Malzahn Strategic - Minneapolis, MN skyline

Managing Treasury Management Service Risk Is as Important as Managing Credits

Managing Treasury Management Service Risk

Managing Treasury Management service risk is as important as managing credits. There are several TM services that carry credit risk similar as if they were loan facilities to business customers, as well as other risks. Therefore, it is necessary to conduct service risk assessments and also ensure the businesses using these services are credit worthy.

So where do you begin? How do you identify those services and ensure they are used in a safe and sound manner? You ask similar questions as when you lend money to a business customer: Will the institution get paid back once the money is gone? Does this business have the capacity to support the debt in case the transaction is done and there are no funds to back it up? Let’s examine these services closer:

Wire Transfers

This product is probably the highest risk-rated service at your institution. If your employees don’t follow the appropriate policies, processes, and procedures, once you click “submit,” the money is gone. Therefore, it is imperative that your procedures are followed exactly as written to ensure the institution is not liable if the wire is fraudulent. Additionally, the platform used to initiate and approve wire transfers must have multifactor authentication capabilities and authority levels—both at the customer’s site as well as internally for employees to approve based on their own limits. There is Operational, Technology, Compliance/Regulatory, and Credit Risk when extending wire transfer capabilities to business customers.

Automated Clearing House (ACH)

Direct Deposit of Payroll is probably the most common service institutions offer to business customers. However, businesses are increasingly utilizing ACH to pay their bills because of the additional cash flow control and because it’s significantly cheaper than checks or wires. Businesses select the specific date for the batch of payments to clear their account. From the risk perspective, once the batch leaves, the institution can only retrieve the funds within a specified timeframe and following specific ACH rules. If the business account does not have collected funds, the institution is out the money. Therefore, ACH services are similar to an open Line of Credit and thus bankers must approve this TM service as a credit facility. As with wires, there is Operational, Technology, Compliance/Regulatory, and Credit Risk for ACH services offered to businesses.

Remote Deposit Capture (RDC)

The RDC carries the same risks as the other two services, but it works differently. The primary risk with RDC comes from customers potentially depositing the same physical check more than once, and in more than one institution.

Current scanners have technology to identify payee, routing number, account number, check number, amounts, and even the handwritten amounts. However, there is still a possibility of a fraudulent check deposited at different financial institutions within a certain period of time where it is undetected (at least for a few hours before posting to the accounts). Therefore, institutions must implement policies establishing daily and aggregate limits for checks deposited via RDC. The systems can automatically approve any amount, but the institution must approve each business customer up to a certain limit and treat each deposit as an extension of credit.

Unfortunately, many institutions review all checks deposited via RDC for all customers manually after a certain amount determined by the institution’s policy making this service costly and inefficient. In addition, most institutions grant immediate access to the funds deposited via RDC. For these two main reasons, businesses that utilize this product must obtain credit approval before they use it. Most institutions provide the credit approval at the time of making a loan to the business customer. For depository-only clients, the institution provides credit approval even if the customer does not have a loan.

Mobile Deposit

Consumers and very small businesses use the Mobile Deposit service with few exceptions. Mobile Deposit carries the same risks as RDC. The key determining factor as to which service a business should use, RDC or Mobile Deposit, is volume. Only businesses should use the RDC service. All consumers can use Mobile Deposit. However, the daily limits for consumers is typically lower than for businesses.

Managing treasury management service risk is as important as managing credits and is part of the overall enterprise risk management program of your institution. The purpose of this blog is to explain the various risk categories that each of these important treasury management products brings to the institution. Conduct service risk assessments on these services and ensure your institution is mitigating all the risks. In the end, all other risk categories affect your reputational risk.

Businesses expect community banks and now credit unions to offer these services. Otherwise, you are not competitive. Institutions price loans based on risk. The question I leave you with is this: Do you charge for these services especially now that you understand the additional risks your institution takes by offering them?

As always, we are here to help.

Improve your Treasury Management Customer Service Experience

Improve your treasury management customer service experience

Our clients see increasing competition for business banking services from not only competitors they know, but ones they don’t know. The ones they know are market competitors from national banks to the smallest financial institution. The ones they don’t know are fintechs, with no local presence and app-based products.

Competing against your known competitors is relatively easy (well, straightforward), but a fintech? How can you do that? Improving your treasury management customer service experience will be a great start.

Let’s start with a new view of treasury management services: They are all technology services requiring modern and proven methodologies to deploy and support. Let’s explore five ways to improve your business customer’s experience with your institution.

Train your Staff

Nothing is more frustrating for a business customer trying to get help with a technology product than getting bounced around from banker to banker in search of a solution. Every time you roll out a new treasury management service, training the staff on that service should be a priority. You’ll need training for the sales team on how to sell it, training for the marketing team on how to generate demand for the service, training for the operations staff on how to deploy and run it, along with training the customer service staff on how to troubleshoot and fix issues.

We see two tracks for training on treasury management services. The first track is on the sales side. Not only does the sales team need to know the service features, but they also need to know how to ask your business customers the right questions to uncover needs. The second track is on the operations side, documenting the service features as a set of results so that everyone on the team knows exactly the goal for each service and the problems the service resolves for the customers.

Create a Business Call Center

Back to our earlier statement that treasury management services are technology services, why not support them as such? Creating a call center sounds like a massive project, but you can start small. Designate a single person (or workgroup) as the business support team. Create a single phone number customers can use to contact that team by setting up a hunt group or a call queue in your phone system. Create a single email address your customers can use to contact the team. Publish this information on your business page on your website. In a nutshell, make it easy for your business customers to quickly contact the trained team dedicated to resolving their treasury management business technology issue.

Use Ticketing Software

Now that you have some of your call center up and running, how are you going to track the service requests without tripping over each other? A modern service ticketing system will do this for you, tracking every service request. Your IT department may already use a ticketing system for IT requests. Maybe you can create a separate service board for treasury management issues and use that system. Maybe you need a new one. Either way, you need a ticketing system – it’s just part of providing excellent customer service.

Whatever ticketing system you decide to deploy, there is one critical feature necessary for excellent customer service: Closed Loop. Closed loop, in ticketing software terms, is where a customer can send in an email, a ticket is auto generated, then an email is sent back to the customer acknowledging the service request. As the issue is assigned to someone, resolved, and closed, each stage of this resolution process generates an email back to your customer (and your staff assigned to the service ticket), keeping them informed of their issue status. This loop of communication, from start to end, is called closed loop, and you need it.

Ask for Feedback

One of the most difficult things to do is ask the customer “How did we do?” or “How are we doing?”. However, if you don’t regularly do that, you’ll be providing support to customers not really knowing if they understand your solution or if the problem was solved. As you deploy your ticketing solution above, be sure to integrate a post-service request close automated survey and regularly review the results. Incentivize your team to constantly improve service ratings. Develop metrics to track this information and regularly review it in team meetings – all with the goal of providing excellent customer support to your business customers.

Keep Improving

Constant improvement in the way your treasury management services are marketed, sold, customers onboarded and supported are critical to the long-term success and profitability of those services. Improvement comes in all sorts of shapes and sizes, but constant communications is the start of all improvement. Start by collecting customer feedback (good and bad), immediately addressing the bad and eventually incorporating the good. Develop internal service cross functional management teams consisting of treasury management product managers, treasury management sales, operations, marketing, and customer support folks. The goal of each team is to guide the service, continually develop it and improve features, re-word sales and marketing materials, re-work support and troubleshooting procedures and generally make that service the best it can be.

Your Call to Action

Start looking at treasury management services as technology services and build your support team to properly support technology services.

With a solid business customer support system, you are on a level playing field in terms of treasury management customer service and on your way to protecting your market share and making business customers happy.

What treasury management projects are you working on? As always, we’re here to help.

Books by Marcia Malzahn