Moving beyond legacy systems: a digital roadmap for commercial banking

While customer banking has gone through a digital revolution, with feature-packed mobile banking apps and self-service capabilities becoming the norm, commercial banking continues to rely on fragmented legacy systems. But the landscape is changing.

Today, financial institutions face mounting pressure to modernize, driven by client expectations, regulatory demands, and the rise of digital-first competitors. 

The solution? A new approach to online banking that delivers seamless, self-service capabilities while enhancing (rather than replacing) the role of RMs.

KPMG’s report highlights how commercial banking is undergoing significant changes due to digitization, increased competition, and tighter regulations. Approximately US$210 billion was invested globally in fintech in 2021, underscoring the urgency for banks to transform their operations to remain competitive.

Despite these changes, Deloitte reveals that fewer than half (46%) of corporate executives rate the overall service quality of their primary bank as excellent or very good. This shows how banks have a significant opportunity to enhance their digital offerings and make their relationship with clients stronger. 

Most commercial banks operate on a patchwork of legacy systems and siloed point solutions. Payments, lending, treasury management, and trade finance often exist in separate systems. This creates difficulty for clients; for example, a multinational corporation with subsidiaries across different regions will struggle to consolidate cash flow data across accounts, leading to inefficiencies in liquidity management.

At the same time, relationship managers often lack the tools they need to deliver personalized, data-driven service — many rely on outdated CRM systems or spreadsheets, juggling multiple logins and struggling to get a 360-degree view of their clients.

The result is a cumbersome, costly model that frustrates clients and erodes profitability. Clients must often contact their RM for even the simplest process, while banks struggle to scale and serve smaller commercial clients efficiently. 

The next generation of commercial banking will be built on a foundation of composable banking, automation, and embedded intelligence. This is why banks are investing significantly in automating their processes – for instance, 68% have begun to monetize API development, and a further 20 percent are planning to do so in the near future.

Here’s how banks can close the digital gap and meet rising client expectations: 

1. Seamless digital onboarding & origination

Unlike retail banking, commercial banking involves complex onboarding and loan origination processes. Businesses have multiple signatories, subsidiaries, and industry-specific requirements, making these processes more challenging to digitize.

A modern commercial banking platform can allow clients to onboard digitally while providing RMs with collaboration tools to manage exceptions. Automated KYC, document scanning, and workflow orchestration can speed up processes and reduce back-and-forth friction. 

The major players are already acknowledging the need for change. For example, HSBC has transformed its business account onboarding process by digitizing and simplifying the procedure. This streamlined process has received positive feedback, with 82% of clients rating their experience as excellent.

2. Unified online banking experience

Traditional commercial banking systems create inefficiencies by operating in silos. Finance teams waste time toggling between platforms, reconciling accounts, and manually transferring data. Without real-time visibility into cash flow, decision-making becomes reactive rather than strategic.

McKinsey highlights that traditional coverage models often result in client servicing costs that exceed 55% of income on average, which negatively impacts a bank’s return on equity.

A unified online banking experience will allow businesses to:

• Manage multiple accounts across subsidiaries

• Initiate and approve payments from any device

• Access real-time cashflow insights and forecasting tools

• Customize dashboards based on industry-specific needs

Seamless integration with ERP and treasury management systems enhances this experience even more, allowing businesses to automate reconciliations, streamline payments, and gain real-time financial insights without leaving their existing workflows. By leveraging API-driven connectivity, banks can embed financial services directly into the platforms their clients already use, reducing friction and improving efficiency.

3. Role-based access & smart entitlements

A key challenge in commercial banking is that different roles within a business need different levels of access. A treasury manager shouldn’t have the same payment approval rights as a CFO. Yet, many banks lack the flexibility to offer fine-grained entitlements, leading to security risks and operational inefficiencies.

By embedding a strong entitlements engine, banks can provide customers with the autonomy to manage user roles, permissions, and transaction limits without having to start development from scratch. 

A state-of-the-art solution for commercial banking offers a flexible entitlements engine that enables banks to tailor access rights for different roles and users within an organization, and should empower businesses to manage user roles, permissions, and transaction limits without requiring costly custom development. With pre-built components, banks can ensure fine-grained access control, enhancing security and operational efficiency.

4. Billing transparency & value-added services

Commercial banks generate significant revenue through non-interest income – fees from payments, lending, and value-added services. But account analysis, tracking and billing for these services is often a nightmare. 

For instance, take a bank that has a large corporate client with multiple business units across different regions. Each unit uses different combinations of the bank’s services, resulting in a complex web of transactions. Some services are billed based on usage, while others are tied to fixed fees or tiered pricing models; the bank’s back-office team spends countless hours reconciling accounts, ensuring that each transaction is correctly categorized and billed.

The complexity increases when dealing with international transactions, where currency fluctuations and differing local regulations add additional layers of billing complexity. As a result, mistakes are common, leading to inaccurate invoices and frustrated clients who question the charges.

The right commercial banking platform enables financial institutions to:

• Offer new revenue-generating services like treasury management, invoice financing, and FX risk management and create new offerings for specific industries

• Provide self-service analytics so businesses understand their financial health

• Automate billing based on actual service usage through seamless account analysis

Banks that embrace these capabilities have the opportunity to strengthen client relationships by offering greater transparency and efficiency, staying competitive against fintechs and non-bank lenders.

For banks to thrive in the future of commercial banking, they must move away from siloed solutions and manual processes and embrace a digital-first model that enables continuous innovation.

A composable commercial banking platform — one that integrates with ERP systems, third-party fintechs, and evolving payment rails — enables orchestrating these siloed systems in the backend, ensuring a seamless, unified experience for the end user.

Banks that act today to modernize their online banking offerings will become the go-to partners for businesses looking for agility, efficiency, and data-driven insights. Those that delay risk losing their most profitable customers to more nimble competitors. 

The opportunity is here: by leading this transformation, banks can shape the future of commercial banking and make the most of new possibilities for growth and profitability.