Continuing our look at commercial banking practices and innovation opportunities, we move on from the SME segment to investigate the world of treasury management.
Recent studies show that there are big gains to be made by banks who are willing and able to invest in IT to deliver better experiences to treasury management clients. According to Booz&co, in their Customer-Centric Treasury Services: Corporate Banking Growth via Integrated Treasury Services report, “treasury is one of only two product groups (along with wealth) poised for growth over the next 5 years”.
The same report asserts that there are growth opportunities available across the full range of treasury products, but that in order to achieve maximum success banks must move towards cross-product integration and put an end to siloed business lines. Booz&c found that the current inefficiencies that are creating road block for treasurers are: inability to forecast company cash flow, weak liquidity management, lengthy transaction times, and inadequate reporting practices. Innovation in this space is heating up and if banks want to remain competitive, and keep their existing treasury clients then they must start moving towards a customer-centric model and invest in their service platforms.
The fact of the matter is, the role of treasurers has changed over the last several years, and treasurers now have significantly higher profile within organizations then they used to. The global financial crisis has resulted in an increased level of regulations and scrutiny, and treasurers are called upon more and more to participate in business strategy especially with regards to liquidity, operational cash management, cash position and reporting, and risk assessment. The rapid evolution of the treasurer’s scope of responsibility means that they are woefully underserved in terms of tools, with many of them still struggling to complete complex tasks with spreadsheets and outdated technologies.
[Image from Kyriba]
Clearly there is a need for newer, more effective and efficient technologies, and banks can easily step into the gap. The uptick in efficiency bought about by innovative, customer-centric tools will have a dramatic impact not only on the daily operations of treasurers but also on the entire organization, and ultimately the bank treasury staff who will benefit from the improved reporting, operational transparency, and risk management capabilities. Deloitte’s latest study, Future of Bank Treasury Management: A profession in Focus, found that “2013 – 2014 is an inflection point for treasurers to transform and adapt, enabling them to meet the challenges and needs for post-2015”:
[Image from Deloitte]
With almost half of the treasurers surveyed by Kyriba in March of 2013 stating that they want and need better tools and technologies, there is clearly a space for banks to step in and deliver. The potential for banks to win in this segment is massive. Not only will they greatly strengthen relationships with their existing corporate clients, they will also gain a competitive edge over banks that are failing to enter the treasury technology arena. It will come as no surprise that some of the world’s largest banks have already started making inroads into this highly valuable sector. In the next installment of our commercial banking series, we’ll be taking a look at what the top 3 performers are getting right and how they’re doing it.