Corporate clients’ expectations are changing rapidly. Today’s large companies want banking partners that not only provide essential financial services but also help them navigate the turbulent macroeconomic environment, including high inflation, changing monetary policy, ongoing supply chain challenges, and pressures to dramatically lower carbon footprints. In addition, corporate clients are looking for a step change in service across just about every interaction. When banks don’t meet expectations, companies are inclined to move a greater share of their business to other banks and deepen those relationships.
Our experience working with leading corporate banks around the world suggests that the solution to these challenges entails a reimagining of how banks serve their customers. The traditional coverage model—in which relationship managers (RMs) each serve a small number of clients through high-touch, in-person interactions—doesn’t always offer the speed of execution or level of industry expertise that banks need to stay competitive. Although today’s clients continue to value personal interactions, they want to have more options for interacting with their banks and to be treated as a priority regardless of their size.
This article, which is based on more than 100 structured interviews with CFOs and treasurers at large companies across Asia, Europe, and the United States,1 examines the limitations of traditional coverage models and outlines how leading banks are implementing a new approach that better serves their entire portfolio of clients at lower costs.
Limitations of the traditional model
Given the complex and dynamic needs of today’s clients, we see traditional models restricting banks in several ways. First, these models tend to overemphasize large accounts. When RMs spend a majority of their time on face-to-face interactions, coverage is often weighted toward the 20 percent of clients that generate 80 percent of the revenues, and vast revenue potential is lost in the medium and long tail of clients receiving less attention. This often results in missed opportunities to cross-sell relevant products to smaller customers, present compelling value propositions to new clients, and make smaller clients feel valued.
As a smaller client, I sometimes felt like the bank would only call me when the market was slow and they did not have larger deals to chase.
A second limitation of traditional coverage models is that they often don’t make full use of the technology levers now available for corporate banking, including generative AI applications. They often lack automated solutions for repetitive tasks like onboarding, know your customer (KYC), risk monitoring, and administrative requirements. RMs performing these tasks manually have less time for clients and for working with product specialists to generate ideas for clients. Giving RMs access to useful market and client data, as well as actionable and meaningful client or industry insights, can help them understand client needs and drive cross-selling opportunities.
These two limitations raise the cost of coverage. In our experience, the cost to serve clients in traditional coverage models is more than 55 percent of income, on average, which puts downward pressure on a bank’s return on equity. By redesigning their coverage model, banks have been able to meet clients’ needs more effectively and efficiently—in some cases improving productivity by up to ten percentage points—which allows coverage teams to redirect capacity to underserved clients.
Finally, despite banks’ efforts to promote greater collaboration, too many barriers still exist between frontline teams in different product areas, sectors, and regions. Without true collaboration, banks can’t generate the strategic insights and innovative ideas today’s clients want.
A new model for growth
Other industries have developed coverage models that suggest how banks can profitably capture a larger share of customer wallets and simultaneously provide better service to customers of all sizes and significance. Leading banks have already adopted these practices with an integrated multichannel strategy that employs different ways of engaging for each specific need. This new model uses three elements: highly relevant, personalized coverage; inside sales using a hybrid team of centralized RMs; and direct digital engagement (Exhibit 1).
Most banks will tier this three-prong model across their client base, using different elements on an as-needed basis. In some cases, a bank can use all three elements in combination for a particular client. Consider, for example, how a bank could use the model to offer a high level of service to a large private equity investor in European and North American technology firms. The bank could deliver the following benefits:
- Insights-driven, high-level interactions. By combining deep, sector-specific knowledge and curated internal research, the bank’s senior RMs generate tailored recommendations about potential acquisition targets. They bring these ideas to the investment firm’s partners and managing directors, which results in several successful M&A mandates combined with acquisition finance mandates.
- Broad knowledge across many smaller companies. The firm’s treasurer wants real-time visibility into, and control over, cash balances across the portfolio of companies. Because a hybrid sales team serves these companies as banking clients, the team presents the treasurer suggestions about how to optimize liquidity at each company and offers insights about when each company will need additional funding.
- Revenue-boosting digital automation. Portfolio company treasurers want their bank to proactively offer hedging solutions for their cash flows, so the portal automatically presents suggestions for foreign-exchange solutions when a cash flow trigger occurs. Besides simplifying this function for the client, the automated offers can boost the bank’s revenues and enable senior bankers to focus on flow business activities.
In the remainder of this section, we take a deeper look at each type of coverage channel.
Creating personalized interactions
Face-to-face interactions and a one-to-one coverage model continue to be the ideal channel for high-value clients, but our interviews with corporate banks’ clients consistently show that companies care less about the mode of interaction and more about whether it is personalized. For example, clients in the energy and transport sectors expect their RMs to understand the implications of the energy transition for corporate investment and financing, and to provide content and recommendations relevant to their company across all possible engagement channels.
My inbox is spammed daily by banking newsletters. They typically go into the bin, as we don’t have capacity to process them. I really need tailored, curated, relevant-for-me bullet points.
To build more sector- and company-specific know-how, leading banks are reorganizing RMs into industry-specific clusters. Not only does this deepen RMs’ understanding of particular industries and their market dynamics, it also can provide a forum for mentorship and other opportunities for RM knowledge building and professional growth—for instance, a speaker series of external experts or master classes. In markets that are too small to be fully “sectorized,” a bank can build industry knowledge by creating clusters of related industries, such as healthcare, pharmaceuticals, and insurance in one cluster and energy, transport, and utilities in another. This allows some degree of specialization while ensuring there are enough RMs for a full desk.
Creating truly meaningful and personalized client interactions, especially with members of the C-suite, requires sophisticated insights. At a minimum, banks can enable such insights by promoting knowledge sharing within industry clusters. Beyond that, leading banks are creating global insights competence centers that research macro trends and translate the findings into content tailored by sector and company. These banks have also made it easier and more convenient for RMs to access this research quickly by creating easily searchable digital knowledge platforms, often including case studies of sanitized client work (Exhibit 2).
Banks are also promoting and incentivizing greater collaboration across their organizations. Some firms have put into place activity key performance indicators (KPIs) that reward RMs for including relevant subject matter experts in meetings. And a growing number of banks are bringing together coverage teams and product specialists to co-create personalized solutions with clients, such as financing that supports the development of a sustainable supply chain. Solutions created in this way can, when applicable, be adapted to meet the needs of other clients.
Although personalized coverage is best suited for high-value clients, banks can also serve medium-value clients with this channel, given its potential to selectively generate event-driven or structured lending deals.
Better covering underpenetrated clients through hybrid sales
Banks are beginning to explore the concept of hybrid sales teams, also known as inside sales. This approach has been successfully implemented in sectors such as telecom and high-tech, and banks serving affluent customers and small and medium-size enterprises have begun to utilize it. However, corporate banking has been slower to adopt the inside-sales model. Changing that could generate significant value.
In this approach, centralized, co-located teams of RMs combine with product specialists (such as experts in global transaction banking or export financing) to serve a large portfolio of customers. Typically, for mid-corporate banking, teams of five or six RMs cover between 150 and 200 clients per relationship manager. Instead of rewarding the teams for their total revenues, which encourages attention to large clients, the bank incentivizes hybrid RM teams to serve a wide array of clients. This could mean incentives based on the level of interactions per client or an increase in revenues from the previously underpenetrated segments. These RMs receive consistent direction on specific client interactions and generally do not engage in one-to-one relationships with clients (although models may vary). Instead, clients get team coverage, product expertise on demand, service for a wide array of needs, and intelligence based on advanced analytics.
This channel is an ideal fit for the medium-value segment of customers—companies not big enough for the expense of personal interactions. In addition, for large clients, hybrid teams can be an efficient way of supporting a business’s cash flow, liquidity, and other treasury operations while maintaining a high service level.
We have seen these hybrid models target the traditional long tail of customer portfolios with high efficiency. They generate a much higher coverage ratio, which results in lower costs and as much as a four times greater interaction frequency per RM than we see with traditional models.
Enhancing customer experience and cross-selling with direct digital sales
Although digital channels have been used most widely in service of small-business customers, midsize and large companies now expect the convenience, always-on access, and speed of digital interactions. To deliver on this, many corporate banks have integrated all client activity and interactions into a single, easy-to-use online portal. Most clients find this tool highly useful; some say they would like to increase their usage of it.
I would prefer my bank to use digital dashboards more often with us. … They still organize meetings in person or over video conference and do not sufficiently focus on data. A well-developed digital dashboard would be of great value for us.
Room still exists for corporate banks to enhance their customer experience with digital innovation. For example, although all banks have mobile apps and web pages designed for business clients, these are often one-size-fits-all platforms that do not adequately address the needs of large corporates or offer the functionality that company decision makers want. Leading banks have designed next-generation business apps that give executives quick, easy access to high-level information of interest to them, such as balances and cash flow forecasts. These platforms also allow decision makers to approve major transactions with a single click and can be further enhanced with insights and interfaces relevant to the company or industry.
Furthermore, the data generated by digital channels and interactions is underutilized as a resource to help RMs serve customers. Most RMs, for instance, don’t know if a key decision maker at a client has browsed a particular page within their app or website. Nor do they receive consistent information on clients’ previous transactions or interactions with the bank, even though this knowledge can be important for maintaining client relationships. Advanced analytics engines can provide RMs with a variety of tailored insights, such as new client opportunities and next lead suggestions; calculations of each client’s revenue potential; detailed pricing guidance; and identification of clients at risk of churn. Giving these insights to the RMs at the right time in the right form can lead to additional client interactions and deeper conversations.
Artificial intelligence (AI) solutions can enhance an RM’s ability to serve clients better. AI does this by speeding up the time it takes to access information and by capturing insights that might otherwise be overlooked. One large multinational bank is using AI to allow RMs to search for exactly the right research while they’re on the phone with a client. Another bank built a generative AI solution that quickly provides synthesized answers to questions posed by RMs, and it trains RMs to ask questions in a way that will obtain the most accurate answers.
We have seen digital innovations boost corporate banking revenues from nonlending products by more than 10 percent at little to no operating cost. When C-level executives can access a platform through any device and see screens customized to their needs, their companies are apt to bring more of their business to one bank. Similarly, when an interface links a suite of products—such as overdrafts, current accounts, trade finance, and foreign exchange (FX)—price sensitivity tends to fall because some clients are willing to pay for the efficiency of starting a new transaction with a single click or tap. One major bank embedded a recommendation for FX products and delivered it to clients just after they received a foreign trade letter of credit. With the automated recommendation, the bank experienced a 20 percent uptick in FX fees.
A call to action
Adjusting a bank’s strategy for serving existing and potential clients can lower its cost to serve, but implementation can be a significant challenge. Driving these changes requires visionary leadership and bold action from top management, as well as clear and consistent communication with the front line. This is not a one-off decision but a continuous process that should be assessed according to periodic milestones and be linked to key commercial processes, from account planning to client engagement.
Banks that are winning this crucial challenge have undertaken several actions:
- Institutionalize the voice of the customer. Treasurers, CFOs, and other key client stakeholders have clear views on how they would like to be served by banks, but they are seldom asked. Other banking segments, including retail and affluent banking, can serve as inspiration for how to systemically gather, track, analyze, and act upon client feedback. Co-creating solutions with clients and embedding them into the coverage journey can be a game changer.
- Clarify the client clusters to serve and the bank’s right to win. This includes defining the clusters precisely, specifying what gives the bank an advantage over competitors, and communicating these so frontline employees can align their actions with both. Being deliberate about where the bank can lead and where it can follow is invaluable for aligning day-to-day decisions with strategic goals.
- Design a multichannel strategy based on tiers of clients. Winning banks identify the priority use cases for each quadrant of the strategy. Then they systematically review whether clients should move from one tier to another.
- Create client-centered pilot tests. Before rolling out any new coverage model to the full organization, banks should consider using test-and-learn pilots that seek detailed feedback from clients and place clients at the center of the design process.
- Adapt capability building and talent staffing to the new coverage model. Winning banks expand frontline capabilities by hiring RMs with expertise in critical and high-growth sectors. They make sure knowledge centers of excellence are well staffed and have the resources they need to succeed.
- Bring together stakeholders from throughout the organization. Tech teams will need to deliver new tools for RMs. Data and analytics will help generate timely insights, and various business teams (products, sales, regions) will need to accommodate the new ways of working with clients.
The journey to implement a different approach to serving corporate banking customers isn’t trivial. Today’s coverage models need depth and flexibility to meet client expectations and reflect a bank’s strategies. This will require the abandonment of long-standing practices like the reliance on face-to-face interactions and overemphasis on current high-value clients. But the opportunity for impact also is nontrivial. Banks that use a multichannel approach to cover all clients in a much more tailored way can simultaneously boost client engagement, lower costs, and drive growth.
