Relationship pricing is a blessing and a curse to those in Treasury. Large companies enjoy getting relationship discounts from a single bank, but at the same time struggle because no two banks’ bills (account analyses) are alike. Determining whether they are getting a fair deal from one bank by comparing it to another is a daunting task that takes time, expertise, and patience to perform.
Last week we spoke at the TEXPO conference with FISERV/Open Solutions and AT&T about this very subject. In two weeks, Steve Weiland, representing The Montauk Group, will be speaking again on the topic in Chicago at the Windy City Summit. No matter how you sugar-coat the project, or claim it can all be automated, or swear by the effectiveness of AFP codes, cross-bank comparison projects are a chore.
Going through the exercise is like taking every piece of clothing out of your closet, looking at it, sorting it, and thinking about how much you’ve used/worn it. After all shorts, pants, shirts, shoes, belts, hats, etc have been properly classified by color, use, and effectiveness, you have to make the decision to keep, donate, or trash each item, and in some cases buy new items. Some decisions are obvious – “Do I really need 10 blue shirts?” Some are hard – “This shirt has a lot of sentimental value but I’ll never wear it, do I keep it?” Some discoveries are fun- “Oh, I forgot about that!” Some lead to shopping to replace things that are just worn out. At the end of the exercise, you will be exhausted, but you’ll know exactly what and why you have everything in your closet.
A cross-bank comparison exercise is a cleaning of your banking services closet. Each company needs to take a hard look at each line item to determine what they have and why they have it. You won’t be tempted to add new services you don’t need if you know and understand what you already have. Instead, you’ll shop to replace services that are outdated or worn out and make your overall experience more efficient, less costly, and sensible.
Are you ready to dive in?
Product Manager, Bank Relationship Management Services
The Montauk Group, LLC.
390 Plandome Road, Suite 209, Manhasset, NY 11030
At Montauk, our clients often ask us “Who is the most competitive bank for my company today?”
When you look at the blog postings and news at the end of 2012, the hot topic was the expiration of unlimited FDIC coverage. Treasurers scrambled to determine what, if anything, to do with their millions in cash held on deposit. Three months later, the FDIC expiration is “old news” and very few treasurers would admit that they made any real changes. Banks continue to pass through an FDIC assessment on full balances yet the corporation is only receiving $250,000 in insurance. Even with that disparity, a sense of general acceptance has already replaced the fourth quarter sense of urgency as priorities shift to other projects scheduled for 2013.
But will Congress agree to collaborate and do something?
The value of a penny is so low that we don’t even bother picking one up off the parking lot when we see one. Retailers pay $0.08 per roll to order pennies and $0.0012 for every dollar of coin and currency deposited. If the U.S. follows suit with Canada, how much would we really be “saving” from the elimination of pennies. As a taxpayer, the answer is billions. As a retailer, not so much. The implementation of a “rounding” system will cost thousands to implement, but the end result just may be worth it.
When the unthinkable happens and the online banking portal we all have come to depend on suddenly goes dark (like it did for Bank of America customers on Friday), the contingency plans are put to the test. When was the last time you looked at yours? I remember spending hours preparing for the Y2K that never happened and testing and retesting policies and procedures to protect the US Treasury from bank blackouts. As our dependency on online banking grows, recognizing and testing the alternatives with your banks is critical to your business. Don’t wait for a natural disaster to have that conversation, even Super Bowls go dark in sunny weather.
Wouldn’t it be nice to have all commercial account bank billing statements, domestic and foreign, available in a standard, electronic format? Then “electronic eyes” could check for billing errors, detect unused services, examine balance usage, bill services to the appropriate departments, aggregate costs on a global basis, budget for the future, analyze trends over time, compare prices, pay bills and get rid of all those mounds of paper statements and 300 page PDFs. The vision has become reality, and with the recent announcement of the ISO 20022 electronic billing statement standard, all this and more are now at your fingertips.
The Montauk Group conducted a survey designed for corporate treasurers in order to capture the level of their awareness surrounding the rates and fees their company is currently experiencing at their existing banks. Responders were asked about the different tools they use to manage their bank relationships and their perceptions on fairness, balance, and control within their current bank relationships.
Banks shoudn’t underestimate the Fear Factor motivating their corporate clients to remove deposits from their DDAs come January. 50% of treasurers plan to move money out of their DDAs because they still fear that their bank may default. No one cancels their flood insurance 2 years after they’ve experienced a real flood. Many feel that the bigger the bank, the less likely to fail, or at least the less likely the Government will allow them to fail. Isn’t this why we all invest in T-bills? We really don’t fear that our US Government will fail. Our corporate investment policies allow for “safe” Treasury securities because we believe that if a security is backed by the Government, it is safe. I don’t need to tell you that the Government’s balance sheet is significantly worse than any of the banks in your portfolio. Yet, we want to believe that the United States and all it stands for will never default or fail. If only we were able to have the same confidence in our banks…
