Hoping to reverse a long slump in revenue, banking companies are rolling out a variety of new or upgraded online cash management systems.
Though many of the new systems and features are aimed at different target markets and offer different benefits, they are all designed to distinguish the companies from the competition, market watchers say.
On Monday, Comerica Inc. started offering a pair of services focusing on small-business customers' checking accounts. Last week Bank of New York Co. introduced a flexible information reporting system for its corporate customers, and the week before that U.S. Bancorp gave a suite of treasury management services a set of common commands and a consistent look and feel.
Daniel J. McCarty, the senior vice president of treasury management services at Comerica Bank, of Detroit, said it plans to use flat monthly pricing on the new services, rather than per-item charges, to encourage small-business owners and managers to do more of their banking online.
Only one small business in 10 currently uses online treasury services - a much lower adoption rate than for consumers or large corporations, Mr. McCarty said. "The banking industry is not getting the message out."
Comerica's new offerings - a fraud prevention system to guard against unauthorized checking account transactions, and a simplified way to initiate automated clearing house transactions for functions such as payroll direct deposit - are the result of testing with customers, "listening to the marketplace and responding," he said.
"We have all made a lot of investments in these systems," he said. "The industry hasn't solved the value equation" for small-business customers.
Bank of New York said it has begun offering several types of customized reports, as well as an optional real-time stream of transaction data to their treasury systems from the company's cash management application, Cash-Register Plus.
"We want to have multiple mechanisms in place. It is a matter of working with individual clients" to provide customized information that is useful to the company, said Alphonse J. Briand, a managing director in Bank of New York's global payments and trade services unit. "The value of information is only as good as your ability to use it."
U.S. Bancorp is emphasizing the ease of use in its SinglePoint set of services. Mary Burchette, the Minneapolis company's senior vice president of treasury management product management, said providing a consistent interface for the various services "helps the customers improve their workflow."
These rollouts may not seem as ambitious as some other recent ones, such as one by HSBC Holdings PLC last month of a multicurrency, multinational payment system targeting the United States, Mexico, and Canada; or one by Citigroup Inc. in October of a system that enables global cash management customers to aggregate financial information from around the world in real time.
Still, the new offerings point toward a growing differentiation as companies try to find new ways to attract corporate treasurer customers. Lawrence Forman, the associate director of the national cash management practice at the accounting firm Ernst & Young in New York, said this is the right time for banking companies to develop applications.
The cash management market has been sluggish, he said; industrywide revenue has been flat for the last three years. Bankers have predicted that they will report a 3% increase in 2005 revenue, but Ernst & Young expects that figure will be closer to 2% when the firm tallies those results this year.
The combination of intense competition and slowly improving revenue is probably driving the current spurt of innovation, Mr. Forman said.
"There's something about the current environment that makes revenue growth a little bit harder, and that's going to make bankers a little more creative," he said. "You're going to see more differentiation. You're going to see some banks do creative things."
Others, however, are critical of the new offerings.
U.S. Bancorp's SinglePoint services appear to be "a very traditional set of cash management products that have been bundled together by their competitors for a long time," said Susan Feinberg, a senior analyst in the wholesale banking group of TowerGroup, the Needham, Mass., market research unit of MasterCard International. "They're playing catch-up."
David C. Robertson, a partner at the Chicago consulting firm Treasury Strategies Inc., said the U.S. Bancorp upgrade amounted to giving customers a portal.
By providing a common look and feel, "that's a trend that makes a lot of sense for the middle market, where a single person may be wearing multiple hats," Mr. Robertson said.
Ms. Feinberg said that systems like HSBC's international payments one are more likely to help banks stand out from the crowd than the commoditized services.
HSBC is "trying to put things together in a new way, in a more creative way, looking beyond cash management to tie in financing products, trade products," Ms. Feinberg said. "That's really where the competitive advantage comes into play."
The analysts agreed that the real-time information-reporting systems promoted by Citi and Bank of New York meet a vital need.
"There's been huge interest and a great unmet desire by the multinational corporate players for global real-time information," Mr. Forman said.
Ms. Feinberg said banks should be more creative in developing products and services. "All of the banks have been focused for the last decade about their delivery, and not about what they are delivering."
The growth of electronic banking is encouraging corporations to reduce the number of banks they use, she said. "From a domestic cash management perspective, does it matter any more where a bank's physical locations are with respect to their customers? It really doesn't. The challenge for each bank is to identify what they have to differentiate themselves."
