The top 3 challenges faced by treasury management leaders

Once relegated to back-office support, treasury management has emerged as the next major opportunity for financial institutions (FIs) to drive deposit growth, grow revenue and enhance profitability. Forward-thinking FIs recognize its promise, but an ever-evolving financial services landscape presents significant challenges to modernizing treasury management solutions for today’s customers.

Why modernize treasury management?

It’s important to redefine the role of treasury department within your financial institution to realize its full potential and spur revenue growth.

In the past, treasury management was considered a back-office service unit. It served a support role and managed existing accounts. Modernization means making treasury management a self-sustaining line of business (with key performance metrics) that generates clients, deposits and revenue to create revenue for the organization.

Financial institutions that modernize treasury management enjoy multiple benefits, including:

• Deeper customer relationships
• Competitive market differentiation
• New revenue generation
• Protection from Fintech disruptors

The greatest risk is to ignore new realities in the marketplace and settle for the status quo, and innovative banks are working to evolve treasury management for long-term viability. However, that evolution isn’t without its obstacles.

Here are the three biggest challenges treasury management leaders face and how your bank can overcome them to integrate a robust treasury management solution that fuels profits.

1. Technology

Treasury management technology is an obstacle for FIs both large and small. It’s difficult and expensive to keep up with rapidly evolving technology designed to meet the demands of modern customers. Fintech companies are disrupting the financial services space, and traditional banks struggle to match step, especially when they’re at the mercy of current vendor development schedules and held hostage by internal bureaucracy. Let’s take a closer look at how these issues hinder treasury management and what your bank can do about it.

Fintech competition

Fintechs present unique challenges to financial institutions. Capable of rapid innovation and tech deployment, Fintechs cherry-pick the most profitable portions of treasury management and threaten financial institutions’ abilities to maintain complete control over their clients’ cash and treasury management relationships. Some banks may struggle to keep pace with Fintechs, and may worry that treasury management could go the way of consumer financial services.

At the same time, Fintechs represent partnership opportunities that may enable financial institutions – especially small and midsize banks – to offer innovative technology, meet customer demands and outcompete rival banks. Thus, Fintechs are both competitors and partners, so FIs must strive for balanced relationships that unlock new service offerings and foster growth.

Core processors and internal bureaucracy hold FIs hostage

Competition from Fintech is just one obstacle; many financial institutions cite core processors and internal bureaucratic processes as hindrances that slow time-to-market with new technologies, experiences, features and benefits.

Reliance on outside vendors and their development calendars limits flexibility and the ability to pivot in response to market demands. Banks are forced to accept vendor solutions and can’t tailor features and integrations to their client bases. That makes it difficult to compete, especially against lightweight Fintechs that can quickly deploy customized technology.

The issue is compounded by the fact that only a few technology and core processor partners exist in the treasury management space, and there’s little differentiation between solutions. When current solutions are deeply embedded in FI systems and customer products, switching vendors could be more difficult and expensive than it’s worth if banks can’t reap substantial advantages due to standardized offerings.

How to meet technology challenges

Financial institutions can meet technology challenges with innovative new approaches that weave technology, internal culture and the customer experience together into a cohesive digital ecosystem.

Start by fully understanding the desired experience for treasury management clients. When you know what your customers want, you can develop a technology roadmap that delivers a compelling user experience and makes it easier to attract and retain customers.

Many financial institutions erroneously invest more time into vendor selection and integration processes than product development and client experience, but the latter two are what will separate successful banks from failures.

Your financial institution should focus on enhancements and innovations that will foster valuable, long-term and loyal customer relationships.

Innovations do not always need to be revolutionary, either. Switching to paperless treasury management onboarding, for example, is an easy way to reduce costs and increase customer satisfaction. It also free sales teams to dedicate more time to improving the customer experience.

Other examples include upgrading mobile and online platforms to make them intuitive and user-friendly as well as adding services for remote deposit capture and real-time integrated payables capabilities.

Many FIs don’t have in-house development teams that can implement technology solutions, but that shouldn’t hold your bank back. The key is to identify an experienced treasury management partner that can help you attract and retain more commercial customers and grow free revenue via value-added tools and solutions designed for today’s business customers.

2. Talent

Attracting, developing and retaining talent is critical to treasury management success. However, it may also be a significant barrier to growth, as some financial institutions struggle to appeal to a younger talent base that’s drawn to the cool factor associated with Fintech and other industries.

Lack of bench strength and future leadership

As the current workforce ages, some financial institutions are concerned about the transfer of knowledge, recruiting and team development. There simply aren’t enough people with the right skills, knowledge and experience to fill open treasury management positions. Banks without clearly defined succession plans are at the greatest risk, as a lack of proper training means no one is available to take the reins when current leadership retires.

Fintech cool factor

Bicycles and casual attire. Ping pong tables and craft beer. It might sound like a frat house, but it’s part of the employee experience at Fintech companies – and that makes it more difficult than ever for traditional financial institutions to attract bright, young talent that craves a relaxed work environment, flexible hours and the perceived ability to make an immediate impact.

Fintechs often offer an exciting career choice and a startup culture that many young professionals enjoy. While no one is suggesting financial institutions should install a kegerator, the ability to attract top talent often hinges on the willingness to adopt new, innovative thinking that positions treasury management as a viable, gainful and even exciting career path.

How to meet talent challenges

Top treasury priorities should be hiring and retention. If you want to compete with Fintech, you need to cultivate a new, innovative culture that resonates with a young talent pool.

Think like a prospective candidate: What are your FI’s strengths and weaknesses? Why would the most talented candidates want to work for you? What are you uniquely positioned to offer that the Fintech world cannot? Ideas include opportunities for advancement and income growth with fewer competitors vying for senior positions.

Once you’ve identified your strengths, market them aggressively to potential candidates. Make sure you bring HR and senior leadership into the fold, too, so they can communicate the benefits of working for your financial institution.

You should also develop a succession strategy that makes treasury management self-sustaining. A mentorship program not only facilitates the passing of knowledge from senior leadership to younger talent, it also makes a career in banking more attractive when candidates can see a clearly defined path for advancement.

3. Structure

Dwindling margins due to factors such as flat interest rates and the war for low-cost commercial deposits mean banks are seeking new ways to spur fee-based growth. Treasury management presents a tremendous opportunity for banks to pick up (and exceed) the slack, yet many financial institutions still consider treasury management to be a secondary function siloed within commercial banking.

This approach can jeopardize the long-term viability of any bank; indeed, many accounts are unattainable without robust treasury capabilities. Treasury management has value beyond account setup, but traditional organizational structure can hamstring its ability to grow deposits.

Poor resource allocation

As long as treasury management is considered a secondary function, it will suffer from limited resource allocation. Treasury management cannot thrive when the department lives off commercial lending scraps.
Without proper resource allocation, treasury experiences throttled growth and cannot compete with Fintechs that have carved a niche in treasury management. 

Failure to recognize sales potential

Financial institutions that view treasury management as an administrative function of commercial lending fail to recognize its potential to drive sales. While Fintechs are making bank on cherry-picked treasury management services, some FIs sit on an untapped revenue machine that is likely a more attractive option for many corporate customers. 

For many banks, transitioning treasury management from an administrative function to a revenue driver only requires a simple shift in thinking.

How to overcome structure challenges

Start by recognizing treasury management’s incredible sales potential, then position it as an independent service housed within your bank. Allocate ample resources to training treasury staff for sales. That could mean hiring sales personnel or simply teaching existing employees how to pitch treasury management services.

Invest in marketing treasury management as an independent service offering. Don’t be afraid to compare your service to Fintechs: Chances are, your financial institution has distinct advantages that attract many commercial clients. Those include stability, reliability, a proven track record of success and integration with a full suite of financial services: from lending to payment processing to check and fraud solutions and more.

Service and customer experience are still paramount, of course, but promoting treasury management as an independent offering – combined with integrating modernized technology and attracting top talent – paves a path to revenue growth.

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