Where does education end and collaboration begin in treasury management?

Shrinking margins, flat interest rates and intense competition have spurred financial institutions to rethink treasury management. Historically viewed as a back-office support function that served other departments, treasury management is transforming into a self-sustaining revenue engine that drives banking profits. Treasury can bring new value to FIs, but success hinges on the ability to educate senior leadership about how to take advantage of untapped opportunities for revenue growth.

Education is only part of the equation. Identifying opportunities is one thing; securing the resources to capitalize on them is another. That’s why many small and mid-sized FIs are turning to Fintech. Though Fintech companies are often regarded as FI competitors, they also present partnership opportunities that enable banks to meet contemporary customer demands. This is where education ends and collaboration begins in treasury management.

Treasury transformation: New revenue opportunities for FIs

Progressive FIs recognize the evolution of treasury management from back-office administration to a self-sustaining line of business that generates new clients, deposits, revenue and value. Treasury is no longer relegated to a support role, but a front-line suite of services suitable for aggressive marketing. It’s a cross-functional service that integrates with other banking lines of business and permeates the entire organization.

A robust treasury can:

• Deepen customer relationships
• Differentiate a financial institution in the market
• Generate new revenue streams
• Help protect the business from Fintech disruptors

Education is key to elevating the role of treasury management within the financial institution. Treasury leaders must teach stakeholders and staff about modern challenges and how treasury management can meet them. They must break down organizational silos and educate decision-makers about the value and full range of services treasury management can deliver to the financial institution, including:

• Enhanced customer service and marketability
• Increased deposits
• Increase fee-based income
• End-to-end client relationships
• Sustainability

They must also educate leadership about the implications of failure to adapt to new customer demands. One pervasive fear is that treasury management will go the way of consumer financial services, a fragmented space where Fintech disruptors cherry-pick the most profitable services and perform them better, leaving the least profitable scraps for banks.

Treasury management leaders, then, must advocate for treasury transformation. They must educate key stakeholders about the industry’s shared challenges, work to elevate treasury’s stature and collaborate cross-functionally to secure resources critical to survival in today’s hyper-competitive environment.

Leadership buy-in doesn’t equal treasury management success

Education can only go so far. Even when treasury makes a compelling case for transformation, many banks simply do not have the resources to tackle contemporary challenges and innovate attractive solutions.

Customer experience and technology

Customer experience is paramount. Demographic shifts mean a younger pool of CFOs and corporate treasurers demand intuitive digital experiences and seamless technology solutions. They expect services like remote deposit capture, integrated receivables, mobile apps and paperless onboarding. However, many small and mid-sized FIs do not have the resources to develop the integrated platforms and APIs required to deliver a modern customer experience.

Internal bureaucracy

Even when stakeholders recognize the need to transform treasury, real progress is often inhibited by a reluctance to change and handicapped by a reliance on outdated vendors that might not have the capabilities to deploy contemporary technology. Moreover, FIs find themselves at the mercy of vendor development calendars; thus, they’re slow to market and risk losing customers to dynamic Fintechs and other competitors. And, with few technology and core processor options, treasury management finds it difficult to differentiate itself in the market.

Talent

The next generation of talent is attracted to the Fintech cool factor: ping pong tables, flexible work schedules and craft beer. Perhaps even more, they’re attracted to the idea that they can make an immediate impact with their work. Treasury management employment opportunities often pale in comparison to what Fintech can offer, so treasury struggles to capture top talent.

It’s clear that treasury management must prioritize enhancements and innovations that create valuable, long-term and loyal customer relationships. However, customer experience goals often collide with resource realities. If banks can’t innovate, they stagnate, no matter how educated they are about treasury management opportunities.

Fintechs: From competitors to collaborators

Financial institutions face heavy competition from Fintech companies. They’re lightweight, agile and, often, more capable. Still, banks have distinct advantages, including decades of proven processes and security, trust afforded by long-term customer relationships, and the ability to handle all customer financial affairs under a single roof.

Savvy financial institutions — especially small and midsize banks with limited resources — recognize the benefits of partnering with Fintechs. One partner brings sexy, new ideas while the other brings the safety and security of established processes and systems.

It's time to rethink Fintech. Rather than view Fintechs as competitors, banks should view them as potential collaborators. Partnering with a Fintech company can offer multiple benefits. Here are a few:

Enhanced customer service

Fintech companies already have the technology needed to satisfy contemporary customer demands. They can quickly deploy custom platforms and APIs designed to target specific market segments. They can develop mobile apps and tools for remote payment capture, integrated receivables and paperless onboarding. Partnering with a Fintech may eliminate the need to develop in-house technology or to be constrained by slow vendor development calendars.

Minimal technology investment

Financial institutions often do not need to heavily invest in technology when they partner with Fintech. Limited resources become a non-issue with collaborators who have already developed necessary solutions. If bespoke solutions are needed, costs can be shared since both partners stand to profit. In addition, banks can drop expensive vendors that do not keep pace with modern technology.

Faster time to market

Fintechs are often lightweight and dynamic, which means they can quickly adapt to evolving market trends. That grants financial institutions the ability to bring new products and services to market faster than ever, thereby allowing them to gain a foothold in the marketplace before competitors emerge.

Access to new talent

Though hiring is a challenge for treasury, collaborating with Fintech lends access to a young, bright talent pool that can innovate (and execute) new ideas. That puts less pressure on treasury management to fill multiple roles with contemporary talent and eliminates the need to invest in new staff members who can solve modern challenges.

Marketability, sales and revenue growth

Treasury management must provide value for financial institutions. Partnering with a Fintech company may not only save money, but it can make banks more relevant and more marketable. An improved customer experience along with greater functionality facilitates sales and revenue growth. This is especially true for small and mid-sized banks that do not have the resources to keep up with competing firms. By partnering with Fintechs, smaller banks can maintain a focus on delivering the baseline functional needs of the client base and still deliver the innovation and experience today’s customers demand.

Customers follow technology, regardless of provider

Perhaps the most important thing banking leadership needs to know is that end users will find innovative and cost-effective treasury management solutions, whether their financial institution provides them or not.

Fintech offers sleek, seamless digital experiences and specific product advancements many banks do not have the resources for. It’s important to educate leadership about how collaborating with Fintechs can help treasury management maintain relevance and profitability in today’s hyper-competitive environment.

Ultimately, an evolving treasury management department must prove its value within the financial institution. Education only part of the value proposition, a segue to collaboration that positions treasury management and the FI it represents for immediate and long-term success.