Where are corporate banking partners focusing their attention in a post-pandemic economy? Here’s what we’ve seen in our client engagements.
It is often the beginning of many meetings and discussions with banks: the announcement of how much capital they are reinvesting in development and innovation. These reinvestments are a particular point of pride and signal to clients the direction in which the bank’s business is moving. Regardless of bank, representative, or market sector, these innovations consistently center on three things: digitalization, automation, and security.
During our advisory process and life cycle of our client engagements, we discuss the improvements that our clients should focus on to optimize their processes. Many of our clients want to know precisely what new products can strengthen their processes, and alternatively, bank relationship managers want to advertise their best-in-class solutions.
We, as advisors, make comparisons and ask the tough questions to unveil the right partners and solutions for our clients. Over time, while communicating with a wide range of potential banking partners and focusing on many different lines of business, we clearly witness popular themes within the treasury industry.
In this post, we’ll unpack these popular themes and what they can do for your treasury operations.
1. Using technologies to do things faster and more efficiently
As the world is hopeful to move past 2020 and usher in a post-pandemic era, many people now realize the importance of shrinking physical distance by communicating through virtual means. Out of necessity, we have created the foundation for a more comfortable virtual interaction. In our day-to-day, we use web-based conferencing applications for bringing the operations process into our home offices. Necessities in the cash management world are much the same.
We often see examples of digital signatures fully replacing wet ink and account opening and closing processes capable of occurring through online portals – and in minimal time. You might wonder where this has been in years past and why it took a pandemic to bring such a convenience to the forefront. Nonetheless, it is now a must-have for our clients, and the added attention has brought the product directly to their door.
Electronic check processing
The path to increased digitalization does not simply stop at e-signature. Many banks strongly focus on the high costs of processing paper checks and how in turn to mitigate these expenses through electronic alternatives. Because of this, they often propose customized digitalization programs to analyze and execute an approach to convert expensive paper payments to ACH.
As we move further into a virtual world and become more aware of the costly nature of time-consuming physical transactions, it is seemingly hammered into the minds of large retailers that the days of old-school cash handling are gone.
The trending decline of corporate bank branches has stretched the physical proximity of banks and retailers. Pair the divestment of the brick-and-mortar presence with the decline of cash as a tender, and you can begin to see the exact direction of depository services. “Superregionals have conceded that smart safes and armored carriers delivering smart safe lease solutions are just simpler turnkey solutions,” said a global treasury management director at a regional financial services company.
This is certainly in line with what we have seen in some of our recent cash and coin engagements. Solutions such as remote deposit capture, smart safes, ATM deposits, armored carriers, and bank by mail have dominated the narrative.
The echoes of several distinct yet parallel philosophies from competing institutions position these receivable alternatives as a better experience for corporate clients, providing improved control, efficiency, sustainability, and scalability.
2. Simplifying accounts receivable with machine learning and AI
The recurring nature of transactional banking provides a foundation for the transition to a more efficient receivables process through the natural stability of income volume, but it also helps to spawn innovations in automation as well. As more competitors – including non-banking entities such as fintechs – look to join this appealing subsection of corporate and investment banking, the importance of digital transformation and new technology innovation must be at the forefront of any large bank’s reinvestment portfolio. In a world where repetition thrives, the amount of data captured on a daily basis is paramount to forwarding these investment opportunities. Data and intelligence gained from harnessing transactional information are some of the most highly touted areas of advancement in automation. There is a growing importance on capturing and learning from data in the race for efficiency in both the accounts payable (AP) and accounts receivable (AR) sides of invoicing.
This technology, more widely known as machine learning, comes to us in the form of invoice matching (AR) and AP automation and is present in nearly every big idea conversation, no matter the market sector of our client.
In the case of receivables, automating the cash application process through AI and machine learning can significantly reduce the processing time for an incoming payment. It can take the manual work out of reconciling receipts by scanning all remittances for key information, then augmenting the payments to match them with open invoices. The benefits of this type of learning directly affect the efficiency of AR teams.
“We’ve seen that big AR teams can really expedite their work and don’t need to have the same personnel [attentive to invoice matching]. You can really allocate your team to something that is more effective,” said the senior director of treasury sales at one of the country’s largest banking institutions.
By eliminating this level of human interaction, companies become one step closer to a more complete straight-through-processing environment.
In addition to machine learning in the receivables process, this type of technology also benefits the payables process. Much in the same way as described for receivables, the collected data identifies trends and exposes issues and processes that require attention when those trends are bucked. As these processes continue to advance and layers are added to identify insights, it is no surprise that a focus on integration and connectivity is often being added into the picture.
3. Leveraging system integrations to improve speed and transparency
Consistently, we see banks promoting integrations in the form of host-to-host reporting, invoice presentment, and APIs, which appear to be the next wave of development as banks prove their worth in the race for speed and transparency.
These technologies bring instant visibility into balance and transaction reporting, reconciliation as well as your company’s cash position. Pair that with the accelerating push to implement virtual account management and reporting, and global treasury operations have never been so positioned for direct control.
Make no mistake. Virtual account management is one of the hottest topics and well worth the discovery sessions to find out if this type of structure can be supported by the current operating account structure. Virtual accounts can centralize cash management to a single bank account without having to worry about complicated sweeping structures. Other benefits include:
- Increased cash visibility
- Reduced number of physical accounts
- Centralized disbursements
- Flexible reporting
But of course, it helps to already have a structure that supports this type of top-down physical/subsidiary construction.
The focus on client solutions is not always solely on speed and automation. Many banks promote tools to monitor fraudulent activity as well. As transformations occur quicker than ever, pioneering in risk mitigation is a need for many corporates more and more each day.
Fortunately, many of the advancements we have covered in digitization and advanced analytics also double as tools for security measures. For instance, one of the most requested topics from our clients is advancements in account verification processes on ACH transactions. These checks can automatically verify account and name information before issuing payment. This solution gives greater visibility of payments prior to initiation and increased actionable control when there are red flags.
Whatever the consequential service enhancement, the investment going back into treasury functions across the banking industry concentrates on an improved product deliverable. With the amount of information gathered in just a single transaction, banks are desperately searching for how to better expedite the client experience.
Consolidation, automation, transparency, and developing data-driven insights are the future of the next wave of digitalized banking. And with fintech collaboration, things are happening at a break-neck pace.