How is Internet Banking Transforming Mid-Market Companies in the US?
The pressure of competing with larger and smaller enterprises is one reason why nearly 80 per cent of the respondents from mid-cap companies in a recent and confidential Economist survey say they’ve embraced information technology as a simple transformative business equalizer that increases speed, encourages adaptability and fosters growth.
The impact of technology on the mid-market enterprise is especially profound and pronounced when it comes to treasury and cash management processes, which are being revolutionized, thanks to the Internet. This unparalleled innovation has also completely reshaped how mid-sized companies conduct financial transactions with their banks. The Web has helped cement these banking relationships and, at the same time, changed them forever because of recent digital breakthroughs.
Ten years ago, financial transactions at mid-cap companies involved multiple calls to the bank, paper-based reports and often the frustration of dealing with complicated dial-up software. Treasury and finance executives had to rely on their servicing agents to do everything for them.
Today, middle-market companies operate in an automated environment and conduct most financial transactions themselves online. Whether paying vendors or international trading partners, making deposits, taking care of taxes, managing investments, exchanging currencies, or monitoring for fraud – all can be performed instantaneously on the Web. This saves huge amounts of time for treasury and finance executives, who have increasingly adopted the Internet because it makes their jobs much less cumbersome and complicated.
Indeed, the Internet has become a virtual branch office located wherever company executives may be at any given moment. The Web is an extension of their workflow, permitting anywhere, any time banking. This means financial managers at mid-cap firms can access critical and customized information instantly and make immediate investment decisions armed with a full picture of their accounts’ status.
Treasury and financial executives at middle-market enterprises also benefit from the Internet’s control. As these companies increasingly expand through far-flung subsidiaries, it becomes even more critical for them to have a tight and transparent hold on all of their worldwide accounts and transactions. The Web provides this through real-time and centralized online reporting and monitoring. Financial managers can view their foreign cash positions all over the world, sorted by currency, regardless of the financial institutions housing the accounts. The Internet places even more control in the hands of financial managers because of the ability to segregate who’s conducting what transactions via online user authorizations.
Not only has Internet usage in treasury and cash management processes enhanced productivity, it has increased profitability as well.
For example, REI, the specialty outdoor gear and clothing store, has made great strides in ‘technology simplicity’. With a treasury staff of just two, the $1bn company cut seven separate banks serving its cash vault depository needs down to two by using ‘virtual’ cash vaults to electronically deposit checks. REI then moved over 65 per cent of its total vendor payment volume to electronic channels. The company also consolidated three separate credit card programs into one online system. Finally, it negotiated with all its international vendors to open accounts to trade directly rather than using costly letters of credit for each trade, saving an estimated $180,000 a year.
A technology-inspired restructuring of this type helps free finance people in budget-conscious companies so they can focus on value-added projects that go well beyond reconciliation of bank data, for example, ERP implementation or capital finance improvements for expansion.
Most treasury and finance executives at middle-market companies would probably agree that harnessing the Web in their departments has made their firms more competitive. The Internet clearly provides nimble mid-sized enterprises with the same technology tools, the same breadth and depth of IT functionality, as muscle-bound large companies.
Internet banking also flattens the world for resource-constrained mid-cap firms stretching to expand in emerging international growth markets; digital solutions provide these middle-market companies with unfettered global access to their accounts and funds while eliminating unwieldy, time-consuming paperwork and processes that used to slow down banking in the far reaches of the world.
While online banking plays a critical role in sharpening a company’s competitive edge, executives can still count on personalized, dedicated support from their financial services providers. The combination is simple and flexible: the bank’s relationship managers offer ongoing consultation and more effective solutions while cutting-edge technology allows for fast, reliable and secure implementation. This frees up time for financial managers to focus on more strategic needs versus the daily tasks of cash management. Plus, with immediate confirmation that an online transaction has been successful, the focus shifts from monitoring the transaction to analyzing more critical data about cash availability and investment opportunities – information that can help grow the business.
Midsized companies are embracing online banking because it is safe and secure. We’ve all been bombarded with unfortunate stories about security breaches and identify fraud over the Internet; but, in fact, using the Web is safer than using paper to make payments.
Mid-cap enterprises can now shop around for the best Internet-based technology from banks. They are demanding solutions that provide virtual information effortlessly on their terms. They also want intuitive, convenient, customer-friendly products and services that integrate hardware, software and the user interface platform. These are the true differentiators in a marketplace driven by technology commoditization.
Banks that truly grasp and simplify the mid-market enterprise’s complexity have the opportunity to add lasting value by improving the speed and efficiency of these businesses. Delivering on the promises of convenience, integration, performance and security is crucial; and banks must remain flexible and change rapidly as mid-cap companies compete against larger and smaller rivals across the world. If banks offer midsize firms the right digital tools that enhance their treasury and financial departments, they will continue to thrive in the ever-challenging global economy for decades to come.