Treasury Management

Many bankers are busy deciphering Dodd-Frank and looking for the next shoe to drop (i.e. the detailed regulations). In the meantime, those who are returning to the marketplace with vigor are making hay.

One of the businesses which afford banks a particularly attractive opportunity to grow non-interest income is Treasury Management. What's new on the TM front? Several ideas are presented below.

1.Go down-market. Many companies have appetite for TM services and a broad-based banking relationship. Unexpectedly, though, many of those are nano- and micro-businesses, with annual sales even as low as $100-$500K. Open your mind to the possibilities. Radon Research says that even the smallest companies look for. Over 35% of their survey universe was comprised of businesses with sales under $100,000. Those were free checking customers, but average balances were a strong $9,000 plus another $30,000 of savings. Their credit needs averaged $62,000. These are very attractive numbers for VERY small businesses. As you go up in size, the numbers become even more compelling. For example, businesses with $500-$1.9MM in sales were 22% of the survey universe with $46K+ average balances in their checking accounts, over $200K in savings and over $200K in credit needs. Almost half of these companies consumed business checking and merchant services, and 1/3 used payroll services. Over a third has high-balances business savings, and almost 1/4 had car loans. I find these numbers extremely attractive.

2.Design segment-appropriate product line and pricing. Our products are typically priced with an upfront fix-cost component which is often too high for micro and nano businesses. Paying $45 or $50 monthly fees is too much for those who process less than 50 checks a month, and are ill-suited to those companies when they offer the first 100 or 250 items free. Further, these prospects have little interest in many of the bells and whistles of the business. A basic, plain vanilla package works just fine for them, with a small upfront cost and appropriate variable price as needed.

3.Target more effectively. Radon Research identified, expectedly, professional services (doctors, lawyers, accountants etc.) as attractive segments with a multitude of financial product needs and high savings and credit needs. Target marketing on the TM side is generally too unrefined. For example, going after the medical profession is way too broad a target. Pursuing anesthesiologists, on the other hand, is excellent. These medical professionals have little need for credit since their business is not equipment-intensive. They are cash-rich and need TM services.

Other segments, say cardiologists, have large credit needs to set up their practice, but they also are in need for strong TM support. Developing segment-specific product suites and marketing plans is an excellent idea in today's environment, an idea which allows community and SuperCommunity banks to attract customers and become experts in a way where their size is irrelevant or even becomes an advantage.

4.Advertise consistently. Consistent advertising isn't just a retail concept. It works for business products as well to build marketplace awareness and presence when the prospect makes a buying decision. Careful targeting facilitates cost-effective advertising and marketing as well, since the target universe is relatively small and their media is less expensive to buy.

5.Business debit card - the forgotten product. When (I ask banks for their business debit card penetration they are often stumped. It's a number that isn't top of mind for most. I dare ask: WHY??? Here is a product that is not affected by the Durbin amendment and is at least twice as profitable as the retail debit card. It creates value for the customer as well as the bank. So why aren't we selling it? What are the objections we need to overcome to improve penetration among our commercial and business customers? I find business debit to be one of the lead products to fill in the void created by the recent legislation. I realize interchange income is under attack, but NOT TODAY!

6.Business purchasing cards and credit cards are another glaring opportunity to be pursued with vigor. Both product provide win-win combination for the client and the bank, yet they are often not integrated into the TM product suite. Take another look at these products, and consider P-Card short-term credit lines and interchange fee sharing with your very best customers.

Credit cards offer many benefits to both the bank and the customers:

7.Payroll services and ACH. Both are in high demand among all business sizes and are extremely sticky products.

8.Find the commercial customers with low deposits. Scrubbing your commercial base to reveal those with low loan-to-deposit ratios is the first step toward building a prospect list for joint-calling with your commercial and business bankers. Some of those customers have low LTDs because they have no money. Many others simply have not been aggressively marketed by the bank to capture both sides of their balance sheet. Now is a good time to revisit those customers, many of whom are not borrowing anyway, and solidify the relationship.

9.Business online product offering. Do you have a strong online business product? If not, get or build one. It's not only sticky and efficient. It is often the access channel of choice for businesses of all sizes.

10.Combine online account access for personal and business accounts for S corps. Small business customers like to mingle their personal and business financial picture and activities. Allowing them to take a single look at their bank relationships (something that can be done only for sole proprietorships) is an important benefit and a valued differentiator for them.

I have encouraged you to revisit your TM product offering and staffing in the past. I'm doing it again. The product line is essential to improve deposit retention as the market improves and rates rise, and those deposits are clearly correlated to both bank franchise value and to the asset quality of loans for borrowers who also have meaningful deposit relationships with the bank.