Rising interest rates create challenges for community bankers in terms of retaining lowcost core deposits – which are critical to profitable lending. Providing treasury management services is one prudent and practical approach to retain and grow commercial deposits of small and medium business customers.

The success of this strategy is predicated on offering these business customers robust services that not only lock in deposits, but also create a sustainable stream of fee income.

The market for treasury management services

The evolving treasury management needs of small and mid-sized corporations presents an opportunity for community banks to differentiate themselves by offering new, more comprehensive, and sophisticated services. And the market for these services continues to grow.

According to Coherent Market Research, the global treasury management market is estimated at over $5 billion in 2023 and expected to grow to $12.6 billion in 2030.

Within the U.S., 99% of companies use a bank for their primary treasury management provider according to an Accenture study. However, that same study notes “the presence of fintech disruptors in the market is becoming more pronounced. Venture capital funding for payments-focused fintechs increased 39% between 2019 and 2021, with substantial investment into startups that concentrate on commercial payments or treasury management.”

The key to competing in this competitive treasury management landscape is to leverage the personal, service-oriented relationships community banks cultivate with their business customers, while at the same time offering a full suite of integrated reporting and payment services comparable to their large global competitors.

Meeting commercial customer expectations

The treasury management expectations of small and medium-sized businesses reflect similar trends for other financial services products. Service, automation, and integration establish a ground floor community bankers must address.

Offering robust treasury management services

A complete suite of treasury management offerings is essential to addressing these expectations because they create differentiated product experiences while increasing operational efficiency of treasury management services. The inventory of these offerings becomes quite broad and can be categorized as
follows:

Digital offerings that include:

• Online business banking
• Integrated payables
• Reconciliation

Capital market products such as:

• Banking and balance sheet risk management
• SWIFT
• Climate risk modeling

Debit/Credit and payment solutions that provide:

• Business bill payment
• Wire and ACH
• Loyalty programs
• Virtual cards
• Pay direct programs

While even a partial list may seem daunting, a community bank’s technology partner(s) should be able provide these services and more, along with the necessary integration to develop specific market offerings – such as integrating banking data into specific ERP and accounting packages to meet an identified industry niche.

Technology partners can offer product depth, R&D, compliance, and a partnership structure conducive to securing the relationships and operating accounts of small and mid-sized businesses. Partners can help even the competitive treasury management playing field for community institutions competing with much larger financial organizations.

As treasury management functions become more strategic and expectations around data visibility and digital access mature, a one-size-fits-all approach no longer seems feasible. Banks must offer products and services that resonate with diverse audiences. A community bank that can provide a mix and match approach (treasury management portal services) could leverage the power of APIs to deliver innovative solutions while leaning on the operational efficiency of the core technology partners.

Maintaining the edge in customer service

As community bankers reach or exceed product expectations with the appropriate mix of technology offerings, they should continue to invest in customer service initiatives that extend the personal touch with their business customers.

To keep their service edge, while delivering robust treasury solutions, community bankers should take the following steps:

1. Leverage any data driven insight available on small and medium-sized business
relationships and focus on high potential sub-segments. Survey often and learn
the characteristics of your customers’ industries.
2. Don’t rely on a one-size-fits-all approach for all business customers. Not all
customer relationships are of equal value.
3. Provide relevant information at the right time. Understand requirements for realtime
and supplemental relevant information.
4. Recognize individual business users’ digital preferences.
5. Share product strategies with key customers in treasury management user group
forums and executive one-on-one sessions.

Treasury management services can secure the operating (and other primary accounts) of small businesses to mid-sized corporations. Acquire this business with a winning strategy that offers the right mix of curated treasury products and focused customer service.