Cash Management Survey 2015: How to build a banking business around cash

Many banks now say cash management is the heart of their business, not just for the returns it can generate in its own right but also for the opportunity to pump other products and services through their networks. Euromoney’s survey reveals banks still have a lot of work to do to turn aspiration into reality

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When it comes to banking propositions, one stands out more than any other over the past five years. Regardless of whether an institution is a big global bank, or an ambitious regional pretender, it is almost inevitable that the chief executive will have insisted at some point that transaction services lie firmly at the heart of the business.

Take Deutsche Bank, whose new CEO John Cryan is trying to find a long-term plan for a bank mired in a low return-on-equity purdah. Everything at Deutsche appears to be in question – apart from transaction services. That’s no surprise: bank-wide ROE for the first quarter of 2015 was a measly 3.1%. But for full year 2014, Deutsche’s global transaction banking division delivered a more-than-healthy 13%.

Take Citi, just about the only bank still offering a truly global network to its clients. At the annual Sibos conference in 2014, a keynote speaker was Jamie Forese, president of the bank and a life-long capital markets and investment banker. He could not have been clearer that Citi’s transaction services business, which proudly transacts trillions of dollars a day for its clients, would be integral to the bank’s growth.

The heart of the business


Buzzwords flow off bankers tongues when they talk about transaction services: it’s sticky, it’s low-capital, it’s high return, it’s the bread and butter of the business, it’s in the DNA of the firm.

That’s all true. But transaction services are attracting attention at the top of the financial industry’s C-suite for another reason: because being at the heart of a client’s daily operations, a close cash management relationship can pump business into other products and services that banks offer them.

Michael Spiegel, head of trade finance and cash management for corporates at Deutsche Bank, says: "The bank has never looked at the transaction services business in isolation."

Frank-Oliver Wolf, head of transaction services Germany at Commerzbank, says: "Banks have been attracted by the stable revenues – the business does not have too many ups and downs. Cash management is a key element of banking. If you have a good cash management relationship, you will often pick up other parts of the business. You cannot do this unless you have deep communication with the client."

Lin Hong, director of corporate banking, Bank of China, says: "In recent years, we have seen the transaction banking services as the most important strategic business and taken an active part in bidding for transaction projects initiated by our strategic customers."

Any banks that haven’t got the point yet may be consigned to playing catch-up. Rajesh Mehta, head of treasury and trade solutions, EMEA, at Citi, says: "Many international banks are realising that they need to start improving their structures. Those that have already prioritized the development of the transaction banking business are ahead of the game."

"The product-silo approach needs to be replaced with a more client-centric way of thinking, to improve the overall client experience."
- Rajesh Mehta, Citi

Just how advanced is the push to make cash management the hub for other revenue streams for banks that are desperate to increase their share of wallet with core clients?

The results of the questions put to nearly 24,000 corporates and 3,000-plus financial institutions in this year’s Euromoney Cash Management Survey make for interesting analysis – and paint a mixed picture of achievement and opportunities begging for the banks involved.


First, the good news. If you have a cash management mandate, there’s almost an 80% chance that you will also carry out payments for your client, whether it’s a corporate or financial institution. The surprise, perhaps, is that the figure is not even higher, given the close relationship between cash and payments.

Bankers often talk about the importance of relationships with treasury teams, given how much other business now flows from them. In terms of related products, none is more symbiotic than foreign exchange. Again, the numbers are good – if you’re a cash management provider, there’s roughly a 70% chance that you’ll also carry out FX trades for that client.

For all that cash management is a core business, by tradition no single relationship between a bank and its clients is more important than the provision of credit. It’s perhaps surprising that the two do not go more hand in hand: among corporate respondents, less than 50% combine a lending with a cash management relationship. Unsurprisingly, given the nature of their business, the proportion for financial institutions is only a third.

Next we get into the high-margin business that banks desperately want, but often only the bigger clients need. Among corporates, one-fifth give mandates to their cash managers for capital markets business; among financial institutions, the figure is more than three in 10. Among both corporates and financial institutions, around one in seven employ their cash management banks for risk management. And just 7% of clients have used their cash managers for M&A, which is a much less frequent requirement for most.