Chief Investment Officer
Commercial Loan Automation
BirdsEye Viewtreasury management opportunities
Treasury Management is one of the important sources of fee income in 2012. As you contemplate your strategy for the business, consider the value of approaching each market segment with a specific product offering and sales style in mind.
1. Money service businesses. I can hear you gulping as you read this. MSBs represent an (uncontrollable?) risk that the great majority of banks have shied away from. Following the "know your customer" regulations, the risk of banking businesses which, in turn, "bank" other customers, exposed banks to an unmanageable risk. As an unintended result of the regulations, banks felt they were forced to exit this segment. This is particularly unfortunate since many MSBs serve unmet need in their communities.
Does this really make sense? Some banks believe there are ways to bank this business while complying with the regulations. It is expensive, but most MSBs don't mind paying for the banks' extra compliance cost. Others need deposits in order to restructure the liability side of their balance sheets, and MSBs are generally depositors, not borrowers.
If you are considering serving MSBs, you will need the following:
You can buy software that will identify behavior outliers and amount anomalies that can indicate they represent higher risk than you're comfortable with.
2. Treasury management Services for Small Business. Most TM product lines today are geared toward middle market and larger corporations, thereby excluding thousands of small and micro businesses who have Treasury Management needs that are simpler than their larger brethren.
As you evaluate your product line, keep in mind the following:
3. Municipal banking. Some banks are exiting Government Banking, or at least significantly reducing their exposure to the segment. Banks are flush with deposits, municipal deposits are often put up for bids, which makes them expensive and less relationship-oriented, plus many municipalities require collateral, which further increases deposits costs.
Don't throw the baby out with the bathwater here. Deposits will become beautiful in the future, and then competition will be fierce just like it was up to 2007. Seek true relationships vs. RFPs and bids, and cross sell to the full range of municipal needs.
Further, municipal banking offers attractive opportunities for payments services, including bill origination, lock-box, reconciliations and even collection. County Treasurers welcome the controls, process simplification and lessened headaches associated with passing this work on to the bank, and the fees are significant. Being a one-stop shop for large billers is a good business for Treasury Management if you have strong back-office capabilities.
I remain a proponent of Treasury Management as an important relationship cementer and fee income generator for banks. Forum discussions reaffirmed this belief, and continue to highlight the huge variability in individual performance and production across our members. Those that expect more and pay greater incentives for full relationship building continue to meaningfully grow revenues in this business both efficiently and profitably.