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Study: corporate treasuries demand broad advisory services from banks.
Corporates are demanding far more than automated treasury services from banks today and crave the expertise their financial institutions have gained from servicing a broad range of clients, with treasury taking on a central role to deliver banker advice to a company’s other decision makers.
Those are key takeaways from the recently released “Corporate Clients’ Top 10 Banking Demands in 2015” study from Aite Group, which conducted qualitative and quantitative studies and participated in bank client advisory meetings throughout 2014.
“We asked bankers what was keeping them awake at night, and the usual answer was they want to know what their corporate clients want,” said Enrico Camerinelli, senior analyst at Aite Group specializing in wholesale banking, cash and trade finance, and payments.
The study provides a list of corporates’ top 10 demands from their banks, most if not all of which require banks’ to provide advice as a complimentary service rather than a product to be paid for (see list below).
Mr. Camerinelli said that the corporate treasury office, given its traditional role managing bank relationships, has increasingly become the conduit to deliver that advice to decision makers in other parts of the company, ranging from procurement to logistics to manufacturing. In this decision-support role, treasury provides the necessary data and information to help the company make better decisions for issues such as cash allocation and the best source of liquidity.
“All this requires the treasury to be aided by the bank, which in an advisory role helps financial executives translate the facts to other parts of the company,” Mr. Camerinelli said.
As an example, he noted treasury’s key goal of optimizing working capital. That can be done by paying suppliers later, or collecting payments earlier from customers, or maintaining low inventory levels. Extending payment terms is the easiest way, but suppliers may react poorly and cause procurement, logistics or manufacturing problems for the company.
“So the role of the bank is to guide and help the treasurer not only to understand the negative repercussions but also find alternative ways to optimize working capital,” Mr. Camerinelli said. He added that may involve advice about how to “best negotiate with suppliers and tweak other drivers such as inventory and receivables, based the best experience of the bank’s other clients.”
Mr. Camerinelli said this advisory role—not just for the company’s financials but its broader business processes—creates a level of customer loyalty that banks previously sought by providing technology or other products.
“The way banks typically handled their customer relationships was providing their own online banking or accounting system, seeking to lock companies into these technology platforms,” Mr. Camerinelli said, adding, “Now this has become quite expensive for banks, and companies are not willing anymore to be locked into a single platform.”
Mr. Camerinelli said technology remains a key element, but now it must be easy to use and much more flexible, giving treasury executives the ability to communicate with the decision makers in other departments and provide data relevant to their functions. Today’s data dumps, for example, will be replaced by data specifically tailored for the decision makers in question and accompanied by analytics to interpret it.
“In the future, greater access to data, internal and external, and the demand for better analytics could bring a different business model for banks: Corporate clients will no longer pay for transaction processing but will instead pay increasingly for relevant data and insights targeted specifically at their requirements,” the report says.
What Corporate s Want From Bank (in no specific order):
- Advanced analytics for more informed decisions
- Enhanced cash management and forecasting
- The continued evolution of treasury and payment solutions
- Greater mobile solutions
- Improved customer experience management
- Options for financing and capital allocation
- Tighter integration between bank and corporate systems
- Optimized planning, budgeting, and forecasting
- Better risk management
- Bank relationship rationalization