How commercial banks can drive non-interest revenue with value-added services

As net interest margins tighten due to fluctuating interest rates and increasing competition, commercial banks are increasingly looking into non-interest revenue (NIR) as a key driver of profitability. Offering and monetizing sophisticated financial solutions beyond traditional deposits and loans allows banks to deepen relationships with clients while boosting their bottom line.

Commercial client executives expect their banking partners to offer frictionless experiences and a nuanced understanding of their industries that helps them to achieve financial goals and manage their businesses more effectively. A KPMG report found that 80% of commercial banking executives consider client centricity a top priority, yet only 47% feel they are exceeding client expectations, and just 15% do so consistently.

In an environment as competitive as the commercial banking landscape, financial institutions that want to achieve primacy and deepen client relationships need to differentiate themselves from fast evolving neobanks, fintechs and alternative lenders. Here’s how moving beyond traditional banking with value-added services helps financial institutions drive both revenue and client satisfaction. 

Traditionally, commercial banks have relied heavily on interest-based income from loans and deposits. However, with economic uncertainty and regulatory pressures affecting margins, the need for alternative sources of revenue has never been greater. Non-interest revenue — which includes fees from treasury management, embedded finance solutions, and digital banking services — now plays a crucial role in ensuring sustainable growth.

KPMG highlights that banks that choose to expand their services can increase client retention and create deeper relationships, ultimately leading to higher profitability. Integrating more deeply into their clients’ operational and financial ecosystems allows banks to generate long-term value that extends beyond traditional lending products.

To maximize non-interest revenue commercial banks must go beyond traditional banking and offer solutions that address their clients' broader financial and operational needs. Here are key value-added services that can significantly contribute to revenue diversification:

1. Treasury and cash management services

Cash flow is the lifeblood of any business; commercial banks can monetize on their expertise and the data they have on their clients by offering sophisticated treasury and cash management solutions. Services like automated receivables management, cashflow forecasting and liquidity optimization enable businesses to streamline operations, reduce costs, and mitigate risks. 

For example, J.P. Morgan’s Commercial Real Estate services help clients manage cash flow and optimize liquidity, allowing businesses to stay efficient while minimizing financial risks. Banks, in turn, generate consistent fee-based income from these offerings, ensuring long-term profitability.

2. Embedded finance

When financial services are integrated into clients’ day-to-day operations, banks move beyond being just a service provider and become an essential business partner. Embedding their financial solutions into the tools their clients use to manage their business keeps commercial banks present in daily decisions, strengthening relationships, increasing product holdings. This deep integration also makes it easier to acquire new clients, as banks become a part of the business ecosystem rather than just another vendor.

3. Trade finance

Commercial banks have an opportunity to facilitate global trade and supply chain financing through innovative solutions. Capabilities like document request and address validation streamline trade finance applications and improve transaction accuracy. 

Credit risk assessment and financial spreading help banks evaluate the financial health of trading partners, while real-time account statements and direct debits enhance visibility and payment automation. By integrating these capabilities, banks can accelerate settlement times, offer flexible financing, and strengthen client relationships in global trade.

4. Forex & international payments

Cross-border transactions are a significant revenue stream for commercial banks. Multi-currency accounts with embedded hedging tools like forward contracts or currency swaps provide banks with an opportunity to offer more tailored solutions. 

By managing currency risk for businesses, banks can charge fees for these value-added services. This positions the bank as an essential partner for businesses with global operations, strengthening client loyalty and boosting revenue from international payments and currency exchange services. For example, Citi’s embedded FX solutions enable businesses to seamlessly execute international transactions while generating fees for the bank. 

One of the pressing challenges financial institutions face today is effectively tracking and billing value-added services. Fragmented systems and a lack of real-time data often hinder usage-based pricing, making it difficult to create transparent, flexible billing models. 

To overcome this, banks can implement scalable and adaptable pricing structures, such as subscription models for ongoing services, per-transaction fees for high-value services like FX conversions and trade finance, and tiered pricing based on transaction volume and service complexity.

But here’s the issue: institutions that are locked in rigid, siloed systems that lack long-term scalability struggle with a lack of interoperability and long-term adaptability. The key to achieving this scalability lies in implementing a unified ecosystem, built on a modular, API-driven platform, enabling banks to seamlessly integrate new billable services without disrupting core operations. 

Embedding service tracking points across the ecosystem allows banks to ensure real-time usage measurement and offer clients clear, transparent reports on exactly what they’re paying for. It’s exactly why in order to successfully scale and monetize new value-added services, a comprehensive platform that integrates the entire ecosystem is essential.

As commercial banks navigate a shifting economic landscape, non-interest revenue is key for long-term success and profitability. Offering tailored solutions that address the real-world challenges of commercial clients enables banks to secure recurring revenue and strengthen customer loyalty.

To successfully capitalize on these opportunities, banks should focus on:

• Providing services that address the unique financial and operational needs of commercial clients, building long-term value and loyalty.

• Collaborating with technology providers to enhance service offerings and expand their reach

• Adopting a modular, unified ecosystem to integrate services seamlessly, enabling scalability and efficient service delivery

The future of commercial banking lies in innovation, integration, and a focus on delivering tangible value beyond traditional lending. Now is the time to move beyond traditional commercial banking and become a key partner in business growth.

Learn about Backbase’s solutions for commercial banking.