Small to mid-sized corporations across North America, Europe, and the Middle East report that their ability to manage working capital is not being supported effectively by their banks, according to a survey conducted by Misys.
“The survey highlights the challenge corporates face in managing the complexities of cash, trade, and treasury requirements as they expand and work with an increasing number of suppliers, banks, and customers around the globe,” says Alex Kwiatkowski, senior banking strategist at Misys.
Kwiatkowski added that “banks have not stepped up to provide the requisite automation, digitization, and multibank connectivity tools these corporations need.”
As a result, he said, “we are seeing an increasing loss of market share, particularly in straight lending and supply chain financing to nonbank alternatives.”
Research holds cautions for banks
Key findings from the survey:
• When’s money coming? 50% of respondents said that forecasting cash flow remains their biggest working capital challenge as import/export operations become more global.
• Digital is a priority. Corporates reported an increasing need for, the following, in order of importance: a single view of balances and transactions globally (including trade, cash, loans, deposits, foreign exchange, and interest rate instruments); secure, efficient payment processing; and integration with enterprise resource planning and trade management systems
• New funding sources. 24% are financing working capital needs through a combination of traditional banks and nonbank alternatives, and 9% of respondents report a greater reliance on alternative funding than two years ago. 28% said accessing finance had become more difficult.
• Inadequate technology. 62% cited poor automation as a barrier to accessing bank trade financing, suggesting it is a deterrent to using bank financing tools.
• Putting it together. 45% of SME and mid-sized corporates now require their online and mobile activities to be integrated directly with their enterprise resource planning and treasury management systems.
According to a report by McKinsey & Company, companies with annual revenues of up to $1 billion represent a $1.85 trillion annual revenue opportunity. Misys believes this makes it an attractive market for banks that can digitize and provide midsized corporates with a cost-efficient solution to manage all corporate banking functions through a single access point.
“Midsized corporations have been less of a focus for banks from a digital services and process automation point of view but they value working capital efficiency the most,” says Tim Tyler, global product manager for FusionBanking Corporate Channels, Misys. “A lack of joined-up multibank and multichannel services impedes these increasingly globalized corporates accessing the information and supply chain connectivity they need to efficiently manage cross-border trade, cash, foreign exchange, and lending.”