The future of the commercial banking industry

Helping commercial customers navigate uncertainty

Commercial banks are looking at 2023 with caution and heightened sensitivity. Tighter monetary policy and macroeconomic uncertainty are putting greater strain on businesses’ growth across multiple industries.

The commercial banking business is also becoming increasingly competitive. For pragmatic reasons, many corporate customers tend to spread their banking relationships across a number of institutions, thereby adding to the competition for wallet share. Moreover, nonbank lenders are increasingly funding leveraged buyouts by private equity firms, taking away share from banks in the syndicated leveraged loan market.

In response, many banks are implementing strategies to defend their turf and deepen wallet share. Yet, deepening wallet share may be challenging for many institutions given customers’ evolving needs. So what else can commercial banks do to win more of their customers’ business?

We conducted a survey of more than 100 corporate executives who are decision-makers on banking relationships to understand customers’ financial needs, their expectations, and their perceptions of the primary bank—that is, the bank their company uses most for its banking needs and preferably also maintains a loan or a line of credit with. The survey results, along with select banking executive interviews, confirm gaps in customers’ expectations and banks’ service quality.

Elevating the commercial banking experience

Our research recommends four levers that can help banks bridge these gaps and elevate commercial customers’ banking experience.

Finding new sources of value

The future of commercial banking is likely to be more digital, more interconnected, and simply more demanding than in the past. While future growth prospects could remain rooted in solid relationships, corporate customers increasingly expect new sources of value from their banks in advice, frictionless experiences, innovative products and services, and new business models.

Maintaining the primary bank relationship and growing wallet share is not going to be easy when competition abounds and every dollar counts. Clearly, the past may not serve as a compass to navigate the future. Banks in the pursuit of new sources of value should forge ahead with conviction while remaining true to their purpose of being the financial intermediaries and trusted advisers for commercial customers. However, those sitting on the fence—constrained by their budgets, culture, digital sophistication, talent, or tone at the top—may find themselves easily displaceable from primary relationships.