Cash management products have been around for over 25 years and are complex and highly technology dependent. All banks promise quality service, access to global payment networks, and a breadth of products to differentiate themselves in this mature market. One way to do this is by offering Web-based e-Cash Management products and services. Banks are focussed on building Web-based cash management electronic banking delivery solutions, an online banking interface for corporate customers. There has been limited competition from dot-com companies in the cash management business. This TowerGroup Research Note discusses migration of traditional cash management products to 'e-products' for cash management, competition from dot-com companies, the changing landscape of IT vendors, and IT investment in e-cash management.
Additional Information
Highlights
Information management plays a critical role in corporate treasurers’ new role as short-term liquidity managers. Banks are making substantial investments in information technology (IT) to develop Internet-based information delivery channel and e-cash management products. But the migration to e-products is slow because complex back-office systems integration is required in order to deliver a full range of products.
US cash management is expected to grow at a respectable compounded annual growth rate (CAGR) of 7.3% over next several years. The small business market is expected to grow at a higher rate as evidenced by the growth rate of midsized and small banks’ cash management business. US cash management annual revenue is expected to surpass $15 billion by 2005.
The dot-com companies have offered only limited competition in the cash management business. Most large banks have introduced Web-based cash management “e-products.” But the product portfolio is limited in its functions and features. Small banks are increasingly introducing e-cash management products and servicing their local small business clients.
The IT vendor landscape has been altered by merger and acquisition activity that occurred in 1999. Midtier and small banks have adopted the strategy of buying not building the IT they need for e-cash management. Vendors have adopted the application service provider (ASP) business model. Some vendors are developing a complete line of e-commerce applications.
IT investment in e-cash management depends on the size of the financial institution. IT spending is expected to grow from $90 million in 1999 to $290 million by 2003, a CAGR of 34%. IT spending will likely slow after 2003, to a CAGR of 18% between 2003 and 2005.
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