The middle market has always represented a critical client base for US banks, though over the last decade some have focused their cash-management services more on large companies. With these customers proving increasingly difficult to serve profitably, it’s time to pay renewed attention to the middle market—companies with $40 million to $500 million in annual revenues—where growth is stronger and margins look more attractive.

Historically, middle-market bank customers have been unwilling to incur the administrative cost of switching to a new institution, even when they were dissatisfied with their present service. McKinsey, however, has identified critical moments when banks can establish a new cash-management relationship with them. To take advantage of these evergreen opportunities, banks must overcome a number of internal sales and service challenges. Doing so will require better low-cost service, segmented product and service offerings, world-class account planning, and revamped sales organizations.

Our experience shows that these moves can increase a bank’s revenues from middle-market cash management by 10 to 12 percent in just 18 months.

An attractive market

We estimate that cash-management revenues from the middle market, amounting to some $16 billion a year, are growing by 3 to 5 percent annually. By contrast, revenues from the...