Corporate banking is all about relationship management between companies and banks. Relationship is built on trust. Mutual trust is required when we are transacting in a B2B environment. But the revelation of many scams recently reveal the fact that many due diligence aspects have been overlooked while blindly relying on relationship! Digitization will reduce existing personal touch but will enhance transparency and collaboration between stakeholders.
Joe is a corporate finance representative of a large manufacturing company. The company recently imported machineries for its plant to expand its business. The funding was arranged by multiple banks with one lead bank. Joe has been actively involved in this acquisition determining the capital expenditure, sources of funds and plan to generate income. The prior relationship with the lead bank and good performance of the company enabled the bank to arrange for advances easily.
Prior relationship with the lead bank included maintaining salary accounts for the company employees, use of funded and non-funded limits for its existing business requirements, use of deposit and cash management services.
Joe’s interaction with bank has been seamless with biometric authentication to avoid any fraud. IoT devices also help to mitigate fraud. A simple and intuitive banking application hosted on cloud was used for banking services to fulfil the needs of the company. In addition voice and chat services meant easy mode of communication. Turnaround time for requests like approvals/due diligence was shortened because of automated processes.
The lead bank played a key role in this acquisition. It understood the business of the company and offered products and services complementing customer need. The analytics solution of the bank helped in credit appraisal and in arriving at how to arrange funds for this acquisition. It solved the company’s funding problem by providing real time inputs and recommendations based on its financial profile thereby providing actionable data insights. The lead bank arranged for other banks to share risk in accordance with the bank’s policy. Exposure limits of other banks in the same company or similar industry was also taken into consideration. The availability of data with respect to exposure of other banks in the company helped the bank shortlist other banks to take up exposure for this acquisition.
The lead bank on behalf of other banks had done risk assessment of the project. All parties involved are part of a block chain network where all documentations will be in place including necessary approvals and collateral security thereby ensuring greater transparency and better communication.
Overall invisible banking is at play!
Digitization not only helps reduce cost, turnaround time and collaboration but ensures compliance and mitigates risk of human error thereby making all stakeholders happy.