Cash managers adapt to tougher times
In a period of financial crisis corporates are particularly concerned about avoiding risk, but are also keen to get their cash working at a time when credit is hard to raise. Competition between top providers is fierce, while there are new opportunities for the second tier. Laurence Neville reports.
IN CASH MANAGEMENT, where contracts last for three years and reputations take decades to build, change has historically played out in slow motion. In the past year, the industry has been on fast forward, with the global financial crisis eroding some of its fundamentals, such as balance sheet solidity, which have simply never been a consideration in the past.
Indeed, the pace of change has been so dramatic that some participants have questioned the viability of the strategies of some of the leading players in the market – most notably RBS as well as, somewhat mischievously given its continued global dominance, Citi – in the wake of problems at their parent banks. Counter-intuitively, there are suggestions that smaller players might have opportunities undreamt of until now.
At the same time, scarce and expensive credit has focused corporates’ attention on how they can best leverage their cash management spending. That, in turn, appears to favour banks that have the balance sheet to lend and can adopt a coordinated approach to relationship management – potentially creating a new competitive dynamic for the once stolid cash management market.
What is beyond doubt is that in the brave new world of banking, where deposits and recurring revenues are a holy grail, the characteristics of cash management make it one of the most attractive businesses to be in.