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Banks must digitise to compete with alternative funding in lucrative mid-size corporate market

Small to mid-sized corporates across North America, EMEA and Europe report that their ability to manage working capital is not being supported effectively by their banks, according to a new survey conducted by Misys.

Some 50 per cent of respondents identified forecasting cash flow remains their biggest working capital challenge as import/export operations become more global.
 
Twenty four per cent meanwhile, are financing working capital needs through a combination of traditional banks and non-bank alternatives, and 9 per cent of respondents report a greater reliance on alternative funding than two years ago. 28 per cent said accessing finance had become more difficult
 
Some 62 per cent cited poor automation as a barrier to accessing bank trade financing suggesting it is a deterrent to using bank financing tools, while 45 per cent 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.
 
“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 (pictured), senior banking strategist at Misys. “Banks have not stepped up to provide the requisite automation, digitisation, and multi-bank connectivity tools these corporations need. As a result, we are seeing an increasing loss of market share, particularly in straight lending and supply chain financing to non-bank alternatives.”
 
According to a report by McKinsey & Company, companies with annual revenues of up to USD1 billion represent a USD1.85 trillion annual revenue opportunity.  This represents an attractive market for banks that can digitise and provide mid-sized corporates with a cost efficient solution to manage all corporate banking functions through a single access point.
 
“Mid-sized 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. A lack of joined-up multi-bank and multi-channel services impedes these increasingly globalised corporates accessing the information and supply chain connectivity they need to efficiently manage cross-border trade, cash, FX and lending,” says Tim Tyler, global product  manager for FusionBanking Corporate Channels, Misys. “The survey highlights that if banks act quickly with more connected corporate banking they can seize the opportunity and compete in a world where non-bank alternatives are here to stay.”

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