The long tail of TCSP banking partners

How the long tail forms

When we first started speaking to TCSPs about their banking relationships, one number kept surprising us: the sheer volume of banking partners a single TCSP maintains.

In Flinq’s conversations with TCSPs, we have seen mid-sized firms with 20, 30 and sometimes more than 40 banking relationships. This is an observation from our work, not a market-wide benchmark. Each relationship comes with its own onboarding process, portal, statement formats, payment-file requirements and relationship-management overhead.

The question is whether every relationship still serves a clear purpose.

Why it happens

There are genuine reasons why TCSPs accumulate so many banking partners:

• Client preference: Clients often come with existing banking relationships they want to maintain. The TCSP inherits the bank along with the client.
• Jurisdictional requirements: Structures operating across multiple jurisdictions may need local banking in each jurisdiction.
• Product specialisation: Some banks are better for certain products — trade finance, FX, custody, lending. A TCSP might use different banks for different needs.
• Risk diversification: Spreading deposits across multiple banks reduces concentration risk.
• Historical accumulation: Over years and decades, banking relationships accumulate. Banks merge, clients move, but the accounts often remain.

These are all valid reasons. The result can still be a long tail in which a small core of banks holds most balances and transaction volumes while many other relationships support relatively small or low-activity positions. The shape will differ by firm, so measure it before deciding whether consolidation is appropriate.

The cost of a long tail

A long tail can create several costs:

• Operational inefficiency: Every banking relationship requires maintenance — portal access, statement downloads, payment processing, reconciliation. More banks means more manual work, more processes, and more room for error.
• Weaker relationships: When the book is spread thinly, it may be harder to make a commercial case for priority service, dedicated relationship management or preferential pricing. A smaller core can support more deliberate banking partnerships.
• Technology barriers: Establishing secure bank connectivity with each institution requires time and investment. The more banks you have, the harder it is to automate across the full book.
• Compliance burden: Each banking relationship requires ongoing due diligence, monitoring, and reporting. More relationships means more compliance overhead.

Start with evidence, not a target number

A consolidation exercise should not begin by deciding how many banks a TCSP ought to have. Start with a complete inventory and record what each relationship contributes:

• Purpose: the clients, jurisdictions, products or contingency needs the bank supports.
• Activity: balances, payment volumes, account usage and recent growth or decline.
• Economics: rates, fees, minimum balances and the wider commercial relationship.
• Operating effort: onboarding, portal administration, payment processing, reconciliation, support and ongoing due diligence.
• Risk and resilience: credit exposure, deposit-protection position, service reliability and concentration implications.

This makes it possible to group relationships into a core network, specialist banks with a defined role, credible contingency options and legacy relationships that may no longer justify their cost. A low-volume bank may still be essential because it supports a particular jurisdiction or client type. Equally, a high-volume relationship may warrant review if its service, risk profile or operating model no longer fits.

Before moving accounts, test whether the proposed receiving bank can support the clients and products in practice. Consider onboarding appetite, client or governing-body approvals, mandates, payment continuity, data retention, notice periods and the operational work of changing account details. A phased migration with clear ownership and exception handling is usually more controllable than closing several relationships at once.

A more deliberate banking network

Now consider a more focused, strategic set of banking partners. The potential benefits include:

• Deeper relationships: With fewer banking partners, your book with each may become larger and more meaningful, strengthening the case for service, pricing and product discussions.
• Operational simplicity: Fewer banks can mean fewer portals, formats and processes for the operations team to maintain.
• Technology enablement: A focused set of banks can make SFTP or API connectivity more practical across the core network.
• More focused oversight: Fewer relationships allow risk and compliance teams to spend more time on each one.

TCSPs we work with that have taken a strategic approach to consolidation report better service, lower costs and improved operational efficiency. These are qualitative client-reported outcomes; the result for another firm will depend on its starting portfolio, bargaining position, migration costs and target-bank capability.

Review your long tail of banking partners

Talk to us about a deliberate approach to consolidation, connectivity and concentration risk.

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