The global financial system is in a relatively stable state compared with seven years ago, so it’s not surprising that corporate executives are largely satisfied with their banks. But that doesn’t mean they have no plans of switching financial institutions or adding and subtracting to their stable of transactional banking partners.
Indeed, the Association for Financial Professionals’ latest Transaction Banking survey suggests companies have become very active and discriminating consumers of business banking products.
While 68% of finance executives are “highly satisfied” with their main banking partners, 23% are renegotiating banking contracts and 25% are “either actively seeking new banking partners in key [geographies] or have plans to move their business accordingly,” says the AFP report.
The survey, conducted in June, garnered responses from 259 global finance executives.
In what product areas are finance executives reviewing their banking strategies? With many companies set on the credit front, the majority are planning to focus on cash management (62%) and payment products (48%). Foreign-exchange products (including hedging) are another area of concern for 45% of finance executives, partly driven by the currency volatility that is cutting into some companies’ profits.
However, these bank strategy reviews might not be resulting in many changes to banking providers. A majority of finance executives in the AFP survey said they have maintained the same number of banking relationships during 2015. (The typical organization has six to ten banks, AFP says.) Another 30% have increased their banking partners, the most oft-cited reasons being to gain access to credit (28%) and to spread counterparty risk (24%). But given the potential greater costs of having numerous banking partners, others (13%) are consolidating their banking relationships this year.
“Over half [of that 13%] report the primary reason [they] are consolidating their banking relationships is to be cost-effective and exploit economies of scale,” says AFP. Somewhat surprisingly, small companies and privately held ones are the businesses that are making this cost-cutting move, even though they probably have fewer banking partners than large multinationals.
Other findings from the AFP survey: