Commercial Banking Trends

Increased lending and digital transformation are some emerging trends around customer experience in the B2B / commercial banking industry.

1. Increased Lending

  • More commercial banks in the US are increasing lending for their customers. An article published by Statista provides that in October 2020, commercial banks in the US granted approximately $14.92 trillion. Using a graph, the article further indicates that the value of loans of American commercial banks has gone significantly up from March 2014 to October 2020. 
  • The graph is available in the attached spreadsheet.
  • By increasing lending, commercial banks such as JP Morgan are providing small to mid-sized businesses with more capital and stability through loans. On the other hand, these banks can make money through the interest fees gained from these loans. Through this trend, commercial banks have continued to establish their importance and redefining their stand as the cornerstone of the American economy by creating liquidity in the market. Industry experts agree that increased lending has improved the economy of North America.
  • In May 2020, JPMorgan Chase & Co gave out over $30 billion in loans to more than 250,000 businesses. By availing these loans, the bank managed to support small businesses, particularly in the middle of the coronavirus pandemic. As the largest commercial bank in the US, the bank has in the recent past increased its lending to both start-ups or small businesses looking to expand and established businesses.
  • Just like commercial banks, business-to-business (B2B) lending is becoming a trend or a financing option where larger and established businesses are investing in smaller or startups through indirect lending. B2B is also making it possible for smaller businesses to qualify for lending for working capital loans in commercial banks. Research indicates that in the recent past, B2B lenders have grown significantly to become the second most popular funding option. Small business owners can therefore choose to borrow either from commercial banks or B2B lenders.

2. Digital Transformation

  • More commercial banks and B2B lenders are embracing various forms of digital transformation to improve customer experience. Artificial intelligence (AI), specifically machine learning (ML), for instance, has continued to gain popularity in commercial banks and B2B lenders for operational enhancements such as fraud control and improved credit-granting capabilities. These institutions are also integrating application program interfaces (APIs) with new products and services. Cloud and blockchain adoption are also on the rise as commercial banks continue to modernize their cash cycle systems. Even though digital transformation was already an emerging trend in commercial banks and B2B, the COVID-19 pandemic has hastened the digital shift and the urgency to improve customer experience.
  • Digital transformation is not a one-size-fits-all for all commercial banks and B2Bs. Instead, each institution is tailor-making systems that are in accordance with personal needs. Most commercial banks are however migrating from the traditional IT models such as systems of record to systems of engagement. These institutions are embracing intelligent engagement that makes commercial banks and B2B platforms cater to their clientele seamlessly. While digital transformation is still an emerging trend for commercial banks, most of them are aiming to deliver a competent customer experience comparable to those of tech giants such as Google, Venmo, Uber, and Airbnb. 
  • Citigroup is an example of a commercial bank that has embraced digital transformation wholly to improve its customer experience. Through application programming interfaces (API) known as CitiConnect, the institution has yielded dynamic connectivity to support real-time banking services such as FX rates, payments, remittance data, account statements, and proof of payment. The bank also uses API for a digital generation to create new customer segments and revenue streams, while unlocking the value of data and enabling its customers to access services, applications, and data in a seamless standardized way.
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