Managing Treasury Management Service Providers is a must. One of the most common topics discussed at our Treasury Management Forums is the challenge of relying on third-party providers. Every Treasury Management service is provided by a third-party vendor, and they must seamlessly integrate into the core system. Many banks experience multiple challenges with their vendors to provide the “white glove” service to businesses they strive for. Most core systems come with a “default” module for multiple Treasury Management services. However, most of the default services are not ideal and some don’t even integrate well with their own core.

In this blog, we list several challenges community banks face with their Treasury Management services providers and ideas on how to approach them.

Managing Treasury Management Service Providers: Critical Systems

One of the first steps in formalizing your TM department is to “turn on” the Account Analysis System (AAS). The AAS is one of the most critical and foundational systems for your TM department. The major decision you must make is which AAS to use. The AAS is not a service nor a product. It’s your bank’s “billing system” for all the account activity and TM services you provide to your business customers. Most core systems come with a “default” AAS and with the “paid version” of the AAS. The paid version is the one you want! It comes with all the additional features you need to provide the best experience for your customers. Some of the key features you need to look for are:

• Tiered ECR capability
• Flexibility with Account Analysis statement cycles and choosing the day of the month to assess service charges
• Multiple Account Analysis types
• Ability to retain earnings history for life (not just for 12 months)
• Ability to allow exception pricing on an account-by-account basis
• Ability to carry over Earnings Credit Allowance if customers have a surplus (to assess services charge charges quarterly versus monthly, for example)
• Able to create billing notices versus directly debiting customer’s account
• Multiple tiers to charge for Negative Average Collected Balances
• ECR variances on account-by-account basis
• Ability to pay interest on the same account that earns an Earnings Credit Allowance (allows businesses to offset service charges first and earn interest on surplus balances – on the same account)
• Separate Account Analysis statement from regular bank statement
• Modeling Module to provide customers and prospects with a comparative sample AA statement

Another critical system that supports your Treasury Management offerings is the Online Banking platform. Once again, the OLB platform is not a TM service or product. It is the platform through which your business customers access their TM services along with doing their normal banking activities. In our Forum discussions we learn about community banks struggling with their OLB platform. Because it doesn’t integrate well with the core system or with the Account Analysis System. Additionally, many institutions’ OLB platforms fail to integrate the TM services such as RDC, ACH, and Positive Pay correctly. This problem results in additional manual labor for the TM Support and/or the Operations teams. They must enter billing manually into the AAS or perform other manual duties.

Treasury Management Services that Need Third-Party Providers

In addition to choosing the right AAS and OLB platform for your institution, you need to choose the right providers for all the TM services you want to offer. Below is a list of the most common Treasury Management services in the market grouped by type of service. Each service needs a third-party service provider.

As you can see from these charts, there are multiple Treasury Management services, and your bank must manage each vendor. Often the core provider also offers several of these services. However, due to reasons stated above (mostly lack of integration), banks use multiple providers to ensure they work well together.

Aside from the integration issue, there are multiple providers that still offer old, antiquated systems that no longer work. These systems are keeping banks behind and impacting their ability to offer top notch customer service to their business customers. These old systems also introduce additional third-party risk to your bank which includes reputational risk. This is unacceptable and community banks must raise their voice and require their vendors to upgrade their systems. One way you can do this is by forming a Treasury Management Users Group or Core System Users Groups. You can then collectively formally complain and pressure them to change.

Below are tips to manage your Treasury Management vendors successfully:

• Ensure each vendor is part of your Vendor Management Program and goes through the appropriate due diligence.
• Assign a Vendor Owner to each Treasury Management third-party provider.
• Require each TM provider to sign a Non-Disclosure Agreement before you sign the contract.
• Always ask the key integration questions before you sign up. Talk to the technical team not the sales rep.
• Research minimum three providers for the specific Treasury Management service you’re looking to implement.
• Stay in touch with your providers to ensure you get serviced when needed. It’s all about building relationships with them so they get to know your bank.
• Follow up on the references. Talk to peer banks that are actually using the services or products you’re researching.
• Enforce the Service Level Agreements if you have one. Hold them accountable when they don’t deliver on their promises.
• Always ask as part of your due diligence if the provider uses third-party vendors. These become your bank’s fourth-party vendors.

Managing Treasury Management service providers requires time and effort. But in the end, it’s always worth it to establish good relationships and to communicate your needs as they arise. It’s a must to mitigate your third and fourth-party risks.

If you’re thinking of formalizing or implementing your Treasury Management department, feel free to reach out. We’re here to help!

After working with many institutions over the years, we’re convinced that there are a minimum of 12 online banking features that are essential for business success. One of the most important systems your institution invests in is your Online Banking Platform (OLB) – yet many of our clients have purchased OLB systems that are missing several features and are not able to offer them as services.

The Online Banking Platform is the primary delivery mechanism through which business customers access your treasury management services. It is the foundation of your business-focused digital banking strategy. Your Online Banking Platform, at a minimum, must be available 24 hours per day and offer complete access via web and mobile interfaces. Today, we’re focusing on the web-based online banking capabilities and their integration with treasury management services.

Let’s Evaluate your Current Business Offerings:

1. Does your Online Banking Platform integrate well with your core system?
   1. Rate your institution from 1-5 with a 1 having no integration and a 5 with a completely human “hands off” integration.
2. Does your Online Banking Platform integrate well with each of the TM services you offer your business customers?
   1. Rate your institution from 1-5 with a 1 having no integration to backend TM services and a 5 with a completely human “hands off” integration.
3. Do you have a separate OLB Platform for consumers and businesses?
   1. Rate your institution from a 1-5 with a 1 having one platform for both and a 5 for two separate platforms customized for each customer type.

If you scored less than a 5 on our evaluation, read on, we’ve got some great advice for you. If you scored a 12-15, either you are one of our clients or you have a very robust OLB/TM system.

Let’s discuss the 12 Online Banking Features That Are Essential for Business Success:

Let’s start with the minimum expectations of your Online Banking Platform for business customers:

• The system allows multiple users with multiple security levels under a single business entity.
• The system allows multiple businesses under one umbrella (i.e., holding company and subsidiaries).
• The system offers multifactor authentication (MFA) options (hard token, soft token, or biometric).
  • Side note: We no longer consider text messaging safe for business OLB system access. It is still too easy to SIM swap a mobile phone.

Your business customers should be able to conduct all or most of their banking business on this platform.

Basic Banking Functions

1. Initiate internal transfers. Businesses need to make transfers between their main operating account and other accounts such as payroll and savings accounts. Initiating internal transfers is a must. Certain business owners who have their personal accounts with you may need to transfer funds between personal and business accounts. These businesses are typically solopreneurs or Single Member LLC entities. Your OLB system should allow this function and it typically occurs via the consumer platform.
2. Initiate stop payments. Businesses with high check writing activity may need, from time to time, to place stop payment on a check. Your OLB platform should allow them to initiate the stop payment with all the appropriate information and submit it online. Often we see clients with a completely manual process behind the scenes as if the customer showed up at a branch. Instead, the system should be able to automatically place the stop payment and process the charge.
3. View current and previous day transaction information. The ability to download previous day information has been available from the early days of online banking. Businesses should be able to download their bank information to their accounting software anytime. The next step will be to download real time transactions (items that post that day).
4. Electronic Bank Statements. Businesses expect the ability to download their monthly bank statement via PDF format for at least the last 18 months. Many institutions offer longer availability, but most businesses usually need 18-24 months’ worth of data.
5. View check images. Along with statements, businesses need to view images of checks that cleared, or items deposited. It is especially important to be able to view checks deposited via remote or mobile deposit capture. Again, the expectation is a minimum of 18 months availability.
6. Originate payments via BillPay. Small businesses enjoy the capability of issuing payments via the BillPay service which is typically free. As their volume of payments increases, you can offer other ways of paying their bills like ACH origination (see below).

Many of the above basic banking functions may be for smaller businesses with low transaction volume. We typically see these types of customers enrolled on the consumer (retail) OLB platform. Your large customers may also as for these functions, so be sure your business OLB system can do them also.

Treasury Management Services

7. Initiate domestic and international wire transfers. As your business customers grow or as you acquire larger commercial customers, they will need Treasury Management services. They will need the capability to initiate domestic wires and international wires. It is important to offer this service with multifactor authentication and the ability to set up multiple authority levels. The more robust OLB platforms allow the business customer to do self-administration where they assign the authority levels to their users.
8. Account Reconciliation service. The ability to download daily account transactions also allows the business customer’s accounting software to reconcile to the bank daily. Account Reconciliation is one of the oldest TM services; however, not all OLB platforms offer it.
9. View PDF Account Analysis Statements. Your TM customers will expect to receive their monthly Account Analysis statement via the OLB platform. This capability is a big challenge for certain core systems that do not produce the Account Analysis statements digitally. They look like a “raw statement” and is not presentable to the customers without major manual work. Some institutions even have to print them to statement paper first and then digitize them because the core is antiquated.
10. Originate ACH payments. One of the top-selling TM services you must offer to your business customers is ACH Origination. For businesses that pay lots of bills via check, the ability to pay bills via ACH saves them time and money. Your TM business customers should be able to upload their ACH batches via your OLB platform.
11. Access Check and ACH Positive Pay. Your business customers should be able to upload their Check or ACH batches via your OLB platform. This is another important TM service that typically is not integrated (or not well) with the core. Therefore, operations staff must do a lot of manual workarounds to make it work correctly. All done behind the scenes so customers “feel” like the system is working as intended. This process can be costly and inefficient for the institution.
12. Connect to Remote Deposit Capture. Finally, your RDC customers should be able to connect to their RDC service through the OLB platform. Again, it takes integration between the core system, the RDC provider (if other than the core provider), and the OLB platform.

It is important to continually offer convenience and safety to your business customers when using your OLB platform. I hope this list of 12 online banking features that are essential for business success will serve as a foundation to improve upon.

Looking for assistance with refining your Treasury Management department? As always, we’re here to help.