Correlating Organizational Size & Commercial Bank Relationships
Intuitively, commercial bankers, treasury / cash management officers, commercial card sales professionals, and branch personnel know that, the larger the prospective or client organization, the more likely they are to be competing with multiple banks for their business. Via recent market research, this phenomenon has been quantified.
For the U.S. market, as shown in Figure 1, 57% of micro businesses (annual revenue of $100K – <$500K) have a single bank relationship while this figure decreases remarkably to 36% for mid-market organizations with $50 to <$500 million in annual revenue according to recent research by Barlow Research Associates, Inc. Not surprisingly, as organizations become larger, their primary bank relationships tend to be with larger banks – particularly for organizations exceeding $10 million in annual revenue.
Figure 1: Bank Relationships by Size for U.S. Organizations
Note: Figures in graph don’t always add exactly to 100% due to rounding
Source: “2012 Annual Report,” Barlow Research Associates, Inc. “Top Eleven Banks’ Primary Bank Market Share Remains Stable for Now,” Barlow Research Associates, Inc. (March 8, 2012)
If we look beyond the U.S. market, recent global research from gtnews suggests similar correlations. In Figure 2, 85% of organizations with less than $10 million in annual revenue have 1 to 4 bank relationships; while, on the high end, 29% of large corporates with over $10 billion in annual sales have 20 or more banking relationships due to operations in multiple geographic markets, syndicated loans, desire to bid out each banking product / service, and many other factors. These organizations then leverage internal ERP and other systems to help consolidate AR / AP and other banking-related data / reporting internally.
Figure 2: Bank Relationships & Payment Systems by Size Multinationally
Source: 2011 gtnews Payments Survey
n = 312 | 42% Western Europe, 30% North American, 16% AP
One also sees in Figure 2 that the number of systems in a given organization’s treasury group used for payments information increases significantly with organization size.
Specific to payment systems, we believe organizations will continue to seek opportunities to consolidate / streamline systems to help achieve more real-time, consolidated, and “dashboard” views of their spending and processes. Such consolidation can sometimes be achieved by reducing overall banking relationships; however, technology providers – from ERPs to travel, e-invoicing, and commercial card control, reconciliation, and reporting solutions are also making it much easier to achieve greater AR / AP payments consistency across geographies and business units.
For more information, please contact Frank Martien Partner specializing in Commercial Payments, firstname.lastname@example.org
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