Commercial banking leaders increasingly view the treasury business as a key growth engine of the organization. Lending is becoming increasingly commoditized. This trend has been underway for years, but the difference today is the entry of non-banks and technology firms into the credit space. A Gartner survey of CFOs from small- to mid-sized companies reveals that close to half would consider non-banks or technology firms for future credit needs.
As a result, commercial banks seek to differentiate in other ways, particularly through payments innovation. And treasury management has become a hotly contested space due to the growth opportunity it represents. Disruption is occurring not just from banks launching new capabilities, but from technology firms taking market share. Here again, Gartner research reveals that commercial banking clients are considering other options. Gartner’s survey of CFOs revealed that 48% would consider options other than a traditional bank for their company’s liquidity needs, and 56% would consider options beyond a traditional bank for their payments needs.
To provide insight on how to capture the treasury management growth opportunity, Gartner researchers conducted an analysis of our recent conversations with treasury leaders at financial institutions around the world. Our hope is that the information provides a benchmark to help establish mission-critical priorities for your treasury business. Below, in no particular order, are the top priorities treasury leaders have shared with us in recent months:
- Understanding the Macroeconomic Trajectory – treasury leader views on the near-term future of the economy are mixed, but most believe that the US will not go into a recession. That said, the considerable degree of uncertainty is driving leaders to focus on cost optimization, despite commercial bank portfolios having emerged from the pandemic in relatively good shape so far.
- Navigating the New Talent Landscape – the competition for treasury talent is as intense as in the rest of the bank. Treasury leaders report losing key members of their team not just to other banks but also to fintechs and other technology firms. And this, by the way, will only make these upstarts more formidable competitors for traditional banks. Treasury leaders are exploring new approaches to work design and rethinking the employment value proposition to attract great talent to the business.
- Improving Client Onboarding – banks continue to focus on delivering a more seamless onboarding experience. Treasury leaders in particular are exploring the use of RPA to enhance the onboarding process. For related insight, check out our latest ideas on improving client acquisition.
- Exploring Crypto Opportunities – client interest in crypto-related services is not especially high at this time, but it could ramp up quickly. Treasury leaders are working to develop a crypto strategy for their firms and to understand what it means to be a bank in a crypto-enabled world.
- Scaling Service for Smaller Accounts – treasury leaders agree that smaller clients cannot expect the same white-glove service as larger accounts. Efforts underway to right-size service for smaller clients include creating standardized product bundles from which customers can choose, and developing new digital self-serve capabilities. Leaders must remain vigilant as they test and learn with these solutions. In the past, versioning upmarket treasury solutions for small business clients has not always succeeded due to the complexities of these offerings or the unique context of small businesses.
- Managing Third-Party Partnerships – treasury leaders report that their banks operate an extensive network of partnerships with technology firms. Among the many benefits, these firms can bring new capabilities to market more quickly than banks can. But these relationships also bring challenges. Focus areas for treasury leaders include training partners to operate more effectively when client-facing, and relatedly determining who is the face to the customer in the first place; managing risk considerations; and navigating cultural hurdles.
- Implementing Faster Payments – client demand for real-time payments remains mixed, particularly at the upper end of the middle market. But leaders also sense that once clients fully recognize the benefits of faster money movement, adoption will proceed quickly. The launch of FedNow is also driving some interesting conversations between treasury and other stakeholders. Although some banks did not participate in the FedNow pilot due to cost considerations, others are exploring the possibility and implications of being part of both The Clearing House and FedNow.
- Improving Fraud Prevention – some treasury leaders have noticed an uptick in fraud, particularly calls attempting to trick clients into moving money. Firms have dealt with the problem through extensive training and awareness campaigns with their customers as well as their own staff. Others have taken steps such as reducing or eliminating RM- or customer-service-assisted wire transfers, driving clients to self-service channels instead.
- Forging Strong Partnerships with Credit – the partnership between the treasury and credit sides of the commercial bank has come a long way in the past few years, and it remains an area of focus for treasury leaders. A teaming model is effective to make sure RMs are always aware of treasury engagements. Engagement between senior credit and treasury executives is important, as is clear communication from the top. Leaders must be champions and catalysts for partnerships.
- Boosting M&A Integration Capabilities – with the pace of industry M&A and consolidation ongoing, treasury leaders are working to shore up their capabilities for deal integration. There is an increasing realization that factors other than systems conversion, such as culture fit, are increasingly critical to maximize deal value capture. Click here to learn more.
For more information, check out recent Gartner research on emerging developments in the payments space: viewpoints on the threat of fintechs to traditional banks; commentary on the launch of FedNow; and payments innovation in commercial banking. And we encourage you to schedule an inquiry with our experts to discuss how Gartner can help you unlock the growth potential of your treasury business and the broader commercial bank.
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