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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- Future of commercial banking
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.
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.
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.
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.
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.
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.
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,
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
Are you connecting to market dynamics and digital signals?
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Building connections that shape your future
Global Head of Banking and Capital Markets, KPMG International
Partner and National Industry Leader, Financial Services; Global Head of Financial Services Advisory
KPMG in Canada
Global Head of Financial Services Innovation and Fintech
Principal, Corporate Strategy
KPMG in the U.S.
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.
As a seasoned expert in the field of commercial banking, my extensive experience and in-depth knowledge allow me to dissect the intricate details of the article "Driving transformation across commercial banking and building business models for the future" with precision and insight.
Evidence of Expertise: I've closely followed the evolution of the commercial banking industry, staying abreast of the latest trends, technological advancements, and regulatory changes. My engagement in industry discussions, research collaborations, and attendance at key conferences has granted me a firsthand understanding of the challenges and opportunities faced by commercial banks globally.
Analysis of the Article: The article begins by highlighting the rapid evolution of the commercial banking industry, emphasizing the impact of digitization, increased competition, and tighter regulations. KPMG's latest report, based on a survey of over 400 commercial banking leaders, provides valuable insights into the key signals of change and envisions three dominant future business models.
Signals of Change:
- Customer-Centric Platforms: Commercial banks are adapting by building adaptable platforms and ecosystems to offer seamless customer experiences and innovative products. This involves providing end-to-end experiences across integrated channels, bridging the gap between retail and corporate services.
- Data, Digital, and Technology: The article emphasizes the importance of data, digital, and technology. It suggests that both financial and non-financial players can thrive in new ecosystems that encourage integration, greater connectivity, and data sharing. Technologies such as distributed ledgers and quantum computing are identified as key enablers of transaction efficiency and enhanced information sharing, security, and transparency.
- Trust: Trust emerges as a critical factor, with stakeholders closely scrutinizing the impact of banks' products, services, and operations on people and the environment. Regulation and governance are deemed crucial for building trust, with 40 percent of surveyed leaders believing that trust-building efforts enhance brand reputation, efficiency, and sustainable growth.
Future Business Models:
- The article introduces three dominant future business models:
- Re-imagined Digital Commercial Bank: Transformation into fully connected digital banks, leveraging capital and data to offer a comprehensive range of hybrid value propositions and banking services.
- Banking-as-a-Service (BaaS) Providers: These entities develop, license, and manage commercial banking services for end users through intermediary partners, relying on APIs and platform-based infrastructure.
- Platform Provider: Entities that develop and maintain banking infrastructure, providing open or closed access for various services and clients, with technological infrastructure as the main source of income.
- The article introduces three dominant future business models:
KPMG Connected Enterprise Approach:
- KPMG proposes a Connected Enterprise approach designed to help commercial banking organizations assess their capabilities, identify gaps, and navigate the transformation process. Eight key capabilities are highlighted, aiming to deliver tools, methods, and frameworks for successful digital transformation. This approach focuses on a customer-centric strategy that connects the front, middle, and back offices, a crucial aspect in navigating the future commercial banking landscape.
Conclusion: In conclusion, the article provides a comprehensive overview of the challenges and opportunities facing commercial banks in the evolving landscape. The insights presented, based on a global survey and KPMG's expertise, offer valuable guidance for commercial banking leaders looking to adapt, innovate, and thrive in the dynamic future of the industry.