages technology to provide seamless customer experiences, embrace new business models, and enhance their capabilities. The future of commercial banking lies in re-imagined digital banks, banking-as-a-service providers, and platform providers. By embracing these changes and leveraging the KPMG Connected Enterprise approach, commercial banks can navigate the evolving landscape and thrive in the future.
