The Outlook for Cash Management

By Bills, Steve | American Banker, December 28, 2006 | Go to article overview

The Outlook for Cash Management


Bills, Steve, American Banker


Wholesale bankers are developing new growth strategies for cash management services, and are anticipating extending what now look to be two solid years of growth into 2007. But bankers and observers continue to counsel caution, citing continuing upheaval in the payments space and uncertainty about interest rates, among other things.

Cash management's expected three-year growth streak, should it pan out, would follow three years of flat to declining revenue for the segment. In that period, 2002 to 2004, cash management was hurt by tough economic conditions as well as challenges specific to payments. While the business climate has improved in the past two years, economic challenges remain. Meantime, the pace of change in payments has continued and even increased in some respects.

These changes take a variety of forms -- including new types of automated clearing house transactions and the growing use of corporate cards, along with the decline of check payments and the movement of certain offerings to automated, real-time systems.

Spot checks with six large institutions this month found the bankers looking at a variety of cash management priorities but focusing on ways to get their clients to use more electronic alternatives to conduct transactions and analyze their financial positions.

In the latest survey of bank operations, by the accounting firm Ernst & Young, bankers projected 5% growth for this year in cash management revenue, which grew 3% last year. Lawrence Forman, the associate director of the firm's national cash management practice, called that "a pretty bullish forecast."

Looking toward 2007, bankers said they expect another strong year in the wholesale banking business.

"Bankers tend to be optimistic," said Alphonse J. Briand, a managing director in Bank of New York Co. Inc.'s global payments and trade services unit. "From what we've seen, for pretty good reason."

In interviews with American Banker, the accountants and bankers said a number of factors are driving new growth: the progressive replacement of paper-based systems such as checks and written information reporting, by electronic ones such as ACH and Internet-based reporting; and higher interest rates, which have revived corporate interest in services such as sweep accounts.

The list goes on: globalization, including more corporate cross-border transactions with suppliers and government mandates that are prompting banks and corporations to transform treasury operations; and as the market continues to evolve, new payment systems -- such as payroll cards for unbanked employees -- that will continue to challenge established ideas about what constitutes cash management.

The stronger 2005 and 2006 results follow three years in which the Ernst & Young studies found cash management revenues were flat or falling. Mr. Forman said that part of that reflects the state of checks. As paper-based offerings become a smaller share of banks' overall cash management business, the fading of checks becomes less of a drag on their revenues, he said.

"Two things are happening simultaneously -- the dollar value is in decline, but the decline rate is slowing a little bit, from a revenue standpoint," Mr. Forman said. Banks reported a 9% drop in check-clearing revenue for 2003, but that slowed to 7.5% in 2004 and to 6.5% in 2005, the study found.

Banks are projecting that the 2006 tally will show flat revenue from check clearing, Mr. Forman said. "I don't believe that's plausible. We think something between 4% and 6% seems reasonable."

Some bankers said the recent improvement in overall revenue does not mean the tough times are over. Brian Lambert, a senior vice president and the head of business development in the treasury services unit at Wachovia Corp., said that many corporations have not yet begun transforming their internal treasury operations to take advantage of electronic systems -- and may not for years to come. …

The rest of this article is only available to active members of Questia

Already a member? Log in now.

Notes for this article

Add a new note
If you are trying to select text to create highlights or citations, remember that you must now click or tap on the first word, and then click or tap on the last word.
One moment ...
Default project is now your active project.
Project items

Items saved from this article

This article has been saved
Highlights (0)
Some of your highlights are legacy items.

Highlights saved before July 30, 2012 will not be displayed on their respective source pages.

You can easily re-create the highlights by opening the book page or article, selecting the text, and clicking “Highlight.”

Citations (0)
Some of your citations are legacy items.

Any citation created before July 30, 2012 will labeled as a “Cited page.” New citations will be saved as cited passages, pages or articles.

We also added the ability to view new citations from your projects or the book or article where you created them.

Notes (0)
Bookmarks (0)

You have no saved items from this article

Project items include:
  • Saved book/article
  • Highlights
  • Quotes/citations
  • Notes
  • Bookmarks
Notes
Cite this article

Cited article

Style
Citations are available only to our active members.
Buy instant access to cite pages or passages in MLA, APA and Chicago citation styles.

(Einhorn, 1992, p. 25)

(Einhorn 25)

1. Lois J. Einhorn, Abraham Lincoln, the Orator: Penetrating the Lincoln Legend (Westport, CT: Greenwood Press, 1992), 25, http://www.questia.com/read/27419298.

Cited article

The Outlook for Cash Management
Settings

Settings

Typeface
Text size Smaller Larger Reset View mode
Search within

Search within this article

Look up

Look up a word

  • Dictionary
  • Thesaurus
Please submit a word or phrase above.
Print this page

Print this page

Why can't I print more than one page at a time?

Help
Full screen

matching results for page

    Questia reader help

    How to highlight and cite specific passages

    1. Click or tap the first word you want to select.
    2. Click or tap the last word you want to select, and you’ll see everything in between get selected.
    3. You’ll then get a menu of options like creating a highlight or a citation from that passage of text.

    OK, got it!

    Cited passage

    Style
    Citations are available only to our active members.
    Buy instant access to cite pages or passages in MLA, APA and Chicago citation styles.

    "Portraying himself as an honest, ordinary person helped Lincoln identify with his audiences." (Einhorn, 1992, p. 25).

    "Portraying himself as an honest, ordinary person helped Lincoln identify with his audiences." (Einhorn 25)

    "Portraying himself as an honest, ordinary person helped Lincoln identify with his audiences."1

    1. Lois J. Einhorn, Abraham Lincoln, the Orator: Penetrating the Lincoln Legend (Westport, CT: Greenwood Press, 1992), 25, http://www.questia.com/read/27419298.

    Cited passage

    Thanks for trying Questia!

    Please continue trying out our research tools, but please note, full functionality is available only to our active members.

    Your work will be lost once you leave this Web page.

    Buy instant access to save your work.

    Already a member? Log in now.

    Author Advanced search

    Oops!

    An unknown error has occurred. Please click the button below to reload the page. If the problem persists, please try again in a little while.