Transaction banking battlegrounds
The globally connected and increasingly digital financial landscape is transforming the banking industry, creating opportunities for growth and innovation.
Corporate cash management is a growing market and is primed for further growth as both established transaction banking players and new entrants vie for market share. However, technological advances are allowing new entrants to compete with traditional transaction banks through differentiation and customer focus.
Given the sophisticated tech solutions that corporates are now looking for, the battle for market share of corporate cash management is intensifying.
This paper highlights some of the key trends and market potential KPMG professionals are seeing and reflects some of the conversations with corporate clients about their changing needs.
Market outlook: Growing opportunities, greater competition
Corporate cash management is a growing market that’s on an upward trajectory. Based on KPMG market research, global transaction banking revenue is over US$1.4 trillion while the corporate cash management market is projected to grow steadily in the coming years, driven by increased demand for efficient cash flow management solutions.
Large traditional transaction banks are investing in new and advanced capabilities to increase their corporate cash management market share. Competitors, including de novo banks and new entrants, are competing with traditional transaction banks through differentiation and customer focus. This is enabled and accelerated by modern technology stacks that can leapfrog incumbents burdened with legacy systems’ technical debt to provide differentiated offerings.
Why the surge in interest and investment? Corporates are open to change and are scrutinizing their banking relationships with unprecedented intensity. KPMG research indicates that 72% of large corporates are reviewing banking relationships at any one time.1
As Courtney H. Trimble, Principal – Lead of Global Payments, KPMG in the US, explains, “We're talking about a robust and growing market that’s seen as a growth engine for banks – there’s an arms race for market share. New entrants and de novos are entering the market by investing in innovative and robust capabilities. Traditional banks are also investing heavily to counter this and to protect and grow their customer base.”
Banks that can offer superior – and industry-specific – corporate cash management services stand to gain a larger slice of the transaction banking pie. The shift is evident in how organizations are managing their cash and banking relationships. According to the Association for Financial Professionals (AFP) Liquidity Survey 2024, 45 percent of organizations moved deposits from regional banks to larger banks in response to the 2023 banking crisis. While 35 percent of companies spread their deposits among a greater number of banks to further reduce risk.2
There's heightened awareness of risk management and the growing importance of diversification in banking relationships. In turn, this is creating inroads for banks that can demonstrate stability and offer comprehensive transaction banking services.
New client expectations: The bar is rising
Today's corporate clients demand more from transaction banking. In this dynamic market, these raised expectations are creating new opportunities to provide differentiated products and services.
A good measure to track corporate treasurer’s overall satisfaction with their bank’s cash management capabilities is to look at whether they are actively reviewing their banking partner relationships. KPMG in the US analysis shows that 72 percent of large corporates are reviewing and the top three bank products under review are:
- Cash management services – including front-end digital channels, connectivity, and onboarding
- Liquidity solutions
- Payments
Banks regularly use multiple cash management partners. With corporate treasurers actively reviewing their banking partner relationships, there is an opportunity to gain entry with the right offerings and value proposition.
Leading practices in the future of cash management
In this increasingly competitive landscape, certain trends are emerging as the most powerful go-to-market strategies – both for existing players and new entrants.
Courtney Trimble comments, “The investment themes we're seeing are consistent across the board and focus on providing differentiated offerings and capabilities and being easy to do business with”.
Key investment themes
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Digitization and complete automation
Banks are racing to offer integrated digital experiences by offering a suite of digital tools across the corporate cash management product/platform stack to deliver digital service experiences across the client journey. Automated value chain processes and speed to market are crucial here; the ability to quickly roll out new features can be a significant competitive advantage.
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Seamless client experience and connectivity
From online portals to host-to-host connectivity and application programming interfaces (APIs), banks are providing streamlined client access connectivity channels with self-service capabilities. Flexible access options with a suite of Treasury APIs for greater access are key.
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Real-time data and transactions
Corporates now expect real-time visibility into their financial positions – their working capital and liquidity. Improved cash forecasting is supported by real-time data on balances and transactions. Banks that can turn their rich transaction data into actionable insights will have an advantage over the competition.
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Investment and liquidity tools
Liquidity solutions play a central role in client relationships within the transaction banking sphere. These solutions are fundamental to how corporate clients manage their cash and working capital. As such, banks are striving to position their liquidity capabilities as both convenient and user-friendly. The goal is to make these complex financial tools as accessible and easy to use as possible.
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Value-added partnerships
Increased collaboration with fintech providers can allow banks to offer best-in-class solutions. Developing the right build vs. buy strategy is crucial for transaction banks. It involves deciding which functions to develop in-house and which to acquire externally with the trend of buying commodity functions and building differentiating capabilities such as the user experience.
KPMG firms’ experience has shown that banks which successfully implement these trends and strategies can significantly improve their transaction banking growth and client retention. By focusing on technology-driven solutions and client-centric approaches, banks can gain a competitive edge.
Case Study: Global cash management strategy for a top 10 global bank
KPMG in the US supported a top 10 global transaction bank with the development of a single global cash management product strategy and operating model across all global jurisdictions. The Bank had disparate capabilities and offerings across their Americas, EMEA, and APAC regions and were looking to streamline and develop a unified global strategy while addressing the competitive landscape and a range of corporate client needs to determine incremental go-forward priority global product offerings.
KPMG in the US baselined cash management product capabilities across all regions and evaluated client needs, product priorities, and the competitor landscape. The US firm then drove regional prioritization and standardization of existing and target product capabilities and developed a standard global cash management taxonomy. Lastly, a phased innovation roadmap and global organizational operating structure were developed. As a result, the bank streamlined its cash management offerings globally, enhanced its product portfolio, and significantly improved its competitive position in the transaction banking market.
Product offering and capabilities
To meet diverse client needs with the right products – across industries and geographies – transaction banks should develop a range of product offering capabilities. While transaction banks should provide foundational capabilities to meet minimum client expectations, differentiated and industry-specific products and services are key for enabling new entrants to gain market share. The same goes for traditional players as they look to effectively address client needs and support future business growth:
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Foundational
These are the basics to meet minimum client expectations – the essential plumbing that enables other product offerings – though they do not create a competitive advantage on their own. Examples include standard payments and deposits services.
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Differentiating
These include advanced corporate cash management capabilities, which provide corporates with differentiated experiences and can serve as a wedge to a larger relationship. Examples include client onboarding and predictive analytics.
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Industry-specific
Differentiated corporate cash management offerings center on solving corporates’ challenges, which vary by industry. Industry-specific product offerings include unique cash management capabilities that are tailored to specific client needs and unique industry challenges to add and enhance value.
Case Study: De novo US corporate cash management strategy
A leading Canadian bank was looking to enter the US corporate cash management market but faced challenges in understanding the new market dynamics and competitor landscape. The bank needed to identify opportunities for differentiation and develop a strategy that leveraged its strengths while addressing market demands.
Working together, KPMG in the US and KPMG Canada supported the Bank with a GTM strategy, inclusive of industry insights, competitor analysis, and client needs assessment. Foundational, differentiated, and industry-specific product offerings and corresponding technology capabilities were defined. A strategic roadmap with quick wins and long-term initiatives along with corresponding operating model business cases were developed to support the successful entry into the US market.
Operating model considerations: Building for success
Beyond basic capabilities, banks are looking to up-tier into those differentiating and industry-specific solutions to really compete.
Creating a winning transaction banking business requires careful consideration of several factors from strategy through delivery. The following overarching operating model considerations apply both to new entrants as well as traditional players looking to enhance their existing capabilities:
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Industry and competition
Banks must understand their place in the competitive landscape and identify their unique value proposition and key differentiator to win in the corporate cash management business.
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Product proposition
What mix of products will best serve the target client base? Banks need to balance comprehensiveness of offering with the right products at the right time.
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Voice of the customer
Banks should collect voice of the customer (VOC) information from existing or target clients to identify the biggest pain points to determine opportunities for new products and services. In addition, banks should determine if they are looking to offer solutions customized to industry sectors.
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Technology and innovation
Banks must determine their build/buy/partner strategy. This includes determining if they will be extending in-house products/platforms or standing up new technology platforms.
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Enablement process
Banks should assess their current client sales, implementation, and servicing processes to determine if the current client delivery and support model can support the tooling required to meet client expectations.
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Operating structure
Developing an effective cash management business requires a strategic approach to team structure and capabilities. This involves leveraging existing skill sets and sales/coverage teams while identifying and addressing gaps in expertise and the go-forward structure.
Case Study: Instant payments platform implementation for a top 10 global bank's US subsidiary
The US subsidiary of a top 10 global transaction bank was looking to implement Real-Time Payments (RTP) capabilities to stay competitive in the evolving payments landscape. KPMG in the US worked to develop the Bank’s overarching enterprise payments strategy, followed by performing a payments platform vendor evaluation across RTP, high value wires, and low value automated clearing house (ACH) to help the Bank select their payments platform for instant payments as well as future payment types.
KPMG in the US then supported the implementation from detailed requirements definition and vendor fit-gap to implementation planning, solution design, platform configuration, testing, and operational readiness. This turnkey approach enabled the bank to successfully launch RTP capabilities, enhancing its transaction banking offering and providing its corporate clients with a new instant payment type.
Conclusion: Tomorrow’s transaction banking, today
The transaction banking landscape is rapidly evolving, driven by corporate clients' increasing demand for digitalization, real-time insights, and advanced cash management capabilities.
Corporates are seeking more customized solutions to meet their complex business needs. This shift presents a significant opportunity for banks to reassess and enhance their corporate cash management capabilities. These are being enabled by modern technology stacks that provide differentiated corporate cash management offerings, allowing banks to compete effectively and gain market share.
Key trends like digitization and automation, seamless client experience and connectivity, real-time data access, and advanced liquidity tools are reshaping the transaction banking industry. KPMG's expertise in these areas is there to guide banks through this transformation, helping them develop winning strategies that align with these emerging trends. Banks that successfully deliver differentiated cash management solutions and services will lead in the increasingly competitive transaction banking market.
With help from KPMG: Partner of choice in transaction banking
KPMG firms work with transaction banks at different stages of evolution. This ranges from de novo new entrants looking to go live in the market and capture market share through to existing global transaction banks looking to enhance their existing capabilities, increase their customer base and build market share. From developing comprehensive go-to-market (GTM) strategies to implementing cutting-edge solutions, our teams bring deep expertise and a track record of success.
Here’s where our support can be pivotal to evolving your corporate cash management services in the most profitable ways:
1. Strategy development
Whether you're a new entrant or an established player looking to enhance your capabilities, we can help chart the course. We develop transaction banking strategies for both new market entrants looking to build new capabilities and established players looking to up-tier their existing product offerings and capabilities as well as strategic delivery recommendations and execution roadmaps.
2. Implementation and enablement
Our business and technology implementation support spans the transaction banking product stack, including but not limited to:
- Digital channels
- Client onboarding
- Payments
- Deposits
- Liquidity solutions
In this dynamic landscape, having the right partner can make all the difference. With KPMG firms, you have the experience and expertise to navigate the challenges and seize the opportunities in transaction banking.
KPMG firms have supported traditional transaction banks and new entrants along their corporate cash management journeys, ranging from strategy development through implementation and enablement.
Related content
[1] KPMG Internal Analysis, 2024.
[2] Association for Financial Professionals (AFP). Liquidity Survey 2024. Available here.
