Corporate banking is stuck in batch – and it’s costing clients billions

Corporate banking, a backbone of the global economy, is stuck in a time warp remaining wedded to batch processing for handling transactions, reconciliations, and reporting.

The next generation of core must provide corporate banks a derisked path to real-time operations

So why has corporate banking failed to transform with the times? Batch-processed transactions are, broadly speaking, simple to execute, but it is the sheer scale of corporate clients’ needs that has prevented banks adopting real-time core infrastructure.

However, today’s markets are hyper-connected and accelerating. Corporate clients cannot leverage AI without real-time data. Simply put, I believe batch processing is now holding corporate banking back. While batch processing can lower operational costs for corporate banks in the short term, the long-term inefficiencies can cost their clients billions through delayed payments, sluggish reconciliations, lack of visibility over working capital, and missed opportunities to innovate at their core with AI.

Banks clinging to batch-based architectures are falling behind, losing ground to real-time innovators, and leaving clients saddled with costly inefficiencies.

The challenges of batch processing

Batch processing works by aggregating transactions for processing in bulk at scheduled intervals. This approach was innovative in the mid-20th century, but over my four decades-plus in the industry, I’ve increasingly realised it is woefully inadequate for the needs of modern businesses. Fast-forward to today, and I believe relying on batch poses a business-critical risk for corporate banks and their clients.

Think of the e-commerce space, for example. Banks today are getting hit with requests from e-commerce businesses for thousands of transactions a second that need to be approved. Without a modern core banking estate, this introduces a number of inefficiencies:

1. Delayed payments: Payments processed in batches can take hours or even days to complete, especially across borders. These delays create cash flow challenges and expose businesses to currency fluctuations.
2. Infrastructure overhead: Maintaining batch systems demands significant infrastructure investment. Banks must allocate resources to schedule and process batches, leading to inefficiencies of time and cost. And now, countries like Australia are getting rid of their batch rails entirely – meaning banks must adapt.
3. Lack of real-time insights: Batch processing leaves clients blind to real-time financial data, such as working capital, complicating activities like currency exchange and interest calculations.
4. Legacy system constraints: Batch systems are often tethered to aging core infrastructures that lack the scalability, integration, and unified data capabilities modern businesses need. This hampers banks’ ability to innovate and serve clients effectively.
5. Inefficient escrow arrangements: Without real-time Know Your Customer (KYC) capabilities, banks are unable to pre-approve clients, disabling those holding escrow from taking control of money effectively and lowering costs.

These inefficiencies translate directly into lost opportunities and diminished client satisfaction. The cumulative impact of these challenges illustrates how batch processing, while seemingly cost-effective, can ultimately erode profitability and client trust.

The benefits of real-time processing

Transitioning to real-time processing can be transformative in addressing these challenges. Unlike batch systems, real-time architectures enable transactions, insights, and analytics to flow instantly. Here’s how real time can reshape corporate banking:

1. Faster transactions: Payments settle instantly, improving cash flow and enabling businesses to act swiftly in volatile markets.
2. Operational efficiency: Real-time processing reduces the overhead required to manage batch schedules, slashing operational costs.
3. Advanced fraud detection: Continuous transaction monitoring enhances fraud detection, providing added security to clients.
4. Real-time insights:  Real-time insights create economic benefit for corporate banking clients via much more effective optimisation of liquidity and forex processes. For example, banks can help their clients by analysing and suggesting currency swaps, overdrafts, or working capital loans in real time. And clients can optimise currency conversions or manage interest payments with unprecedented precision.

Real-time capabilities aren’t just about speed. They enable entirely new ways of operating – from dynamic liquidity management to AI-powered precision analytics – enabling banks to help their clients operate more efficiently and lower costs.

A real-time core will provide escape velocity

Escaping the legacy of batch transactions is a trend already well underway in the financial sector. Corporate banks need to be on that journey, otherwise they are already behind their competitors. Business today needs to move at the speed of light. Real-time capabilities clear a path to enhanced customer experiences, cost efficiency, and market agility, and it’s clear to me that batch systems are a relic of a bygone age.

The choice for corporate banks is stark: adapt to real-time processing or face obsolescence. Corporate banking leaders must invest in next-generation core platforms capable of handling the scale and speed required by today’s global economy. While neo core platforms unlocked real-time innovation for the world’s retail banks, I believe they’re just not fit for the massive scale of corporate banking – which is why no corporate banks have adopted a neo core.

The next generation of core must provide corporate banks a derisked path to real-time operations and unlock the speed and scalability corporate clients need to innovate and win in this AI-accelerated world.

Corporate banking can’t afford to remain stuck in the batch era, it’s holding back the industry and worse, it’s holding clients back. It’s time to embrace the next-generation of core banking solutions for real-time processing and allow corporate banks and their clients to finally unlock their full potential in this fast-moving, data-driven world.

About the author:

Antony Jenkins, CBE, is founder, chair and CEO of 10x Banking, the cloud-native core banking provider tackling legacy challenges for banks.

Antony’s 40+ year career in the banking and financial technology sector has included leadership roles at some of the best-known names in the financial services sector, including serving as the CEO of Barclays and his current role as an external member of the Prudential Regulation Committee at the Bank of England.