How fintech innovation enhances the business banking customer experience

Banking innovation is moving at an impressive pace. In a relatively short amount of time, we’ve seen a comprehensive move towards digital-first experiences, mobile services, and fast response times.

Despite this, the banking customer experience is often scoffed at. Particularly by business customers, who can still experience long delays and generic product offerings. 

But more changes are coming. And smart banks have identified ways to innovate and improve interactions with business customers. 

With the help of four seasoned banking experts, we’ll look at four areas of investment for better banking customer experiences. 

Our experts

• Tiphaine Bergault, Executive Director, Global Corporate Banking and Innovation Economy, J.P. Morgan; ex-Merrill Lynch
• Patrick Brett, Managing Director Strategic Venture Investing, Citi SPRINT
• Socheat Chhay, Group Head of Corporate Ventures, Sopra Steria; ex-Bpifrance
• Aurélien Viry, CEO, Societé Generale Factoring

The state of customer experience in corporate banking

Contrary to popular belief, banks care deeply about keeping clients happy. As with any service business, great CX is a key differentiator. McKinsey found that banks that excel at customer experience “lead in financial metrics such as total shareholder return (TSR), increased growth, and decreased costs.” 
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The challenge is to bring the same upgrades we’ve seen in consumer banking to the business world. 

The success of neobanks and digital-first providers in recent years has proven what’s possible. At least for private consumers, banks have been pushed to deliver digital services, mobile apps, and self-serve offers. 

But business banking hasn’t quite made the same leaps. And lending in particular is still too slow and difficult for most small or growing businesses. 

The SMB experience can be better. A lot better, in fact. And the right combination of investment and innovation can get us there. 

4 ways banks are investing in customer experience

1. More personalization through data

“Banks have a huge amount of historical client data,” says Didier Valet, “far more than any young, new business could hope to have. But the way you use this kind of data doesn’t work as well to serve new clients.

“Fintechs can use hot data to quickly get a real picture of the business, rather than waiting for a half or full year of financial data. They can connect to a company’s business tools and immediately understand their credit position and potential risks.”

This leads to more tailored offerings, particularly for small businesses or those with an unusual profile. 

“Banks have more of a ‘one size fits all’ setup,” continues Didier. “This often misses small companies, or any business that doesn’t match what they’re used to. The fintech approach to scoring—often using PSD2—can rely more on ‘hot data’ than on the company’s balance sheet. From a legal and regulatory point of view, that’s much more agile.” 

SMBs are the perfect test case for a more personalized approach. They make up the vast majority of companies worldwide. And many grow from small, to medium, to enterprise, to multinational. There’s a huge opportunity for any bank able to attract and onboard small business customers at scale.

But as Socheat Chhay explains, “scaling from a few high-value clients to managing hundreds or even thousands of smaller accounts requires significant investment and operational changes.”

While that may have previously closed the door to serving SMBs at scale, regulatory change and new technologies have changed the equation completely.

2. Embracing open banking & embedded lending

Whether fair or not, banks’ reputation for outdated customer experiences comes from three main causes: 

1. Their size, and the need to find one-size-fits-all solutions to serve everyone;
2. Outdated legacy systems which make launching new products a long process;
3. Regulations to ensure that banks can’t move too quickly and risk the health of the financial system. 

But as financial systems open up, banks can more easily overcome these issues. In the EU, PSD2 and other financial regulations gave fintech companies more access to financial data. 

“There are lots of companies that could serve these needs,” says Didier, “but they don’t want to become a bank. So embedded lending is perfect for that space. Defacto and other companies are in this space with pricing that better fits the risk profile, and better understanding of the risks. If you’re smart enough, with good products and willing to onboard these clients, you’re really in a promising spot.”

Patrick Brett is bullish on the opportunities that these partnerships will create. “There’s always a temptation for banks to try to build things on their own. But in many cases lending-as-a-service partners are already there, and can often work better than the tools banks would build. 

“These services can have a much lower cost, and do it in a really client-friendly way.”

“There are real opportunities for fintechs to offer better services and better prices in specific areas,” says Aurélien. “And that then becomes very interesting to banks. If they can integrate and offer those specialized services to customers — but let fintechs create and maintain them — that’s a product they don’t need to build themselves.”

Banks are recognizing the huge potential to innovate alongside partners, rather than competing with them. We’ll explore this further shortly. 

3. An AI-powered banking experience

Few innovations are more visible or trendy than artificial intelligence. But the hype is real, and the impact AI can have on banking CX is enormous. 

“AI is changing the way the ecosystem interacts and works,” says Tiphaine, “and the impact is already being seen. It’s such a big opportunity for the whole financial ecosystem to become more efficient and offer better services more quickly.” 

In lending specifically, the process upgrades bring direct benefits to customers. “They’ll be able to borrow more quickly,” says Patrick. “They’ll lose less time shopping around, and far less time getting onboarded. Fewer forms and face-to-face meetings, mostly thanks to that interplay between open banking and AI underwriting.

“It should also mean less administrative effort throughout the relationship. And all of this leads to lower lending prices. It’s a competitive market, so the more lenders can reduce their spending and increase margins, the more they can pass that on to borrowers.”

Perhaps more than any other recent innovation, artificial intelligence makes fast, low-touch, digital services widely available. And that’s exactly what business customers are crying out for. 

“We’re able to underwrite businesses that would have been much harder in the past,” says Patrick. “There’s a clear competitive advantage to going live with these enhanced services as soon as possible.”

4. Fuelling innovation through bank/fintech partnerships

The relationship between banks and fintechs is often misunderstood. “While at times the relationship is portrayed as an adversarial one,” says Tiphaine, “fintechs and banks share the same fundamental goal: serving clients better and more efficiently.”

Instead, each should fuel the other. Rather than competing, banks can let fintechs find the answers to the difficult problems that hurt the customer experience today.

“By combining fintech agility with the resources and stability of banks, we’re creating a more customer-centric future for financial services,” concludes Tiphaine.

This model is especially promising for the SMB market, says Socheat. “Unlike banks, fintechs have the incentive and agility to innovate around SMB lending by bringing new client experiences. Fintechs thrive by identifying underserved, underexploited and large growth markets—with SMBs being a prime example. Banks recognize this and are content to let fintechs experiment, ready to step in when real progress is made. 

As Patrick Brett explains, “Defacto has identified fixes for the most costly and onerous parts of the [lending] process, and are showing impressive results with their partners. It’s considerably faster and far more cost effective to provide financing. And arguably ensures more compliance.

“It’s really a great example of how specialized fintech can plug into and improve on traditional banking services, and everybody wins. The banks win, the regulators win, and the customer wins most of all.” 

Great banking experiences require innovation & collaboration

Strong CX will always help the best banks stand out from the rest. But the standard definition of good corporate experiences has changed, and banking products need to as well. 

Gone are the high-touch services and white glove treatment. Businesses need to move fast and access capital fast. Which makes automation and AI paramount. 

Further reading from our banking experts

• The new standard: How banks & fintechs are innovating the customer experience with Tiphaine Bergault
• Transforming SMB lending: Bank-fintech collaboration in the post-Covid era with Socheat Chhay
• From competition to cooperation: the new dynamics of financial services with Aurélien Viry
• How open banking and machine learning are shaping modern finance with Patrick Brett