Multi-Banking: Meaning and Characteristics

The commercial banking industry is undergoing a rapid transformation. This transformation has been enabled by the increasing use of digital technologies in the commercial banking industry.

Open banking has become a game changer when it comes to the field of commercial banking. It has enabled the use of many other modern banking solutions. Multi-banking is one such banking solution that has become possible because of the widespread adoption of open banking.

In this article, we will understand what multi-banking is, what its characteristic features are, and why multi-banking is being touted as a game changer in the field of commercial banking.

What is Multi-Banking?

Multi-banking is an innovation in modern commercial as well as retail banking. In simple words, multi-banking is a technological solution that allows corporations to interact with all their commercial banking relationships using a single interface. This means that even if a corporation has five different bank accounts with five different banks, it can interact with all of them using a centralized application.

Multi-banking is made possible by a centralized application that does not belong to any bank. Corporations can add all their financial relationships such as accounts, loans, etc in this application. This application then uses the open banking platform to fetch data related to the various relationships in real time. As a result, the corporation gets access to a financial cockpit which provides a centralized view of the various banking relationships a company has.

What Problem Does Multi-Banking Solve?

Multi-banking has been one of the first solutions which were identified to be implemented once open banking became a reality. This is because this is a crucial pain point for organizations as of now.

Right now, organizations have a multitude of banking relationships which are all separately managed using a complex web of mobile applications and internet websites. Up until now, corporations have been managing all these accounts separately.

Corporations have traditionally used spreadsheets to manually record the balances and create a cockpit of sorts. However, since the cockpit is created manually, the data cannot be refreshed automatically. Hence, without the use of multi-banking, it becomes difficult for corporations to interact with all their balances using a single unified interface.

The problem of not having enough visibility is quite widespread amongst corporations. This is the reason why many corporations are eager to adopt the multi-banking setup using which they can interact with a single interface.

Characteristics of Multi-Banking

In order to understand the purpose of a multi-banking system, it is important to understand some of its characteristics as well. Some of the important characteristics are as follows:

1. Consolidated Financial Relationships: The multi-banking system has been created so that organizations can get a view of all their banking relationships in one single location. This is possible for national as well as international banking relationships.

   Also, all types of banking products such as current accounts, loans, overdrafts, and credit cards can be viewed from a single application. This single view helps the company simplify its reporting process.

   In the absence of multi-banking, corporations have to consolidate and report their finances on their own. Since each company creates the same information system, it ends up being a multiplication of effort. If a multi-banking system is used, companies can save money on the creation and maintenance of such systems.

2. Consolidated Transaction History: The multi-banking system does not only allow the corporation to view all their relationships in one place, but it also creates a virtual centralized database of all transactions. This means that the transactions are actually held in the database of the respective banks which executed them.

   However, using the multi-banking interface, the corporation can search all past transactions at once. They do not have to log into different mobile applications or websites. This helps them reconcile their transactions with less effort which ends up reducing the cost of operations.

3. Payments and Balance Management: The multi-banking system also helps corporations manage the deficits and surpluses in their accounts.

   If there is less money in one account and payment has been presented, the money can be instantaneously credited from a different account and the payment can be honored. We have already discussed this while discussing the sweep-in facility. However, multi-banking makes it possible to sweep-in funds from different banks.

4. Enhanced Customer Experience: The entire purpose of multi-banking is to provide an enhanced banking experience to the customer. Over time, commercial banks have realized that there are a lot of competitive forces at play in the industry. Hence, in the next few years, commercial banks are expected to see a heavy churn.

   Corporations are well versed with technology since they themselves deploy such technology in their operations. Hence, it is very important that the best user experience is enabled for corporate customers failing which they are likely to switch banks.

The fact of the matter is that multi-banking is a revolutionary new concept. This concept is likely to create a huge impact in the market since it provides a significant amount of utility to the customers.

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