Commercial Banking: Nonbanks are Your Biggest Threat
14 August 2018
I attended a webinar recently focused on the topic of integrated receivables. One comment made during the webinar caught my attention. It was an appeal to banks to bolster their accounts receivables management capability because many clients are “forced to utilize vendor solutions” for lack of a suitable bank-provided alternative.
The comment prompted me to revisit results of a 2015 Celent survey of AR practitioners. We surveyed over one hundred AR Managers, Treasury Services Managers, Cash Managers, Comptrollers and treasurers representing a variety of industry verticals in firms ranging from $10 million to more than $10 billion in annual revenue. Monthly invoice volumes ranged from less than 500 to over 10,000. Most (58%) of the firms had a relationship with a single bank for treasury services. Larger firms (annual revenues over $100 million) were much more likely to have multiple bank and nonbank relationships for treasury services.
Among other things, we sought to understand what kinds of treasury services products were being utilized and where they sourced those services, from banks or nonbanks? Of course, the picture is not uniform. Larger firms consume a wider range of services than do small ones. For simplicity, we looked at bank versus nonbank share for each of the services measured. The results are stark. For extremely mature, well-developed services such as wire transfer, ACH and RDC, banks enjoy a commanding share of the market. But for newer, less mature and sophisticated services, nonbanks enjoy an enviable share of the market. In this context, the picture is clear: banks are losing TMS business to nonbanks.
Source: Celent survey of AR practitioners, 2015, n=114.
It gets worse for banks. The survey asked a number of questions designed to understand attitudes toward service providers in the TMS space. Specifically, we asked respondents to indicate their level of agreement or disagreement to a series of statements on a five point scale. The result shows an alarming percentage of firms more likely to source AR automation solutions from nonbanks. Just 28% of firms surveyed agreed or strongly agreed with the statement “Banks would be a logical provider of AR tools and services”. Results like these aren’t so much an indictment of bank’s AR management capabilities as they are an indictment of banks sales and marketing efforts.Based on these results, banks have done a poor job positioning themselves as a credible technology provider.