It’s Good to be in the Cash Management Business

Banks are finding it ever-better to be in the cash management business. There is more concentration, more customers, and less competition:

Companies participating in Greenwich Associates’ 2006 U.S. Cash Management Research Study are steadily increasing the share of their total cash management business awarded to lead banks. On average, U.S. companies allocated nearly 60% of the cash management business to their lead provider in 2006, up from just 56% in 2005.

….Only 1% of U.S. companies now say they put their cash management business out to bid every year, and the proportion putting it out to bid every 13 months to two years dropped from 9% in 2005 to 6% in 2006. Meanwhile, 40% of companies say they put the business out to bid every three to five years and more than a quarter do so only once every five or more years. “The share of U.S. companies reporting that they never put their cash management business out to bid increased from 21% in 2005 to 28% in 2006,” notes Greenwich Associates consultant Don Raftery.