In a hypercompetitive environment, with nonbanks threatening to erode bank dominance and regulators ratcheting up scrutiny, only the strongest, most agile and more stable institutions prevail.
Being a bank at the top of your game in global treasury and cash management is not for the faint hearted. Banks that win our global awards for Best Treasury & Cash Management tend to have more than one of the following: a formidable global footprint; the ability to service clients’ payments, cash and liquidity needs in multiple jurisdictions; a detailed understanding of how local market practices and regulations impact client operations in different countries, and the ability to tailor solutions; and extensive banking networks, clearing memberships and technology platforms that can process high volumes of transactions and information across a multitude of currencies, geographies and bank accounts. Few banks meet all these criteria all the time.
With interest rates and the margins that banks potentially earn on commoditized treasury and cash management services low, growing revenues is especially difficult. Following the 2008 global financial crisis, most multinational corporations have
better credit ratings than their transaction banks. However, comparing banks based just on their revenues from treasury or cash management services or on whether they are A or triple-B rated does not tell the full story. In addition to a bank’s financial stability and knowledge of customer needs, one also needs to look at its investment in innovation and how it is using technology to meet customer needs.
Our global winners tend to have deep pockets that allow them to invest in proprietary technology platforms that make them more competitive, eking out cost savings and efficiency in back-office processes. Those benefits can be passed on to clients in faster transaction processing and response times and more-timely delivery of transaction-related information and account reporting.
In the past, treasury and cash management was about selling as much as possible, regardless of clients’ true needs. While that may still be true at many institutions, leading banks in treasury and cash management recognize the need to adopt a more consultative approach. “The focus has jumped from the legacy push-a-singular-product approach
to a more conversational approach, engaging our clients through consultative troubleshooting,” according to Citi Treasury and Trade Solutions, which won three out of a total of seven global categories in this year’s awards.
As transaction banks face increasing competition from nonbank third parties, who are developing application programming interfaces (APIs) to help address niche areas of
payments and working capital needs, banks are starting to behave more like tech firms. Many leading global banks in the treasury and cash management space now boast innovation labs where, alongside clients and fintech start-ups, they experiment with new technologies such as machine learning, artificial intelligence and the blockchain, to try and solve customer pain points around cybercrime and fraudulent transactions—and to minimize manual, paper-intensive, costly and inefficient back-office processes.
Some, like Citi, for example, are leveraging Big Data and analytics to give corporate treasury customers enhanced levels of reporting and insights to drive better-informed decisions about cash, liquidity and investments. With regulations like Basel III putting greater pressure on banks’ ability to lend and to accept short-term overnight deposits, corporate treasurers are more reliant than ever before on analytics, real-time transaction reporting and visibility of their cash balances on a global basis.
Standard Chartered, this year’s Best Bank for Payments and Collections, was one of the early adopters of virtual accounts to help treasurers gain real-time visibility into their cash positions and centrally control account management. Virtual accounts also help treasurers more easily reconcile incoming payments. Standard Chartered was also an early adopter of distributed ledger technology for real-time cross-border payments, as demonstrated by its partnership with providers such as Ripple.
Every bank may claim to be investing in innovation, but some do considerably more than others. Citi not only consistently demonstrates commitment to upgrading its banking platforms and connectivity with customers, it is also the largest bank investor—an honor it shares with Banco Santander—in fintech companies, according to CB Insights’ The Pulse of Fintech, Q3 2016. Few banks can rival Citi’s reach, scale and entrepreneurship when it comes to developing solutions like TreasuryVision Liquidity Manager and the TreasuryVision Analytics toolkit.
“Data is the new gold,” as the saying goes, and while corporates have always relied on banks for credit, increasingly they are demanding more real-time information to better manage liquidity. For those banks that do not wish to make the up-front investment in technology, providers like BNY Mellon—one of the few banks with a dedicated private-label service encompassing a wide range of payables and receivables solutions, including remittances, electronic bill presentment, global mass payments, ACH/wire, as well as file transfer and data translation services—can manage those services on their behalf.
The global treasury and cash management business is still very much based on relationships between banks and corporate customers. However, regulations like Basel III—and the emergence of new, nonbank providers, particularly in payments and foreign exchange—are putting banks’ traditional dominance to the test. On the investment front, Securities and Exchange Commission and European Union reforms of money market funds, which would require institutional prime and municipal money market funds to move from a stable $1.00 price per share to a floating net asset value, are likely to impact how treasurers handle short-term and overnight investments. JP Morgan Asset Management—with $1.8 trillion in assets under management as of Sept. 30, 2016—has the heft to guide corporates through these regulatory changes.
Banks are likely to remain the dominant providers in treasury and cash management, but increasingly they need to work with fintech start-ups and other providers to take treasury and cash management services to the next level. Winners in our global categories are already working out how best to leverage new technologies and start-ups to turn a threat into an opportunity. On the corporate side, treasurers will also need to decide how they can best combine their cash management banks, fintechs and APIs to deliver added value and greater cost savings and efficiencies to their business.
Best Overall Bank for Cash Management
With a presence in more than 100 markets, memberships in hundreds of clearing systems and the ability to transact and do business in a multitude of currencies and countries, Citi’s global footprint and expertise is unrivaled among global cash management banks. The US-headquartered bank aims to stay ahead of its rivals by investing in its Innovation Labs in Dublin and Singapore. Citi labs provide an environment in which clients can “test drive” the latest transaction banking solutions. The labs have given rise to various analytics applications to help clients better manage their cash and working capital and benchmarking analysis specifically designed to evaluate treasury practices to help mitigate risks and maximize shareholder value.
Best Bank for Liquidity Management
Citi Treasury Diagnostics Benchmarking Service provides independent benchmarking on treasury practices. A company’s performance across six metrics, including liquidity and working capital management, is measured against its peers, to help identify strengths, weaknesses and areas for improvement. To help companies make better informed liquidity management and investment decisions, Citi provides a range of analytics tools that leverage Big Data. For example, TreasuryVision Analytics offers aggregated balances and analytics trending, which is conveniently grouped by bank liquidity structure, such as multi-currency pool, single currency pool and cash concentration. Treasurers can also use the tool to visualize accounts and their relationships to one another.
Best Provider of Money Market Funds
J.P. Morgan Asset Management
Investors are re-evaluating their liquidity and investment strategies in view of the Securities and Exchange Commission and EU reforms of money market funds. As one of the largest asset and wealth managers in the world, with assets under management of $1.8 trillion (as of Sept. 30, 2016), J.P. Morgan Asset Management is well placed to advise treasurers on how the new rules are likely to impact them. The firm’s Global Cash Portal enables treasurers to more easily trade and manage their investments.
Best Bank for Payments & Collections
The bank provides tools that enable treasurers to streamline their payables, including central initiation of all domestic and cross-border payments. Through the bank, clients can access more than 100 clearing systems globally. Foreign exchange is integrated with payments and mobile money, and on-site check printing enable companies to more easily migrate to electronic forms of payment. Standard Chartered was one of the early adopters of virtual accounts to help treasurers gain real-time visibility of their cash positions and control account management centrally. Virtual accounts also eliminate the need to open additional bank accounts, which aids the reconciliation process and reduces costs. Clients can benefit by using a single account to make payments to regional offices and factories.
Best White Label Systems Provider
With a dedicated white-labelling business, BNY Mellon leads the market when it comes to the provision of private label treasury management solutions. Its private-label offering for banks encompasses a range of payables and receivables solutions, including remittances, electronic bill presentment, accounts receivable, global mass payments, remote lockbox deposit, ACH/wire, cash concentration and foreign currency accounts, as well as file transfer and data translation services.
Best Bank for Working Capital Optimization
Citi provides a range of data and analytics solutions to help treasurers optimize their cash and working capital. Citi Treasury Diagnostics Benchmarking Service provides companies with diagnostic information to help them improve their working capital performance relative to their peers. Citi Working Capital Analytics, which was developed in the bank’s Innovation Lab in Singapore in collaboration with customers, combines a company’s accounts payable data with Citi’s proprietary intelligence, diagnostic capabilities, visualization and real-time interactive features to deliver enhanced insights into a company’s supply chain.
Best Bank for Financial Institutions
According to BNY Mellon’s biannual client support survey, its Treasury Services business ranks highly among bank customers for ease of doing business and accessibility. BNY Mellon provides a wide range of services for banks encompassing payments (US dollar clearing, multicurrency funds transfer) cash and accounts payable, trade finance and liquidity services (cash concentration and investment services). The bank says it processes $400 trillion payments per year with a 99.9% accuracy rate and boasts a network of more than 2,000 correspondent bank accounts worldwide.