By Elizabeth Dilts Marshall
NEW YORK (Reuters) -Bank of America is rolling out a new cash management tool to U.S.-based clients, it said on Tuesday, in a bid to gain market share in the $300 billion cash management business for multi-national corporations.
Transaction banking - which covers processing employee payroll, paying suppliers and collecting from customers - contributed roughly 8% of the bank's total 2021 revenue, or $7.23 billion.
The second-largest U.S. bank said it was extending its virtual account management (VAM) tool - already available in Europe - to the United States, where the COVID-19 pandemic has accelerated customers' use of electronic payments.
The tool helps companies manage multiple accounts by creating a virtual ledger, accessible online, that shows all their account balances and transactions, and can model future cash flow. The tool can be opened and used within a day, whereas a bank account can take weeks to open.
Companies need this because they often keep hundreds of a different bank accounts to separate funds generated by their subsidiaries or clients, said Liba Saiovici, head of global receivables in global transaction services for Bank of America (NYSE:BAC).
"It becomes very costly and complex for the client," Saiovici said, because they have to employ people to manage the accounts. "(Our) clients are expanding, but their treasury teams are not expanding at the same rate."
Transaction banking is a competitive but fragmented business. Citigroup Inc (NYSE:C), the largest global bank in the sector, commands roughly 10% of the market, Chief Executive Jane Fraser said earlier this month.
Efficiency, scale and significant investment are key to gaining market share in this business, Morgan Stanley (NYSE:MS) analyst Betsy Graseck said.
"It's a service that needs to continuously be invested in. Clearly there's room for competition."