If there is one sure lifeline during times of financial instability or crisis, it’s a strong banking relationship. When markets tighten, liquidity is strained or economic uncertainties arise, banks can provide critical financial support, strategic insights and customized solutions.

Recognizing the importance of this relationship, AFP conducted the 2024 Bank Relationship Management Survey, gathering insights from hundreds of corporate practitioners and bankers on what matters most in a successful partnership. From financial stability to technological support, the survey showed us the priorities and challenges of both sides.

To help members interpret and apply these insights, AFP hosted a webinar featuring a panel of treasury experts and industry leaders. The discussion offered attendees a practical look at how survey findings translate, particularly when adapting to current challenges like integration issues, increased due diligence and evolving service expectations. Highlights from the discussion are summarized below.

Important selection criteria for banks

When it comes to selection criteria, 98% of corporate practitioners cited financial stability as number one on their list. For Sergio Martin, Assistant Treasurer at Iron Mountain, it is the top factor for long-term partnerships. “You want to have a banking partner that will be there for the long run,” he said. “And in order to be able to ensure that they're going to be there supporting you year after year, you want to make sure that they have a strong balance sheet.”

Frank Sassano, Vice President and Assistant Treasurer of Travel and Leisure Company, agrees on the importance of financial stability. “Being a high-yield company with a securitization program, we need partners who really understand our business and want to participate in the capital markets with us,” he said. “Having reliable partners to make sure that we have liquidity is crucial.”

Second on corporate practitioners’ list of selection criteria (92%) was customer service responsiveness. In fact, dissatisfaction with customer service is a key driver of the issuance of an RFP to select an alternative bank.

“The quality of a bank’s customer service is where the rubber meets the road for a lot of people — if something goes wrong or if they need information, the responsiveness of the bank and through their customer service group is pretty key,” said Jeff Diorio, Managing Director at PMC Treasury. “If that's not strong, then, as you can see here in the survey results, you could push people into doing an RFP regardless of how good a bank you are.”

Integration challenges for both sides

One of the significant challenges for both banks and corporates, as highlighted in the AFP survey, is the complexity of integrating bank services within organizations' existing financial systems. The experts agreed that the implementation process with a new bank can be the determining factor of success or friction.

“I have seen a differentiator for some companies was their bank’s ability to implement their services, integrate systems and get them live,” said Diorio. “These higher performing banks had a well-structured process and project team for migrating a client’s accounts, users and systems integrations quickly and efficiently.”   

Bankers agree. They cited the implementation process (57%) and file formatting/connectivity issues (55%) as the two biggest challenges involved in onboarding new clients.

Both Sassano and Martin mentioned that working with a primary point of contact within the bank can ease some of these difficulties, as these individuals can "quarterback" communication between corporate clients and various bank departments, ensuring that implementation runs more smoothly. However, the panelists agreed that, despite efforts to streamline, KYC requirements and other regulatory factors often add layers of complexity to the integration process.

According to data gathered from the survey, 53% of corporate practitioners believe that their banks could strengthen their corporate relationships by streamlining the KYC process. “From a practitioner's perspective, we have been waiting for a way to consolidate the process across the banking industry,” said Martin. “For some reason, that's not happening. And so, every bank has their own KYC process, and that's where the pain comes from.”

Value-added services

“Banks are really good at doing a lot of the blocking and tackling, but where they can differentiate is around some of the value-added services,” said Tom Hunt, CTP, Director, Treasury Services and Payments for AFP. Bankers understand this. In the results from the survey, they cited optimal product utilization (81%) and regular reviews of account services (78%) as the most important value-added services.

With “one leg in the capital markets and one leg in global operating activity,” Martin said he is always looking at how they’re using their banking services and how they can be optimized. “Which happens to be on top now in terms of when you have to look into the long-term business, and how you're going to finance the business if you need to go to market. That's where you need to have a good economic overview and a banking partner that understands the financial markets, how to prepare and when to be ready. The economic outlook is very important to me for the capital market side. And then, as a global company, you want to be optimizing your banking accounts.”

One of the most important value-added services for Sassano is fraud evaluation. “With our major cash management banks, one of the things we always ask for is a fraud evaluation — a list of exposed accounts, accounts without certain services. We do that with them every six months,” he said.

Impact of the regional banking crisis

What impact, if any, did the regional banking crisis have on organizations? According to 52% of practitioners, they increased the financial due diligence they conduct on banking partners to safeguard their organizations. The panelists also cited increased due diligence, along with diversification efforts.

“Since the crisis, people have been thinking more about financial stability, but it doesn't seem to be quite as impactful because it's been a year plus since it happened,” said Diorio. “But it's definitely there. And quite frankly, in a lot of our advisory projects, when we're looking at bank relationships, we definitely recommend that people have a little diversification. Putting all your eggs in one basket could make sense from a cost and service perspective, but it's also nice to make sure that you've got a bit of diversification.”

And it goes both ways. “We saw a lot of organizations saying we need to diversify our banking exposure,” said Diorio. “And also, we saw banks looking at the creditworthiness of their clients, and in some cases saying, we've hit our maximum exposure on derivatives with your firm and have to pause on bidding for more trades. They're not saying we can't have a relationship with you, but we have seen the creditworthiness and the risk mitigation work both ways.”

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