Australian Leading Trade Finance Providers Win More Wallet Share
Australian business are committing significantly more of their spend to their primary trade finance providers, leaving a much smaller wallet share for secondary providers reports East & Partners.
The results are drawn from the market research and analysis firm’s tenth annual trade finance report. The research programme provides detailed market analysis based upon direct interviews with 1,859 importing and exporting firms across Australia’s small to medium-sized enterprise (SME), corporate and institutional business segments.
Since 2010 primary trade finance wallet share has increased 16.1% within the institutional segment comprising businesses with annual turnover of A$725m-plus. In that time, market average wallet share has gone from 59.1% to 68.6% in the most recent report, completed in February 2014. Best of breed wallet share from the top-ranked provider is now at 82.1%.
Over that same period, secondary wallet share almost halved to a market average of 13.5% in February, against 26.0% in 2010.
Both corporate and SME-sized businesses exhibit a similar relationship, as customers choose to allocate a greater proportion of their Trade Finance wallet to their primary banker.
The firm notes that trade finance has unmistakably become more ‘sticky’ as both Australian and international lenders enhance their product and service offerings. Wallet share remains inextricably linked to customer satisfaction ratings, given that positive sentiment converts directly into a higher percentage share of trade finance business per customer.
Twenty key service satisfaction and importance factors indicate which banks are successfully addressing the most important customer satisfaction expectations.
Letters of Credit (L/Cs) continue to rate highly among SMEs yet do not feature prominently with the Top 500 institutional enterprises.
A bank’s perceived global representation does not rate highly with smaller businesses, yet larger businesses nominate this element as one of the most important factors in fostering a closer trade finance relationship.
East & Partners Senior Markets Analyst Martin Smith points to the differing fortunes of business foreign exchange (FX) and trade finance products in terms of wallet share.
“Declining wallet share remains a defining characteristic of spot FX, options and forward FX products, posing a unique challenge to both Australian and foreign banks,” he reports. “Customers encounter little difficulty using multiple FX providers for their business FX requirements in the pursuit of value for money and useful e-trade solutions.
“Trade finance appeared to be heading in a similar direction, yet the ability of the banks to pinpoint key product and service factors has resulted in a successful, direct strategic response that customers are responding to favourably.”