This is a major conclusion to be drawn from this year's Euromoney cash management poll. The international poll draws on the opinions of 1,154 cash managers, treasurers and senior financial officers, whose companies' gross annual sales amount to over $6.7 trillion – more than three times as many respondents as in last year's poll.
Euromoney's poll is split into two distinct sections. The first asks respondents which banks they retain as their lead international cash management provider and shows those that lead the market in terms of numbers of clients, with an adjustment for their size. These are the quantitative rankings.
The second set asks respondents how they rate the lead bank they have nominated in terms of its performance across a range of services and products. Results show those that are rated the most highly by their own clients – these are the qualitative rankings.
Surprisingly, a bank's performance in one half of the poll does not necessarily correlate with its performance in the other. This is one of the most startling findings – there was, in fact, quite a dichotomy between the two sets of results.
The headline quantitative results show that two houses are beginning to dominate and indicate just how close the race is at the top of the international cash management business. Citigroup – the long-time leader of the market – continues to rule the roost, as ever beating all competition to take the crown of most used international cash management bank – the top quantitative ranking.
Number two position once again went to HSBC, whose plans for increasing market share now appear to be paying off, following a period of overhauling its technology and product offering. The group did so well in this year's poll that it almost knocked Citigroup off its perch. With a separation of just 38 points, the gap between the two banks is so small as to be, arguably, on the border of statistical irrelevance.
JPMorgan made a big leap up the ranks, from seventh last year to third, bumping ABN Amro down a place to fourth. Deutsche Bank, which ranked second as recently as 2002, remains in fifth place, as it was in 2003.Breaking out of the silo
With HSBC and others closing in on its top position, Citigroup has been making a concerted push to change its business to better match what it can deliver with what customers are demanding, and to push the boundaries of cash management. Paul Galant, global head of cash management, Citigroup Global Transaction Services, says: "This was a business that was run as a confederation of country businesses often working in a silo. We are now focusing on things like client segmentation, ranking, market share, and basically just the fundamentals."
The group has separated all of its businesses into five main areas: payments, collections, liquidity and investment, commercial cards, and information services. "Within that, we are trying to bring together the many different solutions we have to determine which ones are the best and focus on those," he says. "With the same budget applied to fewer platforms, we can really make those platforms sing."
HSBC still has some work to do before it can take over the US bank's long-standing number one position. But the group is happy about its close second place. Marilyn Spearing, head of global payments and cash management at HSBC, says: "We are increasing our client base very heavily at the top end and have developed coordinated coverage in the middle market. We have had huge dialogues with clients, and I am happy that we have seen a big improvement over previous years."
HSBC might now be focusing on bigger clients but it is still favoured by mid-sized accounts, coming first in supplying cash management services to companies with annual gross sales of less-than $1 billion, and between $1 billion and $2.49 billion. Citigroup leads in most of the bigger company categories.
Quantity and quality
That's one side of the picture. Paradoxically, though, for Citi, HSBC and ABN Amro, high scores on the quantitative ranking are marred by lower scores on many of the qualitative rankings derived from their own customers' views. So there is no room for complacency in a business in which customers will frequently review providers and send out requests for proposals to other banks hungry to steal market share from the competition. It's a tough business.
Even HSBC, which leads the overall qualitative ranking of how customers rate their own ICM banks, suffered when it came to views of its commitment to the cash management business. "The one thing that surprised me was that we saw an improvement across the board, but the commitment ranking was not very strong," says Spearing. The group came seventh. "We have improved but we are still not in the top, which seems out of kilter with our global position. You don't move up the rankings without the commitment and the money to back it up. Perhaps we have to communicate more."
Although maintaining pretty steady, and high, rankings in the overall quantitative score and improving in some regional scores, ABN Amro had a poorer showing in the more subjective customer rankings. The group came in fourteenth overall on the qualitative side. Not surprisingly, it prefers to bask in the glory of its strong performance in the quantitative section. And, over time, this is indeed impressive. John Gibbons, managing director, working capital cash flow advisory at ABN Amro, says : "We are pleased with our poll results, especially with the continuing number one in western Europe and moving up in CEE and Asia. If we look at poll results since 2002 it shows we have made tremendous improvement in meeting the cash management needs of our clients."
Satisfaction takes time
Citigroup ranked sixth overall in terms of qualitative customer ratings, well out of kilter with its global number one in terms of quantitative use. Galant says: "Quite honestly it takes time between making serious business changes towards becoming a trusted adviser and having clients recognize it. It does not turn on a dime. It is an evolution that we are committed to accelerating. I expect our scores in all of these categories will rise in '04 to '05, more than they did in '03 to '04."
One group from outside the top tier in the quantitative rankings that came out well in the qualitative rankings is SEB.
The Scandinavian bank was rated top in terms of commitment to the cash management business and quality of personnel – a pretty strong commendation from its own clients. The test will be to see if it can grow its overall business without diluting the average level of customer satisfaction.
Of course, interpreting subjective rankings is always hit and miss – correlation does not necessarily equate to causation. For example, for those clients that use Citigroup, global coverage – for which Citigroup ranks number one – would appear to be more important than commitment to the business, where it barely made the ranking, coming in twelfth.
It doesn't appear to be quality of personnel or technical support and guidance that are the draw, as Citi ranked tenth on each of these. It may rather be some of the highly rated technical capabilities that really clinch it for Citigroup.
In any case, for every average score that Citigroup received, it had another first place ranking to match, and indeed improved greatly in a number of categories across the qualitative section.
Intriguingly, none of those ICM banks rated top on quantitative scores came anywhere near to top when rated qualitatively on competitive pricing. Standard Chartered came out on top for that category – up all the way from tenth in 2003 – followed closely by Commerzbank and ING Group. But in the overall quantitative ranking, Standard Chartered ranks seventh with a score of 632, only just over half the score of Bank of America above it in sixth place. Standard Chartered ranked sixth last year and seventh in 2002. So if it is competing on price to win market share, it doesn't seem to be getting anywhere fast.
The decisions that underlie a company's choice of a cash management bank are complex but there are some basic truths to the industry. A crucial one is that the world is getting smaller and companies want their banks to make it even smaller and simpler for them.
ABN Amro's Gibbons says: "We recently carried out a survey of European treasurers and CFOs and asked them what their number one objective is for cash management in the coming years. They said it was to integrate their European and US treasury organizations."
He says customers are taking a broader view of cashflow challenges in their organizations. Companies now have to look beyond the traditional treasury function to find where cash is trapped in their group and generally look at the company as a whole when thinking about cash optimization.
"As a result, we have also broken down those separations within our bank," Gibbons adds. "While traditionally the cash management, foreign exchange, liquidity management and other operations were quite separate; these have now been broken down and tied more closely together as a response to clients' needs."
Many of the biggest cash management banks are radically changing their businesses. Amid fierce competition, they have been forced to choose points of focus and to concentrate resources on those areas. It is no longer possible to provide all services to all clients. Companies want banks that can provide global solutions and connect seamlessly to all the worlds in which they operate.
They want banks that are working towards connecting not just with their treasury and accounting systems and online trading platforms but that can also enable them to have a full overview of all the cash in their organization, gather data from all the banks with which they have relationships, and concentrate cash across all the markets in which they operate.
Corporate clients want cash management banks that can help them deal with complex problems across complex organizations. Those that can provide the whole package –whether alone or with the help of partner firms, continue to race ahead of the field.