The strength and quality of a bank’s electronic banking security is the most important factor in selecting an international cash manager, according to finance officers and treasurers who voted in Euromoney’s cash management survey.
With the threat of online fraud and cyber attacks on the rise, and companies worldwide conducting more of their banking business over digital platforms, e-banking security has become a critical factor and the most important of 19 that respondents were asked to vote on in the 2013 survey.
“Every cash manager is a potential target for cyber attack, as the number, complexity and sophistication of cyber security attacks continues to grow,” says Erol Mustafa, Ernst & Young’s (E&Y) head of IT risk advisory for financial services in Europe, Middle East, India and Africa (EMEIA).
“Electronic banking security is now increasingly critical in the selection of a cash manager.”
Steve Holt, E&Y’s head of cyber security for financial services, EMEIA, adds that banks and their corporate customers have to be alert to this threat, “since a single fraud has the potential to result in five-figure losses or more as well the risk of brand damage and associated loss of trust”.
The importance of ensuring the best possible security systems are in place is not lost on the banks either.
Jonathan Ashton, managing director of global e-channels in the global cash management division of Barclays corporate banking in London, says: “Security is central to a bank’s credibility and clients’ trust of their bank.
“As e-banking is effectively the front door of a banks’ services, banks need to do as much as possible to ensure that the door can’t be opened by anyone except bone fide clients with the right key, without making it insanely difficult or laborious.”
Ensuring this level of security is expensive, requiring billions of dollars of investment each year.
Celent, an IT consultant specializing in financial services, estimates that North American banks will spend around $60 billion on IT investment this year, a large portion of which will be dedicated to improving and maintaining security systems across digital banking products.
Core among them are online banking platforms, mobile payments and smartphone apps, products that cash management banks are fiercely competing on to win more new business and also deliver more to existing corporate clients.
However, in addition to the e-banking security banks can deliver, they also have to ensure they have the age-old necessities of good people who have sound industry knowledge and expertise to win new, and maintain existing, clients.
The quality of a bank’s cash management personnel was ranked a close second to e-banking security, and a bank’s industry knowledge and expertise third.
Other importance factors include: the level of commitment to a company’s cash management business; quality of advisory services; understanding of a company’s business; innovative business solutions; and systems compatibility.
Areas such as a bank’s provision of liquidity and credit facilities, multi-currency capabilities and counterparty risk were ranked outside of the top 10 factors.
The global results were based on the responses from non-financial companies.
Most (59%) non-financial companies that responded to the survey last year said they had between two-to-four cash management banks that were core to their operations, with 53% stating they did not intend making any changers to the number in the next year.
However, 16% of respondents said they intended to decrease the number of cash managers – the highest percentage since 2009.
However, there is a striking difference in the responses between non-financial companies overall and non-financial companies with annual revenues greater than $100 billion.
Only 21% of non-financial companies with annual revenues greater than $100 billion re-evaluated their cash-manager relationship during the past 12 months, the lowest percentage for five years. This figure is sharply down from 58% in 2012.
This, in part, suggests there is a trend among very large non-financial companies to look to consolidate their banking relationships. Indeed, Euromoney data show the number of cash managers used by large corporates fell from between seven and 10 in 2009 to two and four in 2013.