Sen Ganesh: Disruption Ahead in Transaction Banking

As disruptions emerge in transaction banking, banks need to think smarter about their investments. Sen Ganesh, a partner with Bain’s Financial Services practice, discusses four key steps executives can take in order to win in the banking industry’s current competitive state.

Read the Bain Brief: Disruption Ahead for Transaction Banking

Read the transcript below.

SEN GANESH: Banks are making big bets on transaction banking, really to increase their reoccuring fee revenue and improve their return on capital. However, they're all chasing the same revenue pool―and not all will succeed. In addition, we're seeing that the transaction banking industry has been disrupted. Firstly, clients are becoming increasingly more sophisticated and demanding more integrated solutions across trade and cash. We're seeing the emergence of fintechs and big techs who are providing alternative products and solutions, especially in working capital. And thirdly, regulators are imposing greater compliance restrictions.

For banks to win, they really have to focus on four key things. Firstly, they really need to prioritize their client segments and develop truly differentiated value propositions. And this might lead to new economic models―for example, moving from charging from fees per transaction to fees for solution. Secondly, they really have to overhaul the entire operating model, better integrating their different functions―for example, sales, client servicing, operations―and being much more agile. They'll have to attract new types of talent and skills, especially in artificial intelligence and data analytics.

Thirdly, they really have to rethink their entire technology landscape, replacing their legacy systems, and investing in new platforms, especially for digital, their product processes, their payment services app, and distributed ledger technology. And finally, banks have to rethink their role in transaction banking. They have to partner with other banks and service providers, and also maybe participate in ecosystems or other platforms.

Read the Bain Brief: Disruption Ahead for Transaction Banking