Corporate banking is a fluctuating market, and new research from not one, but two reports suggests that businesses are now increasingly shopping around and switching financial service providers.
The latest reports, one from Temenos and Ovum, the other from Greenwich Associates, aim to peel back the curtain on why corporate treasurers are changing banks. Some of the motivation, research suggests, stems from the fact that corporate treasurers are unhappy with the services their financial institutions (FIs) provide; other data hints at broader market shifts at play, as banks reevaluate the role their corporate customers play in their overall strategies.
In Temenos and Ovum’s report, “2017 Transaction Banking Survey: Challenges & Imperatives of Real-Time Payments & Liquidity,” researchers found that 80 percent of businesses without access to instant payment solutions are considering ditching their FI for a competitor within the next year in order to access those capabilities.
The report concluded that corporate treasurers are increasingly prioritizing real-time payment capabilities, with 80 percent saying it supports improved risk management, 77 percent reporting that it improves liquidity management and 76 percent saying it improves cash visibility.
There is some evidence, Temenos and Ovum found, that banks are at least attempting to reach higher in their enterprise services: Most banks said they plan to offer virtual accounts to corporate treasurers within the next 12 to 15 months, with 57 percent of banks planning to do so in markets that offer instant payments.
“Corporate banks are responding to the ever-changing landscape of banking and the move from batch to real-time, but they are often still driven by regulation and are still grappling with these issues of aging legacy systems and a tangle of bolted-together, in-house developments,” said Ovum Principal Analyst David Bannister in a statement.
“The findings of this survey reinforce the opportunity that real-time payments and liquidity management solutions offer,” added Temenos Product Director — Payments, Darryl Proctor, in another statement. “With 80 percent of corporates in countries without real-time payment infrastructures considering moving their banking relationships within the next year, it’s time for banks to address the move to real-time [payments] by leveraging the latest end-to-end digital software that will allow creation of true real-time services in a single platform.”
Separate research from Greenwich Associates suggests there are other factors at play that fuel corporates’ motivation to switch banking providers.
According to research released this week, the Greenwich Share Leaders — the largest U.S. corporate banks that lead the industry — all have something in common: “They all saw their market footprints shrink last year, several intentionally,” Greenwich said in its announcement.
Researchers found that JPMorgan and Bank of America Merrill Lynch lead the U.S. corporate banking market, with 85 percent of corporates using services from one or both of these institutions.
But regulations are forcing these institutions to change their strategy in how they remain profitable and competitive with corporate customers.
“After the implementation of new capital requirements, large U.S. banks and top global banks are looking to grow their corporate banking revenues by earning more of the global and domestic wallets of their best customers, rather than competing aggressively for new customers,” said Greenwich Associates Managing Director Don Raftery in a statement.
Greenwich Associates said this shift has both regional banks and international banks jumping at the opportunity to grab those corporate customers left behind.
“This change is creating new opportunities for regional U.S. banks and several foreign competitors making a strong push into the U.S. market,” Greenwich said in its news release, adding that Japanese banks are in an especially strategic position to take advantage of shifting market shares.
“In both corporate banking and cash management, large companies are adding providers to cover business in Europe, Asia, Latin America and other markets — a trend benefiting both foreign banks and large U.S. banks with robust international networks,” Greenwich concluded.