What Should Banks Consider While Responding to the Changing Cash...

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What Should Banks Consider While Responding to the Changing Cash Management Dynamics?

CFO Tech Outlook | Thursday, September 17, 2020

In banks, debt and equity funding remain challenging to access. This creates a severe challenge for companies that need cash to stay competitive, maintain financial flexibility, and pursue potential growth opportunities.

FREMONT, CA: Cash management (CM) aids the treasurers in optimizing liquidity and improve settlement efficiencies by ensuring that cash is optimally used at the right place and time. Although not the most exciting corporate banking offering, it is an extremely critical service that the banks offer to their corporate clients.

Here are five factors that are impacting the CMs' advancement.

• Evolving technology requirements, together with maturing aspirations of corporate treasurers who are emerging to be more involved with their corporate strategies (pdf). These raise the expectations for more sophisticated offerings, enterprise-wide solutions, and digital connectivity to provide superior corporate banking experiences.

• New, stricter regulations and increased scrutiny make it more cumbersome for corporations to manage multiple accounts or entities and nudge them to simplify banking relationships. To retain relevance, banks need to respond with alternative solutions to help address regulatory changes.

• Faster global payments and SWIFT's mandatory international payments innovation system considerably reduces turnaround time between invoicing and payments. Corporates must ensure enough liquidity to fulfill payments in almost real-time.

• More open legislation permits the sharing of authorized customer data, enabling non-banks to enter and compete with new, attractive payments and liquidity management solutions.

• Evolving market dynamics, expanding corporate aspirations, a leap-frog in technology usage, and regulatory changes mean that the previously staid CM business is about to get more exciting.

Revamping cash management strategies

A maturing CM landscape implies that mandates for treasurers are rising alongside their expanded job scopes and complexities. As corporations look to incumbent institutions to provide innovative support and solutions, their banks must invest in building more sophisticated offerings.

Most banks have defined and identified their CM value proposition (e.g., around channels, salesforce, product management, client service, or operations) and have constructed a transparent business model for growth. They should have also identified significant lending clients that would be most receptive to cross-selling CM businesses.

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