Add another item to the list of banking-related businesses in which the big are getting bigger and marginal players are disappearing or losing ground.
According to a new transaction processing report from Salomon Brothers, the largest banks are grabbing an increasingly larger share of the cash management pie.
In 1995, banks with more than $35 billion of assets gathered more than 67% of all cash management revenues. This was up from 56% in 1994 and 51% in 1993.
There are several reasons for this trend, experts said. One involves the slowing of cash management revenue growth industrywide.
In 1990, revenues from cash management activities expanded 8.5%, to $5.5 billion. But since then, revenue growth has tailed off, hitting a low of 3.7% in 1994. (It bounced back slightly, to 5%, in 1995.)
Slower growth has convinced the largest banks to look for new midsize and small-business customers. Because this market segment historically has been controlled by smaller cash managers, big-bank forays are, in many cases, taking share away from less influential players, experts said.
Big banks also have been adding market share through acquisitions.
But even as the biggest banks get stronger, they are not having an easy time in the business.
Consolidation in manufacturing, electronics, and other industries is giving rise to corporate clients with more clout to demand price concessions and improved services. In addition, keeping pace with technological changes is proving expensive and complicated.
According to Salomon Brothers, such forces may drive cash management players to create shared utilities or to use outsourcing services for so- called commodity services, such as check processing.
"We sense there is an increasing willingness to utilize third-party vendors - some of which are other banks - to fill in product voids," said the report, titled "Transaction Processing - Raising the Technological Hurdle."
