Multinational companies believe non-banks are better than banks at handling certain aspects of traditional banking operations, according to a new report by the Economist Intelligence Unit and consultants A.T. Kearney.
The report says that banks’ corporate business is under threat from the growth of e-commerce ‘virtual business’ and the move toward a single European currency.
The fifty large corporations surveyed most often cited product line, customer service and pricing as the top reasons for choosing a non-bank electronic vendor over a bank.
‘Corporations doubt that banks can provide pan-European solutions because their structures tend to be country-based,’ said Bill Turner of AT Kearney’s Financial Institutions Group. ‘If banks do not radically re-evaluate their business lines, they will be relegated to providing limited products, and their revenue streams will be slowly eroded by new, more dynamic entrants from outside the traditional banking arena’.
Multinationals will require a different form of service from their corporate bankers in future, the report says. Within a five year timeframe, cash forecasting is the services most sought after by multinational corporations. G?ste Bonde of Electrolux told the researchers, ‘We want to be with banks that are fast on their feet with new and better solutions to our problems’. But banks, unlike software vendors, are not yet known for this type of flexibility, warn the authors.
The study found that over 60 per cent of corporations expected to consolidate their pan-European banking relationships with fewer banks within five years. A significant 37 per cent said that this consolidation was already underway.
Respondents to the survey rated operational efficiency and customer service as the key criteria for selecting a bank. Price was the third most important, and much lower rankings were given to the need for banks to have consulting services or software vending alliances.
The top three corporate activities most likely to be affected by e-commerce in the next five years were ranked by respondents as enhanced buyer-supplier relationships, consolidation of bank relationships and the development of shared services.
Internet catalogues are now used – or will be used within one year – by 34 per cent of respondents, with another 31 per cent expecting to use them within two years. However, making the supply chain transactions more efficient and secure is still a major obstacle which corporations, banks and vendors are seeking to address. |
