Companies consolidating cash management providers.

• Author: Marshall, Jeffrey
• Position: BANKING

Corporations have stopped lopping off cash management banks from their ranks of service providers, but have continued to consolidate their business in the hands of one or two key banks with whom they are trying to forge long-term and sustainable cash management relationships.

That's the conclusion of Greenwich Associates, based on its 2006 U.S. Cash Management Research Study. The stabilizing of cash management bank rosters reversed a four-year trend in which U.S. companies had trimmed those lists. However, lead banks are getting more action: on average, U.S. companies allocated nearly 60 percent of the cash management business to their lead provider last year, up from 56 percent in 2005.

Companies cite two trends driving them to consolidate their cash management business into deeper relationships with lead banks. A certain proportion say the desire to maintain strong relationships with large credit providers is a motivating factor. But a bigger proportion of companies say that their growing use of electronic payments and receipts is prompting them to direct more business to their top providers.

"Almost 45 percent of companies' payments and 47 percent of receipts are now processed electronically," says Greenwich Associates consultant David Fox. "The...