Use of treasury management systems (TMS) by corporations and banks appears to have peaked, says a new research report from Greenwich Associates.
The report says that use of treasury management systems by corporates and banks peaked at the end of last year. 43% of treasury officers at 1,369 large institutions interviewed by Greenwich Associates at the end of 2002 report using a TMS – which is down from 46% of the same group at the end of 2001. These percentages match up to those for the total number of institutions interviewed – more than 2,200 in 2002, where the proportion dipped from 44% to 42%. That is a marked contrast from the situation Greenwich Associates found at the end of 2001, when the percentage of users had risen from 36%
However, Greenwich says institutions are not discarding TMS. “People we interviewed had been calling their in-house proprietary systems TMS a year ago, but now that TMS exist in a more marketable way, they realize what they have is something quite different,” says Greenwich Associates consultant Peter D’Amario. He adds that the expense of the systems, and the efficiencies they help to realize, makes them highly unlikely candidates for scrapping. Still, consultant Tim Sangston reckons these findings point to a definite trend of reduced uptake by non-users. “The case for buying a TMS has become harder to make under current market conditions,” he says.
According to the matched sample of 1,369 institutions interviewed in 2001 and 2002, those more likely to use TMS include institutions that conduct over $10 billion in foreign exchange volume annually. Average use declines slightly in the $1-10 billion range, and drops to just a third among those conducting less than $1 billion annually.
Half of corporate treasurers say they use TMS, as compared with less than a third of financial institutions. This reflects the fact TMS functions have traditionally been based on the needs of the corporate user.
In terms of geography, institutions in continental Europe report higher usage (54%) than institutions in the United Kingdom (38%). Half of U.S. institutions say they have TMS, compared with 38% of those in Canada. In Asia excluding Japan, the percentage is 32%, and in Japan it is lower than any other major market, at 18%.
“Some people, particularly in the Asia-Pacific region, are opting to use an internally developed system or Excel spreadsheet to keep costs down,” says Tim Sangston.
From September to December, 2002, Greenwich Associates conducted 2,724 mostly in-person interviews at corporations and institutions around the world. Interviews were conducted with chief financial officers, finance directors, treasurers, assistant treasurers, fund managers, portfolio managers, and buy-side traders active in foreign exchange about their TMS use or non-use, what systems they use, and their level of satisfaction with that system. Interviews were conducted in Argentina, Austria, Australia, Belgium, Brazil, Canada, Chile, China/Hong Kong/Macau, Colombia, Denmark, Finland, France, Germany, India, Indonesia, Ireland, Italy, Japan, Malaysia, Mexico, the Netherlands, New Zealand, Norway, the Philippines, Portugal, Singapore, South Korea, Spain, Sri Lanka, Sweden, Switzerland, Taiwan, Thailand, the United Kingdom, the United States, and Venezuela.