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This Month in Commercial Banking: Primacy and Other Topics for 2022

It’s budget season and banks are planning for a 2022 that promises to be full of opportunities, challenges and transformation in the commercial market as banks and their customers race to keep up with the rapid pace of innovation. At the same time, they are also planning how to manage unprecedented liquidity levels and plan for Fed hikes.

This issue examines how banks have made significant inroads in acquiring new corporate customers over the last year. The challenge for them now is to obtain a clear view of current and potential primacy as they seek to make strategic choices about where to pass through pricing increases when rates begin to rise.

We also share insights on how corporates are increasingly weighing ESG characteristics as they choose providers in the commercial liquidity and treasury management space.

Next, we dig into the recent wave of M&A transactions that will require offensive and defensive strategies for both those involved in the deals, as well as the competitors in those markets. We also look at how innovations in human-centric design are informing investments in the commercial digital user experience.

We conclude by reviewing the four strategic priorities that commercial businesses can invest in to lead the market in 2022 and beyond.


Primacy | ESG | M&A | Design Innovation | Planning For 2022

The Path to Primacy for New Customers

Bankers initially focused on deepening existing relationships in the early days of the pandemic, but struggled to acquire new logos in a virtual environment. That has turned around: nearly three-quarters of the total year-over-year deposit growth for the last 12 months can be attributed to balances from new customers. (See Figure 1.)

Figure 1: Drivers of Year-Over-Year Deposit Balance Growth

Source: Curinos CDA

But some important questions linger. Do these customer acquisitions comprise primary relationships? If not, is there a path to primacy?

There are currently more deposits in the system than banks can efficiently deploy. And it will still take several quarters or more for banks to lend through the liquidity glut if and when commercial loan growth returns to normal.

Any new balances that are accompanied by the client’s payments business and a first-call position for future credit needs represent a tremendous accomplishment in a difficult operating environment. But if these balances are from non-primary clients with low potential primacy, banks will need a careful and deliberate approach to managing the re-pricing of these balances when rates begin to rise. They should also plan for potential attrition of those new, non-primary balances.

This planning should get under way now and it should cover multiple macro scenarios. It must also involve careful consideration of the drivers for each bank’s deposit growth, down to the customer level. As is always the case, banks can and should make room on their balance sheet and in their interest expense budgets to acquire and retain primary relationships. At the same time, they must be prepared to make tough choices about managing those non-primary balances.

Peter Serene (

Corporates Apply ESG Criteria When Choosing Bank Providers

It’s not just products, price, credit and service that help sway a company’s selection of a financial-services provider. A growing number of organizations are beginning to use Environmental, Social and Governance (ESG) criteria to help them choose vendors, including providers of treasury management services.

Although various elements of ESG values have been part of the informal consideration in selecting treasury management, they are now starting to become a formal part of the selection process.

Indeed, Treasury Strategies, a division of Curinos, has recently seen two large corporates include ESG criteria in their formal bank selection scoring process. In one case, the very tight competition between banks resulted in the winning bank’s margin of victory being attributable to its high score for ESG criteria. In the future, we expect the application of ESG criteria to similarly act as a tiebreaker in banking services RFPs where the competing banks have demonstrated excellence in the historical criteria of selection.

Although the use of ESG criteria in choosing investments began in the 1990s, the importance of the asset class has increased tremendously in more recent years. Assets invested in funds that apply ESG criteria grew from $100 billion in 2000 to $14 trillion in 2020. This explosion of interest is now starting to be reflected in procurement policies.

Banks need to be prepared to respond to ESG policy questions from their corporate customers. Corporate clients will expect their banks to demonstrate an acceptable approach to ESG criteria through both policy and the substantive actions. While the largest banks are already prepared for this, smaller institutions should begin to develop a strategy to document their policies and efforts to improve environmental, social and governance improvements.

Paul LaRock (

Bank Deal Boom: Know Your Playbook

The pace of announced bank M&A is showing no signs of slowing, with a number of significant deals announced this year, including U.S. Bancorp’s acquisition of MUFG Union Bank, M&T’s purchase of People’s United Financial and Webster’s merger with Sterling Bancorp. These deals come on the heels of PNC’s recently completed acquisition of BBVA and Huntington’s combination with TCF. (See Figure 2.)

Figure 2: M&A Bank Activity Over the Past 10 Years

Source: SNL Financial

All deals create opportunities and risks, both for those involved in the transaction and for other providers that operate in the impacted footprint. Curinos has found that a target bank’s customer base typically declines 5% between announcement and conversion, underscoring the need for systematic defensive and offensive playbooks aimed at M&A-related disruptions.

For acquirers, investing in deposit due diligence can go a long way toward understanding the deposits of the target and its customers who may be at risk of leaving during an integration. This can influence purchase price. And it is critical to develop a defensive playbook during integration planning – this typically entails proactive efforts to identify overlapping customers through a structured clean room process so that bankers can hit the ground running on legal day one. Other defensive strategies include aligning product positioning and pricing practices.

We have also often seen banks use a defensive strategy of highly accommodative pricing between the time of announcement and deal close. While there is some merit to this strategy, banks should put in place guardrails to prevent pricing from crossing the boundary from “highly competitive” to “out of market.” The former may be appropriate, but the latter is rarely necessary.

Offensive strategies for banks involved in transactions include more than just a footprint expansion. They can also benefit from enhancing product capabilities and expertise to deepen market share and primacy in an expanded set of verticals. And with digital capabilities emerging as a key driver of differentiation, mergers provide both added scale and a unique opportunity to engage customers.

For banks operating within the footprint or vertical space of a major transaction, the near-term focus should be on offense. Transactions present a high potential and time-limited opportunity to pry primary relationships away from the merging players. Additionally, banks that want to expand share in specific markets or verticals may find that M&A presents a good opportunity to poach high-impact bankers or even full teams. Although near-term opportunities are critical, defensive strategies can’t be ignored because scale alone doesn’t guarantee success. That said, banks that are facing off against new, larger entities must continue innovating their product set to remain competitive.

Whether you are considering a transaction, in the midst of executing one or competing with banks involved in M&A, the period around the transaction requires deliberate planning.

Jing Tang (

New Corporate Platforms Have a Human Touch

As digital continues to be the preferred channel of client access and engagement, banks are starting to take a human-centric design approach to building core processes that guide the customer journey. Finally, they are creating systems, processes and machines that reflect the corporate customer’s actual wants and needs to build the best experience. The goal: to target digital marketing more effectively based on function, role and persona.

Design teams are using artificial intelligence across all channels in the corporate space to access data based on client usage and profile, taking the feedback for further iterations and design. AI is also being integrated into the center of core processes for research and development and output of new solutions, such as virtual assistants. This shift aims to embed the UX team in day-to-day tasks of their core user by improving and designing a method regardless of the backend configuration or system in place.

Design-driven growth is taking center stage at national and regional banks. It is at the core of innovation because design plays a pivotal role in customer attention, satisfaction and adoption of new products. Ultimately, this approach facilitates the growth and retention of primary clients, one of the many core goals of any bank. Cross-selling and adoption of new services are successful when the right products are positioned in front of the users who need and can benefit from them. When the design and steps are intuitive through the digital platform, self-selection is made possible.

This approach replaces the traditional engineered system-centered and function-centered design approach that relied on the process and requirements of the system instead of the user experience. This is no longer a viable strategy that can survive in the competitive market.

With new and emerging fintechs focused on the end-user experience across all solution sets, it is imperative for banks to migrate towards this new model. Human-centric design is already becoming the standard for digital banking across all market segments. UX design teams have embraced this approach when designing new services. Curinos has observed a number of financial institutions that are upgrading processes to be intuitive around a number of self-service and payment modules. Most corporate platforms now have a feedback link available for customers to provide comments or suggestions for improvement. This direct feedback will be critical as the approach continues to evolve.

Jennifer Sypal (

Planning for 2022 and Beyond

As 2021 ends, commercial banks are completing their strategic planning and budgeting processes for 2022. The next 12 months look especially challenging as banks navigate excess liquidity, headwinds to loan growth and a rising-rate cycle that will require a different playbook from the prior cycle.

To navigate this environment, we see four strategic priorities for commercial investment:

  1. Investing in digital. The pandemic has accelerated the growing importance of the digital channel. Digital is becoming the preferred channel of commercial clients for both access and engagement. Going forward, we anticipate that digital capabilities will be one of the key differentiators between leading commercial banks and the rest of the field.
  2. Deepening customer primacy in the business. As we’ve discussed in this issue, primary relationships drive an outside share of fee income and stable low-cost operating deposits. Primacy scoring will also be a key element of pricing strategies as rates rise. Primacy scoring requires a combination of analytics and data. The best approaches systematically incorporate data to size and validate the “off-us” portion of the customer’s business and are implemented with top-down sponsorship and a programmatic approach.
  3. Enhancing TM fee pricing capabilities. Banks are accelerating TM fee pricing events after a muted 2021, but they are taking a more analytical and surgical approach. To optimize pricing opportunities, banks should leverage a range of tools including benchmarks, elasticity scores, value drivers frameworks and primacy. Leading approaches address both standard and negotiated pricing.
  4. Planning for rising rates. Excess liquidity in the system means that the rising-rate playbook will be different this time than in previous cycles. While prior playbooks were based on price sensitivity and funding demand, the focus this time will be on the strategic use of rate to retain and attract primary relationships. This will require careful planning, proactive communication and access to timely benchmarks on cleared deposit pricing to execute and calibrate the strategy through the cycle.

Scott Musial, (

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