Optimizing, Expanding, and Monetizing: Regaining Transaction Banking Revenue Momentum

For transaction banking, the sharp downturn in interest rates in 2020 led to a collapse of net interest income on deposits and effectively wiped out the growth from the prior three years. In 2021 challenges remained, driven by decreases in cash management revenue, while trade finance revenue increased moderately. Despite declining revenues, the segment remains very attractive, with stable revenues, sticky client relationships, low capital requirements, and a funding source for the bank.

As banks seek to regain transaction banking revenue momentum, Celent views technology as both an opportunity and a challenge. Against a backdrop of traditional, vertically integrated bank product delivery models alongside disruptive, agile plug-and-play fintech players, Celent outlines three technology-based strategies for banks to regain transaction banking revenue momentum.

The time is now to respond to the tech arms race in transaction banking. In July 2021, the Financial Times reported that the top US banks were making bigger investments in technology, marketing, and talent, partially spurred by the growing threat from fintech rivals.

To ensure success, your bank’s transaction banking technology strategy must be carefully crafted to suit your institution’s aspirations and customer base. Of course, you don’t want to adopt a “me too” mentality. Simply copying your competitor’s investment moves may feel like you are staying competitive, but if you’re looking for an advantage to regain a larger share of your clients’ wallets, differentiation is vital.