Cash management: Innovation among the turmoil
The digital dividend dominated the cash management market in 2020. Corporates responded well to those banks that digitalized the services they needed to stay afloat in the choppy waters of a global pandemic.
In recent years, there has been much discussion about the internationalization of transaction banking services for clients who no longer recognize geographical limitations. A bank’s global footprint and its market power were closely correlated.
In 2020, the focus shifted towards consolidation. Coalition’s transaction bank index shows that cash management revenues in the first half of the year fell to levels not seen since 2016.
After a decade of continuous growth in global transaction banking revenue pools following the global financial crisis of 2008, the research firm anticipates a decline of 6% in 2020.
Interest rate cuts ate into profitability and quantitative easing resulted in unprecedented growth in market liquidity. Banks also received a boost from corporates drawing down on their uncommitted lending facilities during the pandemic in order to have cash on hand.
The leading cash management banks have had good reason to feel ambivalent about digitalization in the past. They acknowledge that this is where the market will end up, but they have also recognized that physical cash and cheques are more profitable.