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The New Corporate Transaction Banking Landscape

by Pedro Rapallo and Maarten Peeters, The Boston Consulting Group 

Transaction banking products have always been at the core of the relationship between corporates and banks. The role of financial institutions in supporting corporates has traditionally been centred on providing products and services that facilitate the transactional flow between the corporate and its clients and suppliers, as well as providing the appropriate credit facilities to cover short-term financing needs and longer-term investments. The recent and long financial crisis in several large economies, still to be fully overcome, has put significant pressure on the lending capabilities of banks and, by contrast, has made evident the need to reinforce their value proposition to corporates in the transaction banking space, across the spectrum from payment services, in particular cross-border to liquidity management, working capital tools, and supply chain finance.

A state of the art transaction banking offering generates a ‘win-win’ situation for banks and corporates. By excelling in transaction banking, banks earn significant revenues (~25% of global banking revenues, with retail and wholesale payments related revenues expected to reach $2tr in 2023) and benefit from annuity-stream fee revenues, low risk and capital requirements, and high returns on equity of these businesses. Corporates win when banks efficiently support their core processes such as ordering, invoicing, accounting and working capital management. To further the win-win, corporations need banks to keep up with and adapt their offerings to the trends that impact their transaction banking and treasury needs. We see five trends altering the nature of transaction banking and hence meriting the attention of corporate treasurers and their bankers.