Commercial banking is at a pivotal moment. As digital transformation reshapes the financial services landscape, commercial banks face a unique set of challenges and opportunities distinct from their retail counterparts. The complexity of commercial customer journeys, the rise of embedded finance, the imperative for cross-functional leadership, and the need to blend human and digital interactions are all shaping the future of the sector. Drawing on insights from the latest Global Banking Benchmark Study and interviews with leading commercial banking executives, this page explores how commercial banks can navigate their digital transformation journey to unlock new value for both customers and the institution.
Unlike retail banking, where digitalization is now well established, commercial banking’s transformation lags by several years. This is due in large part to the sector’s reliance on relationship management, bespoke and negotiable products, and a highly heterogeneous customer base—from sole traders and SMEs to large, complex corporates. These factors make the digitalization of commercial banking both more challenging and more critical.
Recent studies show that competitive pressure is intensifying. Incumbents and digital-first challengers alike are investing heavily in commercial banking, with neobanks and specialist lenders rapidly gaining market share, especially among SMEs. In the UK, for example, challenger and specialist banks accounted for 59% of total gross lending to smaller businesses in 2023, outpacing the big five banks for the third consecutive year. As digital-first entrants set new standards for customer experience and operational agility, incumbents must adapt or risk losing relevance.
A central focus of commercial banks’ digital transformation is the customer journey. However, the diversity of commercial clients—each with unique business models, needs, and regulatory requirements—adds significant complexity. While retail banks can often standardize and automate customer journeys, commercial banks must accommodate a wide range of non-standard, negotiable products and services, especially for larger clients. This results in fragmented systems and higher costs to serve.
For smaller commercial clients and SMEs, digital engagement is advancing, often drawing on lessons from retail banking. Digital-led neobanks have found success in this segment by offering fast, frictionless onboarding and account management. However, for larger corporates, digital engagement remains limited, typically confined to legacy portals for payments and cash management. Achieving seamless, end-to-end digital journeys that can flexibly serve all segments—while meeting stringent KYC, AML, and compliance requirements—remains a significant technological and organizational challenge.
Embedded finance has emerged as a key priority for commercial banks seeking to innovate and grow revenue. By integrating banking services directly into clients’ business processes and platforms—such as ERP, accounting, or e-commerce systems—banks can offer new, value-added propositions like embedded payments and working capital finance. This not only enhances the customer experience but also opens new distribution channels and revenue streams.
However, rolling out embedded finance is not without hurdles. The diversity of client technology platforms, the need for flexible integration, and the challenge of breaking down internal product silos all complicate implementation. Moreover, many commercial clients are not yet ready to fully adopt embedded finance, requiring banks to support a gradual transition. Success in this area depends on modernizing core systems with API-driven, cloud-based architectures and fostering cross-functional teams that can design, deliver, and support these new propositions.
Digital transformation in commercial banking is as much about organizational change as it is about technology. Traditional product-centric, hierarchical structures often create silos that hinder innovation and slow down the delivery of new customer experiences. Leading banks are moving toward cross-disciplinary leadership teams that bring together expertise in technology, data, operations, and customer experience.
Interviews with commercial banking executives highlight the importance of reorganizing teams around customer journeys and segments, rather than products. This approach enables a more holistic understanding of client needs and accelerates the development of tailored solutions. Yet, only a minority of banks have fully embraced agile, cross-functional operating models. Embedding a culture of collaboration, experimentation, and continuous learning is essential for sustaining transformation momentum.
Despite the push toward digitalization, human expertise remains a critical differentiator for commercial banks—especially in managing complex, non-standard client relationships. The challenge is to seamlessly blend digital and human interactions, allowing relationship managers to intervene at key moments in the customer journey and to leverage digital tools for deeper insights and more proactive service.
Most banks’ current systems do not provide relationship managers with real-time visibility into clients’ digital activities or the ability to step into digital journeys as needed. Building this capability requires investment in integrated platforms, data analytics, and AI-powered tools that support both self-service and high-touch engagement. The goal is to create a converged model where digital and human channels reinforce each other, delivering both efficiency and personalized value.
Unlocking the full potential of digital transformation in commercial banking hinges on the ability to combine and analyze data from across the organization and external sources. Richer data resources enable greater personalization, more accurate risk assessment, and the application of advanced analytics and AI. However, many commercial banks struggle with siloed data, inconsistent taxonomies, and concerns around data security and privacy.
To address these challenges, banks are increasingly involving data strategists early in proposition and process design, investing in modern data architectures, and building the foundations for scalable AI applications. As core technology becomes more standardized across the industry, the ability to generate actionable insights from data will become a key source of competitive differentiation.
Leading commercial banks are already demonstrating what’s possible:
These examples underscore the importance of leadership commitment, cross-functional collaboration, and a willingness to experiment and learn from both successes and setbacks.
To succeed in the digital era, commercial banks should:
The digitalization of commercial banking is a complex, ongoing journey. By embracing these principles and learning from industry leaders, commercial banks can unlock new value for their clients and secure their place in the future of financial services.
Publicis Sapient partners with leading commercial banks worldwide to accelerate digital transformation. To learn more about how we can help your institution modernize and compete, visit publicissapient.com/fs.
© 2024 Publicis Sapient Corporation.