Reversing a four-year trend, US companies in 2006 stopped severing relationships with cash management banks, according to a new Greenwich Report.
Even as rosters of providers stabilised however, companies continued to consolidate their business in the hands of one or two key banks with whom they are trying to forge long-term and sustainable cash management relationships. Companies participating in Greenwich Associates’ 2006 US Cash Management Research Study are steadily increasing the share of their total cash management business awarded to lead banks. On average, US companies allocated nearly 60 percent of the cash management business to their lead provider in 2006, up from just 56 percent in 2005.
Companies cite two trends that are driving them to consolidate their cash management business into deeper relationships with lead banks. As always, a certain proportion say the desire to maintain strong relationships with large credit providers is one motivating factor. But a bigger proportion of companies say that their growing use of electronic payments and receipts is prompting them to direct more business to their top providers.
“Almost 45 percent of companies’ payments and 47 percent of receipts are now processed electronically,” says Greenwich Associates consultant David Fox. “The efficiencies created by electronification eliminate some of the need for companies to maintain large numbers of cash management relationships. At the same time, the up-front costs associated with developing and implementing these systems encourages both banks and customers to make serious commitments.”