Treasury management (TM) is transforming to meet the demands of a rapidly evolving market. Long relegated to a back-office support function, treasury is now viewed as a sales engine that can help financial institutions overcome low interest rates and shrinking margins.
Despite abundant opportunities, however, many commercial banks are leaving money on the table due to a disconnect between treasury management products and sales. The following details key areas FIs are failing and what an ideally aligned sales, product and treasury management operation should look like.
The disconnect between business capabilities and client needs
Advanced technology empowers financial institutions to differentiate themselves in the market and compete with Fintech disruptors for high value commercial clients. Armed with compelling products, such as remote deposit capture (RDC), integrated receivables, automation, cloud-based platforms and mobile access, treasury can attract and retain customers, increase deposits and fee-based income, boost revenue and ultimately provide value to financial institutions. That makes treasury an attractive growth opportunity for banks.
However, there is a disconnect between business capabilities and client needs. Though product teams create capabilities to meet market demands, sales teams are the ones that uncover client needs. When these branches fail to communicate, banks leave a lot of money on the table.
This is especially true for small and midsize banks. For example, best-in-class banks report 48% remote deposit capture penetration — but midsize banks report only 25% and banks in the bottom 20th percentile report just 10%. This disparity cannot be explained by differences in target markets — it’s due to banks’ inability to effectively communicate capabilities into client needs.
If midsize banks could achieve the 48% remote deposit capture penetration of best-in-class banks, they might be able to double their RDC revenues and small banks could yield even greater gains as well. And that’s just for one treasury management product: The ultimate ROI could be even greater if similar successes were achieved for integrated receivables, paperless onboarding, collections and other treasury management products.
Banks that want to maximize profitability, then, must reevaluate their sales, product and treasury management operation to identify opportunities to bring more existing customers on board with TM services and gain greater market share for TM products.
Treasury is missing a go-to-market infrastructure
The primary reason for this disconnect is lack of a go-to-market infrastructure, where banks institute a formal process to:
- Identify and prioritize prospects
- Uncover client needs
- Design optimal solutions
- Quantify and articulate benefits
- Mitigate concerns about change
Too often, banks bypass go-to-market processes and instead identify and prioritize prospects without examining the attributes that make a good prospect. Sales teams spend time chasing down leads without knowing how well the bank’s capabilities fit client needs. At the same time, product development teams create products without consulting sales teams to identify solutions that specifically address the needs of high value customer segments.
Every bank wants to offer value and an exceptional customer experience, but without a go-to-market infrastructure it can be impossible to deliver exactly what customers need, while maximizing sales and boosting banking revenue.
The working capital cycle illustrates this challenge: A complex process, it affects customer relationships, revenues, profitability and the corporate balance sheet. The order-to-cash cycle encompasses everything from credit management and billing to deductions, disputes, collections and receivables while impacting cash concentration, forecasting and planning, bank or counterparty management, and cash deployment. The buyer procure-to-pay process also plays a critical role and includes purchasing, invoice processing and disbursements.
As if that’s not complicated enough, highly effective banks recognize that corporate needs and opportunities vary by industry group, customer technology environments, attitudes and preferences. Banks need to understand which customer segments need which products, and they need to know which industries in their market they should focus on to grow deposits.
It’s clear there is a communication gap between the people who develop treasury products and the people who sell them. The bottom line, then, is product development teams need sales to help them understand market demands; sales teams need product development to help them understand what benefits existing solutions offer to specific customer segments. Establishing a go-to-market infrastructure is the way to bridge that gap and deliver value both to customers and the financial institution.
What a sales, product and treasury management operation should look like
Sales, product development and treasury management should collaborate to build a cross-functional operation, deliver compelling products, meet market demands and convert prospects into treasury customers. As treasury transforms into a sales driver, the entire team should work together to establish a go-to-market infrastructure that generates revenue and value for the financial institution. These tips can help.
Create a product management group
Treasury should establish a dedicated product management group that’s responsible for strategic development and pricing. The group should work closely with sales to understand the desired customer experience, then identify — or innovate — solutions to meet those demands.
To achieve this goal, sales can help the product management group understand:
- Client processes, decisions and data architecture
- Client economics
- Customer propensity to buy, switch or augment
- Industry and customer segments and their needs
- Market scans of industry verticals with revenue pools, profit pools and key order-to-cash pain points and needs
- The competitive landscape: what fintechs and other competitors are doing, and where opportunity gaps exist
Armed with this information, the product management group can either develop bespoke solutions or partner with fintechs to deliver an exceptional — and salable — customer experience.
Educate and collaborate with sales
At the same time, treasury and the product management group must educate sales about its existing service offering and the benefits it can offer to specific industry and customer segments. Often, the right technology already exists; but without proper communication, the sales team doesn’t know how to articulate its value to prospects. Thus, product management can help the sales team understand:
- Product value proposition
- Cross-sell opportunities
- Value-added sales opportunities
- Opportunities based on value to the bank and difficulty of execution
- How to create pitch decks that generate prospect interest
- How to uncover, qualify and quantify benefits of opportunities
- How to articulate benefits and how to outline mitigation plans
- Common obstacles to adoption and mitigating responses
Together, product management, sales and treasury management can establish best practices and key performance indicators (KPIs), then track important metrics to improve results over time. KPI tracking also enables treasury management to prove its value, which can justify greater resource allocation and yield outstanding ROI.
Put marketing upfront
Marketing is another crucial link in the treasury management product sales chain. As treasury evolves into its new role as a revenue driver, it’s important for product management to partner with the marketing team so it can effectively communicate its value proposition.
The marketing team, then, should work to generate leads via multiple channels: print, digital, online, mobile, email and media. Sales should partner with marketing to nurture leads through the conversion process, so that marketing hands off warm leads to sales to close deals. Once a client is on board, sales can then hand them off to a treasury management account representative for ongoing management.
The entire end-to-end customer experience must be cohesive, from marketing to sales to fulfillment. When treasury, product management, sales and marketing work together, transitions from one department to the next are seamless. That fosters deeper customer relationships, increases operational efficiency, reduces costs and ultimately generates revenue for the financial institution.
Sales, product and treasury management alignment can generate value and profit
When banks work to align sales, product and treasury management into a cohesive, collaborative group, they can yield excellent ROI and potentially deliver high value solutions to a variety of customer segments. This might allow them to outcompete both fintech newcomers and rival cross-town branches.
Just as importantly, alignment enables treasury management to transform into a sales driver that offsets — and even exceeds — losses due to shrinking margins and the war for low-fee deposits. Unlike commercial lending, for example, treasury income is not interest-based but fee-based. Thus, treasury margins are largely unaffected by declining interest rates, so it’s a powerful way for banks to boost profits and maintain viability in a tumultuous financial climate.
Aligned with sales and product management teams, treasury management can:
Advocate for resource allocation
KPI tracking quantifies treasury management’s impact on the bank’s bottom line. When treasury management can prove its value, executive leadership can justify additional investments into technology, marketing and other initiatives that ignite growth and yield even greater ROI.
Elevate its status
Transitioning from a back-office support function to a front-line sales driver means treasury management must elevate its status within the financial institution. Treasury must earn a seat at the table so it can be involved in strategic decisions and secure buy-in from bank leadership. An aligned sales, product and treasury management operation helps treasury prove its worth — including its ability to meet sales targets and other benchmarks — and obtain the position it needs to succeed.
Hire and retain top talent
Financial institutions are losing top talent to the fintech cool factor, but a progressive treasury can win them back by demonstrating its ability to deliver innovative products that cater to a tech-centric audience, purpose-driven products. When staff have the opportunity to develop technology, market it, sell it or manage it for corporate customers, banks can make a compelling pitch that attracts bright minds. That, in turn, helps banks establish mentorship programs and formal succession plans so top talent is ready to take the reins when senior leaders retire.
When product management and sales collaborate, treasury management can create a strategic product development roadmap predicated on customer needs and technology capabilities. From enhancing the customer experience via RDC and paperless onboarding to managing customer payments with real-time, integrated payables, internal alignment sparks innovation, thus enabling treasury to compete and fostering long-term growth and stability.
Generate value for the financial institution
By understanding customer needs and technology capabilities, FIs can leverage treasury to deliver compelling products and sales pitches to top prospects. That, in turn, generates value for the financial institution via greater deposit volume, more fee-based income, deeper customer relationships, long-term customer loyalty and enhanced market visibility.
Banks of all sizes can benefit from treasury transformation, but it takes a dedicated effort to properly segue treasury management from a support status to a self-sufficient sales leader. Critically, banks must work to align sales, products and treasury management so that each informs the others’ functions. When alignment is achieved, financial institutions can enjoy the benefits afforded by a transformed treasury that generates new revenue streams, differentiates FIs in the market, deepens customer relationships and helps protect the business from fintech disruptors.
The information provided in this blog does not, and is not intended to, constitute legal or financial advice.
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