US banks signed more than 100 new contracts with the 10 largest cash-management technology vendors last year, according to a report published by Aite Group.
As banks prioritise availability of money management and forecasting tools, this trend will only continue, says Aite Group research director Christine Barry, author of the May report.
In September, Goldman Sachs announced a collaboration with Volante Technologies that will see the bank use the cloud payments and financial messaging solution provider’s technology to process domestic and international payments on its digital transaction banking platform.
Patricia Hines, head of corporate banking at Celent, believes it will take Goldman some time to build out its offering to the point it could replace many of the primary banking relationships in place today.
Corporate banking generates as much as $85bn in annual revenue in the US and the top five banks account for most of that income.
However, she rejects the suggestion that transaction banking and cash management has changed little during the past 40 years and is now ripe for disruption.
“The largest US banks have very sophisticated customer facing portals – CitiDirect BE, Bank of America CashPro, JPMorgan Access, Wells Fargo Commercial Electronic Office,” she says.
“Citi Treasury and Trade Solutions won Celent’s Model Bank of the Year award in 2019 for the new commercial services launched through its portal and we have recognised banks such as BNY Mellon, Bank of America, PNC, Bank of Montreal and CIBC for innovation in corporate banking.”
Rapid change
Aite’s Barry observes that while the incumbent players have the advantage of existing relationships, rapid change within the industry is creating huge opportunities for any institution with the right digital strategy, client experience and product offering to gain market share.
“The emergence of innovative fintech companies – coupled with a growing personal comfort with technology carrying over to expectations in the business/corporate world – is forcing change," she says.
“Business is no longer solely won based on products and functionality, but rather on digital experience and platform flexibility.”
Vijay Oddiraju, CEO at Volante Technologies, acknowledges that while providing solutions derived from the best technologies to end-customers can be a key differentiator, “how those technologies are applied by banks and financial institutions is what will set them apart and help to drive and accelerate customer acquisition”.
In simple terms, while new entrants such as Goldman have newer technology, the established transaction banking and cash management providers have advisory and relationship expertise – so which is the more valuable?
The incumbent banks have a broad and deep set of corporate banking relationships, including advisory services. Experienced relationship managers and treasury advisers work closely with bank clients to help them to make the right liquidity-management and cash-flow decisions.
“As Goldman has only mentioned virtual accounts and payment services, it doesn’t seem that it offers all the pieces that leading banks deliver,” says Celent’s Hines. “Specifically, looking at virtual accounts, JPMorgan, Citi and Bank of America have had solutions in the market for the past few years.
“I appreciate that Goldman is leading edge in regard to a cloud-native environment, but I don’t see how newer technology in itself makes it superior to the feature-rich platforms of the largest players.”
Barry reckons relationships are at least as important.
“The institutions that ultimately come out on top will be the ones that are able to package a modern and flexible digital experience with actionable insights and advisory services that clients value,” she concludes.
In early July, Eduardo Vergara, Goldman’s global head of product and sales for transaction banking, told Euromoney it had signed up 175 clients with total deposits of $20bn.
The bank – which is understood to have targeted annual revenue of $1bn from its transaction banking business within five years – declined to provide an update on those figures for this article.
This article was originally published by Euromoney on 5 October, 2020
For more, please visit https://www.euromoney.com/