It takes less than five minutes to transfer funds, make bill payments or even open a new bank account through mobile phones or net banking. But the corporate world operates in a different realm, where physical (paper-based) transactions still rule the roost.
For instance, a simple fund transfer or a fixed deposit placement requires manual letter instructions signed by two or more authorised persons of the company. The instruction is then faxed, mailed or couriered to the banks for processing. The more advanced a transaction, more are the paperwork and procedures.
It is not that digital transactions were unavailable to the corporates. While banks have the ability and infrastructure to process almost all kinds of transactions digitally, adoption from the corporate side remains abysmally low. But it has been accelerating in the last few weeks due to the Covid-19 pandemic.
As the pandemic-induced lockdown forces people to work from home, companies are finding it difficult to process transactions manually due to the absence of authorised signatories and the ability to physically send the instructions to the bank. As a result, many companies are showing interest in adopting digital transactions.
Foreign banks, which hold a substantial chunk of corporate business, are witnessing a significant spike in digital transactions besides interests from companies, who have hitherto stayed away from the digital fold.
“We have had digital products for many years now. The adoption was also good but it wasn’t as wide as we would have liked. But with the crisis, even people who were reluctant to move to digital are now considering a shift,” said Rajat Verma, Head-Commercial Banking, HSBC India, adding that “There is a mindset change because the advantages of digital are becoming more and more clear.”
Standard Chartered Bank, another major player in the wholesale banking space also said it is witnessing a surge in corporate interest towards digital banking.
“With the current circumstances of a lockdown, we have seen a positive surge in corporate interest to move to digital transactions. The bank is extending all necessary support to such clients. Some of the initiatives that we have undertaken are training the clients remotely on our Straight2Bank (corporate internet banking platform) capabilities and guiding them in registering the users for this facility,” it said.
Banks are also using this opportunity to impress upon the clients the significant cost and time advantages of going digital, besides training corporates who are not well-versed with technology.
“For clients who haven’t been digitally savvy in the past, we have been conducting regular online sessions with them to assess their current processes and suggest ways to digitise the processes using our advanced digital solutions,” Niraj Mittal, Managing Director & Country Head, Institutional Banking Group, DBS India, said.
“Most of our clients, large and small corporates alike, find our digital business banking solutions intuitive and useful, and the lockdown has only accelerated the pace of adoption. We have seen a 29 per cent rise in the number of digital transactions in Q1 2020 versus Q1 2019,” Mittal added.
Rajesh P, Managing Director of Mumbai-based GrowTrust Ventures said, that unlike in retail, where the decision-maker is one person, for corporates there are challenges of multiple authorised signatories, so the workflow (in digital) needs to be more secure and user-friendly.
A former banker himself, Rajesh said: “Banks should also incentivise corporates, who adopt digital platforms, in the form of free transactions, some kinds of credits which can be adjusted towards bank fee or charges payable by the clients.”
Bankers also say that not all corporate transactions can go 100 per cent digital. Trade and supply chain transactions like Letters of Credit (LCs), collections and guarantees require physical documents for processing.
“Today you have import and export transactions happening online, which was not possible 2-3 years ago. Even all the government authorities are moving towards digital, so transformation happens only when everything moves towards digital,” HSBC’s Verma said.