Each year, consulting firm Phoenix-Hecht surveys corporate users of bank treasury services. For 2010, the survey included nearly 2,000 responses from representatives of companies with sales of $40 million-plus.

Among the major findings:

1. Credit was tighter. No surprise there, but the numbers were significant. More than one-fourth of large companies, defined as those with sales of $500 million or more, experienced either a reduction or withdrawal of credit. That’s more than double the 12 percent responding affirmatively a year earlier. When it came to middle-market companies, 18 percent saw access to credit shrink; that was more than three times the year-earlier number.

2. Because credit was tighter, companies had to hunt for more credit providers. As a result, the proportion of companies with credit-only bank relationships (as opposed to relationships that included both credit and treasury services) jumped. For instance, 30 percent of midmarket companies had established credit-only relationships in 2010, up from 25 percent in 2009. Credit-only relationships among large corporate customers jumped from 35 percent in 2009 to 44 percent. Similarly, just one-third of large companies indicated that they would expect to move their treasury management services to a new bank that offered them a credit package; while that’s a substantial number, it’s down from 44 percent a year earlier.

3. When it comes to ending relationships with their banks, availability of credit (again, no surprise) and customer service are the main drivers of corporate behavior. Somewhat surprisingly, however, while both rose in importance for midmarket firms, customer service became more important – it was mentioned by 27 percent of respondents, compared with 24 percent that ranked credit availability first.

4. Checks still dominate the payment landscape. In fact, their use inched up slightly in 2010. Large companies, for instance, used checks for about 62 percent of their payments in 2010, up from 60 percent in 2009. What accounts for the shift? The tight economy probably prompted at least a few firms to put any initiatives related to payment technology on hold. And, given the precarious state of the economy, at least a few companies probably found that they wanted the timing flexibility that’s possible when paying by check.

5. About 39 percent of midmarket firms and two-thirds of large companies plan to expand their efforts to pay suppliers electronically. However, the researchers question just how many of these plans will come to fruition. While checks cost more to process on a per-payment basis, they have the advantage of being simple, says David Bochnovic, executive vice president with Phoenix-Hecht. “You don’t need the bank account info and can just write the check and include the remittance detail.” In addition, while processing payments electronically is less expensive, adding those capabilities isn’t cheap.

6. Incidents of fraud dropped. Among large companies, for instance, 28 percent of respondents had experienced fraud in the most recent survey, down from 36 percent in 2009. While that’s good, of course, it’s also prompting fewer companies to implement safety features like positive pay. Those decisions could come back to haunt these firms.

7. The quality of ACH transactions, measured by the speed of error corrections and overall features and capabilities, dropped. Not by much, but a drop nonetheless. What gives? Most likely, the increase in electronic payments on the consumer side caused some of the errors, Bochnovic says. “It caught some of the banks slightly off guard.” In addition, many of the larger banks, like other businesses, cut staff in order to navigate the recession. While the blip likely is one-time, it points to a hidden cost of electronic systems, he adds: “When things go bad, it’s a royal pain to correct.”

8. The rebates provided with the use of purchasing cards jumped significantly. Among midmarket firms, 57 percent received rebates in 2010, up from one-third in 2009; the numbers for large companies are 82 percent in 2010 and 68 percent in 2009. The increase most likely is a result of efforts by the banks to stimulate growth, Bochnovic says.

9. At the same time, prices for bank services rose faster than the increase in the Consumer Price Index in 2009. That’s a shift from the period from 2005 to 2008, when bank price increases held below the CPI. The researchers attribute this to the fact that “credit-stressed companies are more dependent on their banks.” That allows banks to raise prices on the other services they’re already providing their corporate customers.

Not fun news for those sitting in the buyer’s chair. However, the momentum can – and eventually will – change direction. Although pricing of treasury management services doesn’t dominate companies’ banking relationships the way that credit availability does, it does come into play for a small but growing number of firms. Among midmarket firms, 9 percent said that these prices were a primary reason for ending a bank relationship, up from 5 percent in 2009. Among large firms, 13 percent gave that answer in 2010, versus 10 percent a year earlier. If these trends continue, it’s likely that prices will come down. ###