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What is treasury management's function?

Financial Institution: Streamline Operations

treasury has a new role

Long relegated to a back-office support group for commercial and business relationships, treasury management is transforming into a front-line revenue driver for financial institutions. In the wake of shrinking margins and heavy Fintech competition, leading banks view treasury management as a catalyst for deposit growth and enhanced profitability. This shift in thinking means treasury must become a more visible and strategic partner, as well as a critical contributor to FI strength, stability and success.

Elevating treasury’s status to capitalize on its potential isn’t without obstacles, and meeting challenges begins with understanding exactly what treasury management’s function is within financial institutions  and how it can help FIs improve their bottom lines.

What is treasury management?

Treasury management is a broad term applied to a suite of services financial institutions can offer to business and nonprofit customers. Those services include receivables management, payment processing and remote deposit capture.

Within financial institutions, treasury management represents an opportunity for revenue growth. Forward-thinking banks are working to implement innovative technologies that enable treasury management to compete with Fintech companies, backed by strategic marketing initiatives designed to captivate customers. That, in turn, spurs increased deposit volume and more fee-based income.

Capitalizing on treasury management’s full potential requires significant investments in technology, talent and marketing as well as status elevation so treasury has a say in strategic organizational decisions. The question, then, isn’t what treasury management is; but what treasury management means within a given financial institution.

Banks must ask themselves: Is treasury management primarily in support of commercial relationships? Or, is it a self-sustaining sales and service organization that generates clients, deposits, revenue and value for the financial institution? Financial institutions that adopt the latter approach position themselves to survive aggressive competition and dictate their own destinies in an evolving financial services market.

What are treasury management’s functions?

Traditionally, treasury management existed to support commercial and other business relationships; however, a transformed treasury department spearheads several critical functions within any FI. A robust treasury can deepen customer relationships, differentiate a financial institution in the market, generate new revenue streams and help protect the business from Fintech disruptors.

Deepen customer relationships

Treasury management and its breadth of services deepen customer relationships by offering them a “one stop shop” for their financial needs. From payment processing and check imaging to integrated receivables and remote deposit capture, businesses can have their most critical money affairs handled under one roof.

Businesses come to depend on banks that can capture the full scope of their cash accounts, but the heart of sound customer relationships isn’t based on dependence. Rather, it’s based on the trust businesses place on treasury to reliably and accurately manage their money, provide an exceptional customer experience and ultimately simplify their operations. That trust fosters deep customer relationships and long-term loyalty, which in turn yields additional business and greater profitability.

Differentiate a financial institution in the market

When competing banks are stuck in the financial stone ages, a forward-facing treasury department serves to differentiate its financial institution in the market. Treasury departments that implement innovative technology that enhances the customer experience may make themselves more attractive to contemporary customers, many of whom represent shifting demographics as CFOs and corporate treasury leaders continue to get younger.

Savvy treasury departments are establishing dedicated product development groups responsible for understanding exactly what experience customers want and need, then identifying ways to deliver  often via strategic partnerships with Fintech companies. By embracing the evolving role of treasury management, these banks are able to stand out against a sea of nearly indistinguishable competitors, which enables them to attract and retain more customers.

Generate new revenue streams

Product development coupled with effective marketing enables treasury management to generate new revenue streams for financial institutions. Some products might not necessarily be new, but delivered in a contemporary fashion: cloud-based payment processing, mobile banking platforms and artificially-intelligent receivable management systems, for example.

Progressive treasury departments are partnering with marketing teams to communicate the benefits of treasury management products as well as the advantages of conducting business directly with their banks. As today’s customers are increasingly receptive to modern messaging influenced by the Apples and Instagrams of the world, treasury may find it's useful to adopt a Fintech/consumer marketing mindset to acquire new treasury management customers and generate new revenue streams.

Protect the business from Fintech disruptors

It’s no secret Fintech is disrupting the financial industry. These companies cherry-pick the most profitable parts of treasury management, and in many cases do them better than traditional banks. A transformed treasury management is better equipped to combat that competition and market its advantages to attract and retain customers, and therefore protect the business from Fintech disruptors.

This is a major reason why many banks partner with Fintechs. Though they’re viewed as competition, when banks bring Fintech into the fold they can offer the same innovative, streamlined solutions without bogging down the organization with development overhead. Moreover, they’re able to keep the totality of customer cash accounts in house. Financial institutions can market their technological capabilities alongside their proven strength and stability in the market  something Fintechs cannot boast.

What are treasury management’s products?

Treasury management can offer a variety of financial technology solutions that enhance the customer experience, improve efficiency and optimize operations. They include: 

Receivables management

Integrated receivables accelerate working capital and reduce exceptions with straight-through processing across all payment channels. By eliminating the need for manual processing, customers enjoy reduced days sales outstanding (DSO), minimize labor costs and increase revenue.

Receivables management functions include:

  • Remote capture and aggregation: Banks can empower customers to accept modern payment methods  including paper, electronic and lockbox  that meet the needs of digitally-driven consumers
  • Remittance processing and intelligent match: This service uses AI (artificial intelligence) to automatically match remittance data to open invoices, which cuts labor costs and speeds the order-to-cash cycle
  • Research and analytics: Lend powerful business insights into receivables performance, incoming cash flows and team metrics
  • Exceptions and deductions management: Automated processing streamlines deductions and exceptions handling, ultimately improving the bottom line

Receivables management services maximize efficiency, reduce risk, increase revenue and allow banks  and their customers  to gain strategic advantages in the market.

Remote deposit capture

Remote deposit capture enables banks to offer their customers digital check scanning, depositing and clearing services via multiple channels.

Benefits of remote deposit capture include:

  • Merchant/lockbox service: Customers can scan checks from remote sources
  • Mobile deposits: Customers can deposit checks via camera-equipped smartphones
  • Risk monitoring: Grants customers the ability to safely scan checks with FFIEC-compliant scanning systems
  • Location awareness: Identifies where RDC deposits originate and issues alerts for potential fraud

With remote deposit capture, treasury can offer customers the convenience of a teller or after-hours dropbox in their establishments.

Payment processing

Many companies are outsourcing their image and item processing to financial institutions to reduce capital expenses, improve flexibility and gain access to modern technologies.

Treasury can offer a host of payment processing services, including:

  • Exceptions processing
  • Incoming and outgoing returns
  • Dispute and claims processing
  • Domestic and international collections
  • Legal mandates, such as subpoenas, levies and garnishments

With the right technology (or the right technology partner), treasury management can help businesses meet the demands of a digital-driven society with automated back office processing for every type of payment, including check, electronic, image, ACH, ATM, credit card and debit card.

Paperless onboarding

Though paperless onboarding is a technology that’s primarily used within treasury management, it also benefits customers by streamlining what is often a tedious onboarding process and reducing errors that push back “go live” dates  for example, a missing implementation form.

Paperless onboarding:

  • Delivers an enhanced experience digitally-driven customers deserve and expect
  • Improves compliance and reduces audit and validation efforts
  • Reduces costs and improves efficiency
  • Accelerates revenue by freeing the treasury team to focus on selling and relationship-building, not paperwork

With paperless onboarding, customers can sign and wirelessly submit electronic forms within minutes. Paperless onboarding solves key challenges with treasury fulfillment and provides tangible value to corporate customers, which in turn fosters deeper relationships.

What is treasury management’s role, and why is treasury management important?

Treasury management has always been a crucial cog in the FI machine. Other departments have historically leaned on treasury for support, and banks would not be able to attract and retain commercial customers if they did not offer treasury management services. That makes treasury an integral part of any bank’s foundation; however, an evolving financial climate has elevated treasury management to a new level of significance.

No longer “simply” a support service, treasury management’s role must be elevated to a front-line service that’s aggressively marketed. In doing so, banks can compete against  and beat  Fintech competitors.

A modern treasury management department that boasts innovative technology products, top talent and an enhanced customer experience is supremely marketable. It’s well-positioned to captivate and retain customers who might otherwise flock to Fintech.

As banks seek new ways to capitalize on technology to offset, overcome and exceed losses caused by slim margins, low-fee deposit wars and exceedingly competent competition, treasury management has emerged as a compelling sales driver that provides exceptional value to financial institutions.

Given its importance, treasury management’s “new” role is that of partner, strategic decision-maker and sales catalyst. It’s a business within a business, and forward-thinking FIs must be willing in invest in treasury management so it can succeed in the digital age.

That means treasury management must:

  • Advocate for necessary resources
  • Educate executive leadership and other staff about how it improves the bottom line
  • Document wins to prove its value to the financial institution
  • Set key performance indicators (KPIs) and track metrics to illustrate its contributions to revenue growth
  • Earn a seat at the table for strategic decisions that impact the entire organization
  • Collaborate with other departments, as treasury management depends on cross-functional assistance to achieve success and inspire new lines of business
  • Hire and retain top talent by competing with the Fintech cool factor (this includes establishing mentor programs and outlining clear paths to career advancement) so it can become self-sustaining
  • Innovate new technology and establish a dedicated product development group to enhance the customer experience
  • Partner with marketing to promote its services to customers in a variety of segments, and train a dedicated sales team to close deals and foster long-term customer relationships

Moving forward, treasury will play a critical role not only in its own success but the viability of any financial institution.

Elevating treasury’s role within the financial institution is key, but it’s only part of the equation. Transforming treasuring management from a back-office support group to a leading sales division isn’t without obstacles, and technology is one of the most prevalent challenges. That’s why many treasury leaders are partnering with Fintech so they can quickly and efficiently deploy the technology their customers need and avoid losing customers to competitors.

A robust treasury management service is virtually a requirement if banks are to maintain relevance in the digital financial landscape. Treasury management’s function, then, is not only to drive sales and enhance customer service, but to secure the future of the financial institution.

The information provided in this blog does not, and is not intended to, constitute legal or financial advice.

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