Corporate cash has become one of banking’s most consequential bargaining chips. The third-quarter earnings season is offering chief financial officers a glimpse of what financial institutions are willing to provide to keep it.
Third-quarter results from JPMorganChase, Citigroup and Bank of America suggested that the competition for corporate deposits is expanding beyond interest rates and into the infrastructure surrounding the money itself. The world’s largest banks are chasing mid-market CFOs by offering corporate products that remove settlement friction and potentially some reconciliation; transfer greater influence over cash routing to software and banking platforms; and could be creating a competitive market for programmable liquidity and its associated data.
J.P. Morgan Payments reported quarterly revenue of $5.6 billion, up 14% year over year. Citi’s Services business grew revenue 15%, with average deposits increasing 16%. Bank of America reported $669 billion in average Global Banking deposits, up 6%, alongside a 10% improvement in treasury service charges.
The figures reflect more than a scramble for funding. They illustrate how valuable the operating relationship surrounding corporate deposits has become.
For CFOs, the opportunity is to negotiate for capabilities that may ultimately be worth more than incremental basis points on idle cash.
Read also: Everyone Is Selling CFOs Real-Time Finance. Most of It Isn’t.
Banks Are Offering to Give CFOs Their Time Back
The first bargaining chip banks are laying on the table in their corporate finance strategy is time, specifically the hours or days that corporate cash can spend traveling between accounts, jurisdictions and financial institutions. Traditional treasury operations are built around constraints that have long been treated as unavoidable, such as banking cutoffs, settlement windows, intermediary institutions and delayed confirmation of payment status.
Today, banks are trying to cut that friction down, not monetize it. JPMorgan’s third-quarter Payments update highlighted expanded faster cross-border payment capabilities, its Kinexys blockchain deposit network, and an embedded payments integration with BILL designed to support real-time payment posting for small businesses.
Citi CEO Jane Fraser said during the Tuesday (Oct. 13) earnings call that Citi is finding strong traction with tokenized deposits, which allow institutional clients to transfer funds using blockchain technology while keeping those funds within the regulated banking system.
“Our idea is, let’s give the clients a choice between all the different platforms and capabilities,” Fraser said. “Then they can choose which is the best for their particular need. There’s not a one-size-fits-all here. As I’ve said before, Citi Token Services and the tokenization of deposits is the area we’ve been most excited about because it’s so easy for a client to move money from one account within Citi to another, taking advantage of our blockchain.”
‘This is a capability now operating in seven markets around the world, and it also connects into our 24/7 clearing capabilities” Fraser added.
Faster settlement alone does not eliminate reconciliation. Data quality, reference information and integration with corporate systems remain decisive.
Still, the PYMNTS Intelligence report “The Bankers’ Playbook: The ROl Case for Instant B2B Payments,” a collaboration with The Clearing House, found in July that 88% of financial institutions surveyed rated the return on investment from real-time B2B payment rails as high or very high.
See also: B2B Payments’ Next Legacy Format Is the PDF
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Banks Are Giving CFOs More Control While Competing to Control the Software
Earnings also put an exclamation point on how banks are offering corporate clients greater control over payments and liquidity through digital platforms, APIs and automated treasury workflows.
The PYMNTS Intelligence report “Payment Protection: Why Firms Still Aren’t Real-Time Ready” found in August that 70% of surveyed firms planned within 12 months to adopt or expand automation that matches and clears payments against invoices, ledgers and bank statements.
Bank of America’s third-quarter results offered one indication of how significant the digital channel has become. The bank reported that 86% of its qualifying Global Banking relationship clients were digitally active. Payments through its CashPro app reached $358 billion, an increase of 20% year over year. Global Transaction Services revenue rose to approximately $3 billion.
Historically, treasury teams made cash management decisions and then instructed banks to execute them. Today, the systems used to make those decisions can also initiate the transactions. The competitive question is therefore not simply which institution offers the best cash management product. It is who controls the instructions that determine where corporate liquidity goes.
Read also: How B2B Invoices Became Payment Infrastructure
Corporate Deposits Are Becoming Programmable, and Their Data Is Becoming More Valuable
None of this means deposit pricing has become irrelevant. Interest income remains important, particularly for cash-rich companies. Counterparty exposure, liquidity requirements and access to credit will continue to shape where corporate funds are held.
However, the next generation of corporate banking agreements may be judged not only by deposit rates and transaction fees, but by settlement availability, automated reconciliation, data access, system interoperability and the ability to deploy liquidity without unnecessary operational constraints.
Banks want to hold corporate cash. The more consequential question is how much control over that cash, its movement and its data they are willing to give companies in return. Tokenized deposits, in this example, are not merely another payment format. They potentially allow bank money to move through systems capable of executing transactions based on predefined conditions.
In practical terms, a company could eventually link payment execution to verified delivery, approved invoices or other contractual events, subject to the capabilities and controls of the participating institutions. That’s exactly what the world’s largest banks are working on providing their corporate customers.
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