Corporations of all sizes are increasingly turning to their financial institutions to provide them with an array of cash and treasury management services. Demand from corporate clients, in addition to the competitiveness of the cash management marketplace, is driving an abundance of innovation in this space. At the same time, financial institutions are being plagued with a disturbing metric – waning cash management revenue growth. They need new, innovative cash management solutions to seek new streams of revenue. Some financial institutions and cash management solution vendors are taking the lead as innovators and implementing new technologies.
Current State of Cash Management
Cash management suites have been offered to corporations for some time. These mature products are the bread and butter of corporate banking, and their core functionalities provide essential financial tools to an overwhelming percentage of corporations. Over time, the fundamental capabilities of these products have evolved to encompass a plethora of both core and complementary features and functionalities.
Banks are positioned as the primary supplier of cash management solutions to corporations (through internally developed and/or vendor-provided solutions). Given the ultra-competitiveness of the marketplace for cash management solutions, many financial institutions, as well as the software vendors who supply them, are on a constant mission to innovate and differentiate. By providing a slew of advanced features and functionalities, banks are attempting to increase their cash management subscriber base and, in turn, cash management revenues.
Innovation in the cash management space comes in all shapes and sizes. There are two distinct categories of advanced features and functionalities: core capabilities, which refer to features that are inherent to cash management and are central to the user’s activities, and complementary features, which tie directly into the cash management system yet are not central to cash management activities.
Core Features
Most innovative banks and vendors have more or less plateaued as far as offering core capabilities is concerned. They are, however, periodically upgrading their core products as required as part of their commitment to the overall solution and in response to market demand. Banks have added or are working to add advanced capabilities to their cash management offerings.
- Payments are a central component of cash management solutions, and banks and corporations are slowly realizing that paper checks are no longer the name of the game. Banks are paying attention to a number of advanced payment functionalities. In addition to basic wires and ACH, multicurrency and cross-border payments have become part of the offerings of cutting edge banks.
- Many banks have taken their solutions a step further and offer modules for foreign exchange. These full-blown solutions integrate with the bank’s rate table and allow users to purchase contracts and initiate transactions.
- Some more avant-garde banks have integrated a cards module that allows users to have a full view of purchasing cards and associated transactions.
- Check imaging is also receiving a lot of attention. Financial institutions are wrapping themselves around various applications of check imaging and are offering a variety of tools to corporate clients that allow them to view, manage, and archive check images. Sophisticated check imaging has been introduced into areas, such as lockbox, where cash management users can now view check images of payments. Images can also be viewed for items requiring attention so that the client can decide whether the check should be processed or returned.
- Remote capture is truly one of the most discussed and hyped new features being introduced into cash management portals. Scores of financial institutions of all sizes across the US are jumping on the remote capture bandwagon, with the majority of banks partnering with a third party to offer solutions.
- A variety of other non-traditional products have risen to the surface, including loan and investment modules to provide clients access to loan information and investment opportunities.
Complementary Equals Core
Banks are also focusing on innovating, differentiating and marketing the complementary capabilities of their solutions. For banks with solid cash management solutions, complementary features and functionality are of utmost importance because these will help grow subscriber base and revenues. These features do not define the essence of cash management, yet they have become so critical to the product that they can now be considered core.
- The current cash management environment has the overwhelming majority of corporations employing a token for two-factor authentication in order to release a wire transfer, and many banks and their corporate clients are now spending time evaluating the use of two-factor authentication for other aspects of cash management – such as the login process.
- Banks are also evaluating alternative methods of authentication. For instance, banks are quite interested in understanding how biometric (e.g, fingerprint scanner) authentication can be applied to their cash management solutions. Several banks have already set up pilots where fingerprint scanners are being employed to authenticate users at login.
- Advanced cash management solutions offer a range of security functionalities that are accessed via the administration tools. Features such as detailed user permissions and access rights, as well as dynamic control over multilevel entitlements, are all important security requirements.
- In order to give corporations increased control over their activities, banks are offering robust administration tools. These tools allow the corporate administrator to take full control over user access rights, permissions and availability of features.
- Cash management suites have never been terribly dynamic as far as presenting information to the client. But now tools that promote efficiency and streamline tasks are a priority for banks and for corporate users looking to simplify tasks. A variety of alerts can be set, although there is quite a variation in the types and flexibility of alerts offered by banks. Innovative banks are certainly moving toward a model of completely customizable alerts where the user can select just about anything to be notified on. Some banks have jumped ahead of the curve and have achieved a higher level of customization allowing users to set event notification for a multitude of items including balance thresholds, payment receipt, outbound wires and an assortment of other events.
- In addition to sending a basic email alert, many banks have embraced multiple communication channels – alerts can set up to be received via email, fax, mobile phone, pager, or PDA.
- One of the prime areas that banks and vendors have been working on is the user interface. Many systems now allow users to control the layout of their screens, along with customized color schemes and navigation. Individual profiles can be saved by the user so that their preferences are retained for future use. In addition to the general interface, much of the individual customization has been extended to areas such as information reporting, where the user can select desired fields as well as their order of appearance on the screen and in print.
- Founding, growing and nurturing customer relationships is a key component to customer retention, satisfaction, and growth. This philosophy has long been a critical part of the retail banking environment, yet has been given minimal attention on the corporate side of the fence. Wholesale banking relationships have long been handled on a personal, one-to-one level, and banks have not been over-eager to move forward with technology to manage processes and people on the corporate side of the bank. Although some banks have leapt ahead of the pack with wholesale customer relationship strategy initiatives, most banks are still scratching their heads or disregarding this critical market.
Although cash management offerings are mature, well established products, there is certainly room for growth, innovation, and improvement. Unstable cash management revenues and associated growth rates are placing financial institutions in a precarious position. Banks need to assert themselves through innovation and firmly plant their feet on the bumpy revenue terrain that represents corporate banking.
Strong opportunities exist in the cash management space, however, and financial institutions need to know how to strategically position themselves in order to find them. Innovation is the name of the cash management game – banks that believe that cash management has reached its full potential will lag behind the pack and will incur short-term and long-term anguish. Ascertaining client needs will point financial institutions in the proper direction as they develop cash management offerings that are in line with present-day and upcoming requirements for corporations of all sizes.
There is no shortage of innovative banks and they find themselves developing a wider range of upgrades and enhancements for their cash management offerings. As an increasing number of features and modules are becoming integrated with treasury and cash management portals, banks will need to ensure that they are continuously on the ball. Customers are increasingly looking to one-stop cash management shops that provide a host of cash and treasury management capabilities. Staying current will require investment in advanced, fully integrated core and complementary features and functionalities.
