Online Cash Management Systems Make Gains In U.S.

According to TowerGroup, IT spending by banks on commercial deposit and cash management systems will reach $5.5 billion worldwide this year, with an expected growth rate of 2.5%-3.0%. Of that figure, U.S. spending is expected to total $1.3 billion.

"Europe and Asia are probably as far ahead as the U.S. and perhaps a little bit farther in corporate banking," said TowerGroup analyst Lee Kidder. "There's a longer tradition of not using checks in those countries."

TowerGroup's spending estimates include just the cost of the software, hardware and installation, not the revenue-sharing agreements that often make the deal possible. By agreeing to pay the software vendor a per-transaction fee, a regional bank can quickly deploy competitive technology without significant up-front costs or undergoing a lengthy development process. Observed Kidder, "If you can buy it at the local cash management store, why spend months developing it in-house?"

With a Web-based cash management system in its quiver, banks can help their business customers to make optimal use of their balance sheets. "You can reduce the elements of cash management to three simple requirements: a company wants to be able to collect its accounts receivables quickly, it wants to be able to extend and drag out its accounts payable as long as it can, and it wants to invest money that isn't needed today, either to pay bills or to use in operations," said Kidder. "The proposition to the company is, 'Don't put your cash under a mattress overnight.'"

Yet many business customers still need a push to go online. "There's still a little bit of apprehension, a little fear and a little anxiety over the risk, security and reliability elements of Internet banking," said Kidder. "Banks really have to go out of their way to reassure and convince customers that risk is a high priority of theirs."

Even security measures once considered intrusive might prove to be a vital selling point. "Companies that are concerned about risk will, by and large, put up with reasonable extra procedures that they have to go through to satisfy that," said Kidder. "In fact, they probably expect and want to see those."