How to build new competitive competencies in transaction banking

Abstract

This paper holds a view that technology advances have added pressure to transaction banking’s existing revenue model. There is also a further potential longer-term structural risk to lower profitability via the industry’s current strategic responses that can cause further downward spiralling effects on margins. As a result, this paper suggests that banks should consider three new competitive competencies – as part of their frontoffice functions such as product development and management – to create new strategic options. This can be achieved by competing on new value creation based on application programming interface (API) as a means to transition from legal to new system capabilities, data consent and analytics for predictive-based services, and cybersecurity as part of product designs to build new digital trust. As necessary conditions for such pathways to be available to the transaction banking industry in future, the paper also attempts to highlight the considerations of existing regulations and legal aspects in the intersection between technology and uses of technology in finance, and the importance of having aligned frameworks for such advances to be sustainably applied.