How COVID is Changing Relationship Banking
(10 February 2021 – Asia) COVID-19 is shaking up corporate treasurers’ relationship with their banks, and customer preferences are changing, according to a new study by East & Partners.
While the COVID lockdown may have driven a wedge through corporates, compartmentalizing various functions of multinational corporates (MNCs), the pandemic has had the effect of deepening the relationship between corporate treasurers and Chief Financial Officers (CFOs) and their banks, according to a new report by East & Partners.
According to the survey, which took in interviews with CFOs and treasurers from 748 of a defined population of 800 institutional enterprises globally, the majority of firms contacted their relationship manager (RM) by phone or online each day on average (42 percent) during the crisis.
Some 35 percent said they were in touch with their RM multiple times a day, about 17 percent were in contact weekly and seven percent were so intermittently or on an as-needed basis.
"We are a relationship bank and those relationships have deepened more in the past six months than they would have in the past six years,” ANZ Institutional Managing Director Tammy Medard was quoted as saying in the report.
Chinese ‘High Touch’
Chinese corporations were interacting the most actively with their primary bank RM, with one in two reporting intraday dealings (48 percent) while 39 percent connected with their RM daily.
The report said this relatively “high touch” model operated by Chinese firms absorbed a significant commitment of resources and bandwidth in comparison to Canadian, US and British enterprises, who were more likely to contact their RM once a day or weekly at most.
This high contact rate was in line with CFO and corporate treasurer expectations, with one in two saying they were pleased with the level of interaction (52 percent). Forty-one percent said they would prefer to deal with their RM even more actively, while a minority (four percent) were unhappy with the level of contact.
But to what extent were these interactions meaningful?
Interestingly, customers with the highest touch points based in Singapore, Hong Kong and China reported the highest quality interface, rating 2.19, 2.33 and 2.38 respectively on an inverse scale, where 1 represents high quality and 5, low quality.
COVID-19 Churn
Customer churn and wallet share were critically important key performance indicators for global interbank relationship manager teams as competitive pitching accelerated and corporates ensured they were structuring their response to the COVID pandemic in the most efficient and effective way.
Reflecting enormous disruption across interconnected global supply chains, the majority of customer-switching activity both over the past six months and anticipated into 2021 was confined to trade and supply-chain relationships.
One in ten corporations have switched their trade relationships since the onset of the COVID pandemic in the first quarter of 2020, while a further 12.3 percent plan to switch as a direct result of their negative experience with their current service provider.
COVID-influenced customer churn by product showed deposits were next, with around seven percent planning to switch as a result of COVID-related issues. Next were transaction banking, lending and cash management, which were all under 5 percent.
“One of the interesting phenomena to come out of COVID is that corporate have become more ‘sticky’ - the churn is subdued throughout most of the product lines except for trade and supply-chain relationships,” East & Partners Asia Business Head Sangiita Yoong told Corporate Treasurer.
“Basically, they are just trying to wait this out until and delay any decision until the crisis is passed; they don’t want to commit to new products or they don’t want to expand their wallet share until they get some clarity,” Yoong said. “In some respects, it’s artificially sticky behaviour because corporates just staying with their incumbents until the crisis is over.”
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