The competition among banks for commercial customer deposit dollars is as heated as ever. Banks are using advanced data mining and segmentation techniques to find and market to these valuable commercial accounts. Yet, even with this drive to capture and retain commercial customers, many banks are finding it hard to invest in the very services that promote new and longstanding customer relationships.
Many corporate customers, for example, cannot run their billing and payments operations without lockbox services, and a corporation’s current banking relationships are often the first place they turn. Therefore, banks have continued pursuing the sale of this offering; for many institutions, it is the second- or third-largest contributor to treasury revenue. Lockbox provides steady, significant deposit dollars and also typically generates lasting customer relationships that open up cross-sell opportunities taking place over their lifecycle. However, many banks are still hesitant to invest in upgrading lockbox platform and services, much less expand their offering into electronic and mobile payment services.
The Competing Conundrum
Competing priorities for investment dollars is an ongoing challenge for banks. With funds pulled in many directions and their lists of desired technology projects growing, resources are currently not being put toward lockbox upgrades and expanding payment acceptance methods. However, these services are incredibly valuable to banks’ customers — in particular, their corporate customers looking to increase the number of ways in which their own customers can pay bills.
Although investment dollars today are typically allocated for fee-based opportunities, in this highly competitive environment banks cannot ignore the need to add or improve services that create revenue from customer acquisition and strong retention. Today’s consumers expect an array of options when it comes to making payments and other financial transactions. Modern, multichannel systems designed to accommodate every payment type — from paper checks to mobile payments — have made this more affordable, and therefore feasible for banks large and small to implement. When it comes to investing in a multichannel payments solution, banks cannot sit on the fence for too much longer. Without providing a multichannel offering to their corporate customers, giving them the ability to accept payments in any form from consumers, banks will certainly hinder their own ability to remain competitive and obtain and retain valuable depository accounts.
Multichannel cannot just be a discussion about the latest, most innovative payment service — it is now just as much about preserving and improving the delivery of banks’ tried and true services while expanding options as new payment methods reach critical mass. Established, longstanding services cannot simply go away to make room for others. Instead, there must be a place for every payment option — both paper-based and electronic — to truly be full service and satisfy all customers.
Eliminating Siloed Channels
As the business world shifts from paper to electronic, emerging payment methods are still often built and offered alongside paper methods as separate, siloed channels. Corporate customers today want to simplify their internal requirements and their payment relationships, and thus are looking to their financial institutions to seamlessly handle this mix of paper and electronic. For the company that wants to continue accepting paper checks, but also wants to give its customers web and mobile payment options, it can save a lot of integration and IT costs if its bank offers a single-route conduit for processing all payments together. In addition to letting customers pay using their preferred method, this gives bank customers the ability to gain true, holistic visibility into their entire cash flow.
For this reason, different payment channels cannot be managed as separate entities. Banks and their corporate customers alike can no longer view these channels in their own, disconnected buckets of check payments, Web payments, mobile payments — they must been seen as just payments.
By eliminating a siloed structure in favor of a single solution for collecting payments, banks have the opportunity to give corporate customers a holistic view into all channels at once. Without this capability, they cannot truly give their customers the ultimate insight and control of cash flow they need.
An Affordable Infrastructure
We started seeing the shift to this multichannel or omnichannel view of payments with larger banks, which were first able to take this idea and create additional value for their corporate customers; however, it is now possible for banks of any size. Not only has the infrastructure cost for a multichannel offering dropped dramatically in recent years, hosted and software-as-a-service methods are now giving community and regional banks the chance to experience outstanding operational efficiencies and cost savings from consolidating their payment channels into one feed for processing. Banks of any size can now effectively compete with the larger institutions for these corporate, high-value depository accounts. In many ways, they actually have an advantage. By partnering with third parties and leveraging modern, cloud-based technology to deliver multichannel solutions, smaller banks can often prove more nimble than their national competitors.
Making the implementation of a multichannel offering a priority will enable banks to see the greatest return when it comes to customer retention. Without giving customers the ability to handle all channels through one source, banks risk serious third-party competition from organizations that can offer a variety of services under one roof. Instead, banks have the ability now to make the opposite their reality. Instead of sacrificing customer relationships, they can become their customers’ sole financial services provider — from offering credit to payment processing to presentment. They can develop deeper customer relationships and secure their role as a customer’s primary financial institution.
When it comes to payments options, leveraging a single solution that provides a multichannel offering gives banks the right degree of configurability — they do not have to serve as custom developers to meet customers’ unique needs or demands. Banks must view their investment in a multichannel offering as one of the strongest ways to differentiate themselves while providing the exceptional value that leads to these firm relationships.
Keeping up with the evolving world of payments is certainly a top priority for any institution. Despite limited resources, expanding payment options and adding convenient services that both corporate customers and their consumer base value are of utmost importance to compete in today’s market. Banks should keep in mind that for their corporate customers, processing paper, let alone electronic payments, is completely out of their realm of knowledge and expertise. Banks must take advantage of the opportunity to step in and take these resource-intensive tasks off their customers’ plates while enabling them to better serve their own customers.
Todd Shiver is executive vice president of sales and marketing at TransCentra, a leading provider of billing and payment software and services. For more information, visit www.transcentra.com.
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