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THESE ARE THE U.S. BANKS YOU SHOULD BE TRUSTING WITH TRADE FINANCE AND CASH MANAGEMENT

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THESE ARE THE U.S. BANKS YOU SHOULD BE TRUSTING WITH TRADE FINANCE AND CASH MANAGEMENT

Global Finance editors, with input from industry analysts, corporate executives and technology experts selected the best trade finance banks in 97 countries and eight regions.

In addition, Global Finance selected the best banks for trade by U.S. region, a list that was based on various service categories, such as document management and export finance.

This year’s winners were revealed during Global Finance’s 20th annual World’s Best Trade Finance Providers awards luncheon on Jan. 15 in Frankfurt, Germany, during the BAFT Global Annual Meeting.

The American winners were:

New England: Webster Bank
Mid-Atlantic: M&T Bank
Great Lakes: KeyCorp
Plains: Commerce Bank
Southeast: SunTrust Bank
Southwest: Comerica
Rocky Mountains: Zions Bancorp
Far West: U.S. Bancorp 

Globally, HSBC took the top spot in Euromoney’s Trade Finance Survey for the third year running, with Deutsche Bank in second place and UniCredit in third. Citi fell out of the top three to take fourth position. One of the biggest upsets was JPMorgan, which fell to 17th after reaching ninth place in 2018.

“Many of the American banks have enough trade business in their home market,” explains Eric Li, research director at Coalition. “So it’s no surprise that when it comes to a global survey, European banks will thrive.”

Global Finance editors say the winners are those banks and providers that best serve the specialized needs of corporations as they engage in cross-border trade. The winners are not always the biggest institutions, but rather the best—those with qualities that companies should look for when choosing a provider.

A proprietary algorithm with criteria—such as knowledge of local conditions and customer needs, financial strength and safety, strategic relationships and governance, competitive pricing, capital investment and innovation in products and services—weighted for relative importance was employed by Global Finance.

A DIFFERENT TAKE FROM GREENWICH ASSOCIATES

As of press time, the most recent Greenwich Share and Quality Leaders in U.S. Large Corporate Banking was released during the fourth quarter of 2019.

“For a business that is generally considered stable and rather slow to evolve, large corporate banking is changing fast,” notes a statement from Greenwich Associates. “The globalization of U.S. corporate business coupled with a disruptive trade war, the proliferation of digital technology, the rise of fintech providers, and the strategic retreat of certain global banks are just some of the variables shaking up the corporate banking industry and putting more corporate clients and business up for grabs.”

From April through September 2019, Greenwich Associates conducted interviews at U.S.-based companies with $2 billion or more in annual revenue with 422 chief financial officers, treasurers and assistant treasurers, 441 cash managers and other financial professionals in cash management, and 136 corporate trade finance professionals.

Participants were asked about market trends and their relationships with their banks. Trade finance interview topics included product demand, quality of coverage and capabilities in specific product areas.

THE WINNER’S CIRCLE

The 2019 share list is topped by J.P. Morgan, followed by Bank of America, Wells Fargo, Citi and HSBC—in that order.

The order of the top two changes when it comes to U.S. Large Corporate Cash Management: Bank of America; J.P. Morgan; Wells Fargo; Citi; and HSBC.

“Despite the trade war between the United States and China, the ongoing Brexit saga and other signs suggesting that globalization might have temporarily peaked, U.S. companies actually increased their exposure to overseas markets last year—at least in terms of their banking needs,” according to Greenwich. “For example, the share of large U.S. companies using at least one bank for payments/receivables and/or cash management in Western Europe increased to approximately two-thirds in 2019 from just 58 percent in 2018. The uptick was equally impressive in Latin America, Central and Eastern Europe, and the Middle East and Africa.”

BANKS CHARGE INTO CASH MANAGEMENT

The biggest U.S. banks are placing a new strategic focus on the cash management business. In part, this new emphasis comes from a desire to capture the cash deposits of large companies, which provide a much-needed source of balance sheet stability.

However, banks are also looking to capitalize on an inefficiency in corporate treasury management by creating new client values. International payments, receivables transactions and even corporate cash transfers often trigger a corresponding foreign exchange trade. Some companies put those trades out to bid—but many don’t.

Even for trades up to $20 million in size, many companies simply pass the trade on to their cash management providers. For that reason, margins for FX transactions on the back-end of international cash management transactions can be especially attractive.

U.S. TRADE FINANCE AMONG LARGE CORPORATES

Trade finance is an area of renewed interest by the major banks. Citi, Bank of America and J.P. Morgan all vie aggressively to be the lead trade finance provider among U.S. large corporates, with each bank doing business with just under half of the market. Wells Fargo and HSBC round out the top five banks. Bank of America, Citi, HSBC, J.P. Morgan, and Wells Fargo are all recognized for distinctive quality and share the title of Greenwich Quality Leader.

GREENWICH EXCELLENCE AWARDS

The accompanying table presents the complete list of 2019 Greenwich Excellence Awards in U.S. Large Corporate Banking and Cash Management.

Greenwich consultants John Colon, Don Raftery and Chris McDonnell specialize in corporate banking, cash management and trade finance services in North America. Consultant Chris McDonnell also specializes in digital banking.

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OUT WITH THE OLD: WHY BANKS MUST ADOPT FINANCE TECHNOLOGY TO REMAIN RELEVANT

The term “FinTech” continues to saturate the news and financial institution reporting in recent years. It’s not surprising that streamlining financial services in the age of automation is something traditional banks struggle with adopting as global markets capitalize on technology. The trade sector on a high level is already purging antiquated, traditional processes involving paper, phone calls, Excel spreadsheets and tedious, unreliable methods of tracking and invoicing.

Now that FinTech is part of the bigger financial picture, it only makes sense that more companies in the global trade market are adopting FinTech as the norm rather than an option. This presents its own set of challenges for banks to overcome as much as it presents opportunities in optimization and risk mitigation. FinTech has its own challenges to overcome as well before it can successfully replace the traditional financial processes currently in place.

To understand exactly how FinTech fits into the bigger picture, we must break it down and evaluate all angles. To start, trends in emerging finance technology include variables from governments and dominating players to emerging acquisitions positioning big tech as a disruptor and solution to trade finance. So, what are some of the top emerging trends currently found in the financial technology space? According to experts at Azlo, a no-fee digital banking platform, government regulation will weed out fly-by-night FinTech while ownership of a self-sovereign identity will become more prevalent for risk modeling. Additionally, FAANG companies are currently positioned to become major players in the FinTech space as they continue to raise the bar for consumers and businesses alike.

Azlo also maintains that banks must adopt FinTech and emerging tech to remain a relevant part of the financial industry, warning that if they don’t, European, African and Asian markets, which possess less regulation and oversight, will own the space very soon. Additionally, optics, trust and inevitable obsolescence will ultimately serve as supporting reasons behind the adoption of emerging tech in the banking space in the near future.

From a safety and risk mitigation point of view, cybersecurity requires a sophisticated and advanced system to combat various strategies hackers utilize to disrupt the financial industry. Cybersecurity goes hand-in-hand with the recent surge in FinTech and will present itself as a challenge for financial companies to mitigate. How will this risk impact banks from a cost perspective? Think of it in terms of compliance and regulation. Circling back to Azlo’s expert point that once the government starts implementing harsher regulations, the days of FinTech will take a different stance in the financial industry. An example of this is found in Mexico’s FinTech law that took full effect this year and in the Latin America markets. As noted in a November Nasdaq article: “The goal of the FinTech law was to help bring more people into the formal economy. Additionally, it would help to reduce the amount of cash in circulation, which would cut down on money laundering and corruption as well.”

Nasdaq experts also point out the significant progress FinTech has made within the Mexico and Latin America markets. “In January 2019, Albo raised $7.4 million, sparking a surge in investor interest in Mexican neobanks,” states the article. “In March 2019, Mexican neobank, Fondeadora, announced a $1.5 million round of investment, and in May 2019, Nubank, Brazil’s largest neobank with over 15 million users, announced its plans to expand into Mexico.”

Considering the reputation for cash dependency in Mexico paired with the more than 273 FinTech ventures operating in the country, it’s no surprise that FinTech is disrupting and recreating opportunities for global markets while changing the way cash flow is approached.

FinTech will not necessarily hurt the traditional banking model, as it does offer an automated and sustainable approach for customers while keeping up with what is expected of companies on a cultural scale. To remain relevant, banks should consider what customer generations are emerging while maintaining the changing ecosystem supporting efficiency, sustainability and cost-savings.

Furthermore, FinTech is changing the way investments and lending are assessed. FinTech allows for much larger sets of data, providing a new level of visibility. Possessing the ability to manage multiple information streams that reflect the health of a company is found as an unmatched solution provided by FinTech, according to Azlo. With this information, companies can further evaluate next-step approaches and what actions in place need to be revisited, revamped or completely eliminated. The name of the game is data visibility, folks, and that is exactly what FinTech is doing to redefine how finances are approached.

“FinTechs are relying on different information when underwriting consumers, looking at things traditional banks have never considered and providing more people with access to personal and business capital,” explains Donna Fuscaldo in her blog, “The Rise of Fintech: What You Need to Know & Financial Services Now Offered.”

“Traditional financial institutions may be late to the FinTech party, but they haven’t missed it altogether,” Fuscaldo writes. “Many of them are creating their own services or partnering with established FinTechs to bring services to their clients. It’s happening in every aspect of FinTech from robo advisors with Charles Schwab’s Schwab Intelligent Portfolios to digital payments with Visa’s Visa Pay digital payment service. Even heavy hitters like JPMorgan are turning to FinTech’s data to evaluate applications for loans, and Quicken Loans, the online mortgage lender, launched its Rocket Mortgage app that can churn out mortgage approvals and rejections in minutes. All of this action on the part of the traditional financial services industry make for more choices beyond just the startups.”

With cybersecurity and automation consistently creating new ways for companies to optimize their payments while maximizing data and integration, only time will tell how much regulation global governments will impose and whether that reshapes the FinTech marketplace. One thing is certain: Traditional banking will continue to be challenged to redefine how customers are served, transactions are protected and how the investment and lending sectors approach opportunities throughout the international and domestic markets.