Customer-Centric Treasury Services

Corporate banks will be positioning treasury services as a growth engine over the next few years, and are undertaking large-scale programs to transform their online treasury platforms. They are focused on providing a seamless client experience, unified administration, and integrated reporting. This Leading Research highlights changing client demands, the capabilities that banks will need to respond, and practical considerations for bank success.

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Leading Research

Ramesh Nair Brodie Dixon

Customer-Centric Treasury Services
Corporate Banking Growth via Integrated Treasury Services

Executive Summary
Our industry research, and experience with banks across the country, suggests that treasury services has reached a “tipping point” • Corporate banks will be positioning treasury services as a growth engine over the next few years • Major banks are undertaking large-scale programs to transform their online treasury platforms • They are targeting growth primarily in the under-penetrated small and medium-sized enterprise (SME) and middle-market segments • Leading banks are using their online platforms to integrate their treasury products • Banks are beginning to transition from a product-centric to a client-centric business model • They are focused on providing a seamless client experience, unified administration, and integrated reporting • Ultimately, their goal is to broaden and deepen client relationships to increase cross-sell and up-sell This Leading Research highlights changing client demands, the capabilities that banks will need to respond, and practical considerations for bank success
Source: Booz & Company
Booz & Company


Treasury is one of only two product groups (along with wealth) poised for growth over the next 5 years
U.S. Product Revenue & Operating Profit Pools1
Operating Profit Margin2 70% 60% 50% Commercial Loans3 40% 30% 20% 10% 0% $10B $20B $30B $40B $50B $60B $70B $80B $90B $100B $110B $120B $130B $140B $150B
1. Excludes insurance (life, P/C, etc.) and capital markets. Revenue 2. Excludes loan loss provisions, nonrecurring gains or losses, and income taxes. 3. Excludes commercial real estate. 4. Includes fees from cash management, online payment processing, global trade, and wire transfers; also includes interchange fees from credit and debit card transactions. 5. Includes originations, holdings, and servicing of multifamily, commercial, and farm mortgages; excludes securitization. 6. Includes originations, holdings, and servicing of 1-4 unit residential mortgages; excludes securitization. 7. Includes home equity lines of credit, auto loans, student financing, and other consumer lending products; excludes mortgage and credit cards. Source: Federal Reserve; FDIC; Nilson Report; MBA; 2010 Financial Services Fact Book; analyst reports; industry newsletters; news articles; annual reports; Booz & Company analysis

2014F 2009
Commercial Mortgage5

(2009–2014F) Bubble Size = Operating Profits in US$ Billions

= $5B
Residential Mortgage6 Credit Cards

= $25B

= $50B

Consumer Loans7 Wealth
Revenue Growth (CAGR) 2004–2009 5.3% 2009–2014F 1.2% Profit Growth (CAGR) 2004–2009 3.8% 2009–2014F (1.1%)


Treasury & Payments4 (includes cash management, FX, payments, and trade finance)


Growth opportunities are available across the full range of treasury products
Treasury Product Cash Management & Liquidity Payables & Receivables Overview
Cash management tools (e.g., notional pooling) to monitor and consolidate global cash Short- and long-term investment options Electronic invoicing and working capital optimization Connecting buyers with suppliers across settlement networks Payments via ACH, wire, and other methods Visibility and control over payments via purchasing cards, T&E cards, single-use cards, etc. Management of physical and financial supply chains through integrated cross-border trade and logistics solutions (e.g., letters of credit and commercial trade documents) Consolidated, up-to-date views of account balances and demand deposit account services Global cash and investment positions

Strategic Direction & Opportunities
Global cash management combined with payments to make best use of available cash

Early payment discount optimization Integrated payables, receivables, payments, and invoicing Payments integration with accounts payable/accounts receivable/liquidity Regional or global market card programs Purchasing cards and single-use cards Letter of credit-related revenue accounts (largest fraction of trade revenue) End-to-end supply chain financing products

Payments & Cards

Trade Finance

Cross-product information Risk management via forecasting and scenario analysis

Information & Reporting
Source: Booz & Company


Our research indicates that broad market and client forces are accelerating the need for modern, integrated treasury platforms
Market Forces Recent financial events are driving many clients to seek multiple bank relationships to spread risk Banks must provide a more integrated set of services to achieve “stickiness” in their client relationships Technology Clients’ increasing familiarity with push technology raises expectations for proactive prompts/suggestions All mobile devices are viewed as integrated, Web-enabled platforms for accessing treasury services Increasing variety of payment vehicles drives customer demand for more integrated operational and reporting capabilities Integrated Treasury Platforms Holistic online solutions that support multibank relationships, multiple payment methods, enhanced security requirements, and overall liquidity management Tighter partnership/integration with back-office systems and processes Proactive prompts and alerts to advise clients on their to-do lists across access devices Fraud and Security Increased recognition of the risks of internal fraud is driven by: – Automation – Self-administration – Online access from anywhere Increased malware and external threats drive demand for more robust security capabilities in treasury platforms

Cost/Capital Pressures Increased profit pressures have led client treasury departments to reduce head count, driving demand for enhanced treasury services (e.g., back-office finance and accounting integration and reporting) to reduce the workload on remaining client staff Holistic working capital management has increased in importance
Source: Booz & Company industry research


Treasury clients are frustrated by inefficiencies resulting from the current lack of cross-product integration
Inefficiencies Hindering Treasury Optimization
Inability to forecast company cash flows Weak working capital/liquidity management decision making Time for transactions processing is too long Inadequate financial reporting practices Inefficient payments process (accounts payable) Inefficient collections process (accounts receivable) Inability to pool company's cash accounts Poor performance of short-term investments 0%

67% 38% 36% 35% 34% 30% 28% 13%
10% 20% 30% 40% 50% 60% 70% 80%
% of Respondents

Growing Demand for Cross-Product Integration
Four of the top eight inefficiencies cited by treasury clients stem from their inability to manage global positions across all product groups Product silos restrict their ability to pool, optimize, forecast, and report on cash balances Increasing cross-product integration and online access would help bank clients address these inefficiencies

Inefficiencies due to limited cross-product integration

Source: Aberdeen Group survey; Booz & Company analysis


Executive users are increasingly using treasury products to support strategic decision making, accelerating the need for cross-product integration
Users of Treasury Products Value Drivers & Needs

Strategic Planning
Key Users: Board, CEO, CFO

Strategic decision making based on accurate and comprehensive financial data from across the enterprise

Strategic insights to support optimized decision making


Key Users: CFO, Treasurers, Cash Managers, Liquidity Managers
Data Integration

Visibility into cash information across the organization to drive informed decision making; comprehensive and consolidated views of corporate-wide data to improve asset utilization and return Integrated and seamless solutions to reduce time spent on key activities (e.g., global cash forecasting and investments)


Key Users: AR Clerks & Managers

Key Users: AP Clerks & Managers

Seamless, simple systems that provide relevant functionality
Consistent core functionality across products to reduce learning curve

Trade Finance/Logistics
Key Users: Operations Managers, Trade, Logistics

Automation of low-value activities

Source: Booz & Company


Treasury platform investments are largely focused on satisfying three fundamental demands from online clients
Demand Description
Customers increasingly value seamlessness and improved visibility into their global cash positions, which is driving demand for crossproduct integration Usability drives the client experience, and as competitors broaden their product offerings, ease of use will become more important to the overall value proposition

Insight from Industry Interviews
“Once Bank of America CashPro solves legacy integration and scale issues associated with its online platform, it will be poised to grow market share.” “Citi is the global leader and has great functionality, but it is not as intuitive or easy to use, which limits its acceptance, mainly with larger and more sophisticated customers.” “As customers try to do more with less, they need advanced entitlement administration capabilities such as more intuitive selfservice and greater control across a broader universe of users.”

Cross-Product Integration

Improved User Experience

Self-Service Entitlement Administration

Customers are placing greater importance on entitlement administration capabilities to manage change and maintain control over increasingly complex organizational layers and transaction rights

Source: Interviews; Booz & Company internal industry research


The investments are geared toward achieving greater clientcentricity in treasury, moving away from product-centric models
Traditional Treasury Services Model: Focus on Vertical Product Silos Emerging Treasury Services Model: Focus on Horizontal Client-Users
Payments Liquidity Accounts Receivable Information Management Trade Finance

TS Products Cash Manager




Accounts Receivable

Information Management

Trade Finance
AP Specialist

A/P Specialist

AR Specialist

Product-Centric View

Client-Centric View

Problems with Product-Silo Model
Limited cross-product penetration; hence, low revenue growth Products developed in silos Multiple systems support similar functionality Lack of formal sharing of ideas
Source: Booz & Company

Benefits of Client-Centric Model
Drives greater revenue potential through increased value of product offerings Emphasis on client roles and needs across the entire value chain Drives product groups to develop integrated product offerings that best meet client needs


While the move toward client-centricity requires changes across the value chain, most investment is focused on the service platform
Value Chain Step
Product Design

Integrate and bundle products based on client needs

Client-Centric Approach
Integrate treasury products to create seamless solutions – Design based on client needs rather than available capabilities (e.g., integrate supply chain solutions with procure-to-pay, payments, and commercial cards) Provide simple pricing options, differentiated by segment – 2-4 standard bundles with varying levels of sophistication – A la carte pricing for optional add-ons – Simplified billing to reduce administrative burden on client and provider


Simplify pricing structure of products


Coordinate sales efforts across products & segments

Align relationship managers with treasury product managers Approach product bundles/suites as an opportunity to cross-sell Realign and dedicate resources according to client need

Service Platform

Provide enhanced selfservice capabilities

Support ease of access and effective decision making
– Streamline product platforms – Improve user interface

Current investment focus of major banks
Source: Booz & Company


To deliver a truly client-centric platform, banks must enhance their capabilities in five critical technology layers
Customer Issues
Multiple & inconsistent user interfaces
Seamless front-end user interface

Solution Layer

Enhanced user interface providing single sign-on, and consistent look and feel across all products and administrative functions Seamless transaction experience across all products Single point of access across all customer segments

Poor user experience

Limited cross-product integration with independent product platforms

Integrated core product functionality

Enhanced product capabilities through rich and comprehensive functionality across treasury products (e.g., trade finance and payments) Ability to allow users to self-administer profiles and user access Efficient means of onboarding new treasury clients and products

Complex process for assigning & managing entitlements

Cross-product selfadministration Cross-product integrated data access, reporting, and transactions Customized and flexible data transfers

No holistic view of operational data

Integrated transaction and position data (e.g., cash management positions) to enable cross-product reporting Direct integration to ERP systems and existing templates Options to deliver data in various file formats (e.g., XML)

Limited ability to send customized data in varying formats
Source: Booz & Company


Major banks are recognizing these demands and are investing heavily in their treasury platforms
Treasury Platforms from Three Major Providers
Platform Current Offering & Positioning
Active user base growing at 20% a year, to ~400,000 in 2010

Investments in Future Offerings
Grow CEO through mobile applications – iPad and Android versions in development – Focus on small business (10% now use mobile app) Integrate the “best of both” from Wells and Wachovia – Wachovia international trade and payments – Migrate to S1 ACH solution with enhanced reporting, tools, and payments Major investment in multiyear “banking evolution” – Electronic bank account management (eBAM) – Media channel with online training and user support – Mobile capabilities, including approvals and collections – Service-oriented architecture and open standards Revamp online treasury management platform to establish an online payments hub and increase usability and client visibility CashPro Invest application to be launched and integrated with CashPro online

Wells Fargo
Commercial Electronic Office (CEO)

Majority of systems are built internally Run by “IT experts acting as bankers, rather than bankers acting as IT experts” First to deliver commercial banking mobile services Easy to use (e.g., single sign-on system permits access to 60 products) Perceived to be the strongest solution for large multinationals with international payments


Smaller clients can get “lost in the shuffle”

Bank of America
CashPro Online
Source: Booz & Company

Easy to use, particularly for clients with relatively simple needs Lacks some functionality valued by large, complex clients


There are five critical success factors in transforming to a modern integrated treasury services platform
Critical Success Factor Description
Develop shared vision and metrics for cross-product client-centricity Align objectives of key stakeholders across corporate, treasury function, product lines, and clients Develop a high-level road map; prioritize rollout based on client usage and cross-sell opportunities

End-State Vision

Integrate data infrastructure to support single view of client, including hierarchies and entitlements

Data & Client Migration to New Platform

Develop detailed and phased implementation plans for migrating clients Ensure that internal product and support processes are in place prior to large-wave client migrations Prioritize product functionality to be migrated to new platform in phases; identify and fill gaps Migrate functionality in phases based on cross-sell and penetration potential Align release schedules with the company’s production release schedule Develop a comprehensive program structure including corporate, business unit, product, and IT roles Define resources needed for each release, including client availability for requirements and testing Manage project plan “pressure points” (e.g., too many concurrent releases) Define metrics to track cross-sell, penetration, and referral rates Define new client-centric metrics aligned to relationship manager metrics

Functionality Prioritization & Sequencing

Program Management & Resourcing

Metrics Program
Source: Booz & Company

Design implementation scorecard including metrics for activity, operations, and business impact, along with project management metrics 12

Leading institutions are embarking on significant treasury platform initiatives starting with several key analyses
Critical Up-Front Analyses
Identify Headroom for Growth
• Summarize product penetration within existing client base • Prioritize cross-sell and up-sell opportunities • Prioritize enhanced functionality requirements

Assess Online Platform Technology Layers*
• Map current platforms against five layers of treasury platform architecture: – User interface – Integrated product functionality – Onboarding and self-administration – Integrated data and reporting – Data, files, and template transfers • Prioritize areas of focus and spend

Assess Technology Implementation Plans
• Accommodate fivelayer architecture approach into implementation work streams • Seek synergies and coordination: – Across work streams – With enterprise initiatives (e.g., integrated data and reporting, single view of customer, process orchestration) • Detail resource requirements, by skills and by phase

Benchmark Platform Against Competition
• Identify suite of products and features desired • Align to industry nomenclature on product features and attributes (e.g., more than 200 attributes from Booz & Company’s benchmark study) • Conduct benchmark analysis • Prioritize areas of focus for competitive parity vs. competitive advantage

Rationalize Product Road Maps with Platform Road Maps
• Understand existing product management road maps • Identify overlaps on product road maps for each of the five layers of architecture • Seek synergies across product road maps • Align with platform road maps and implementation plans

* Five layers of architecture: Booz & Company framework for treasury platforms.
Source: Booz & Company


Contact Information
Florham Park, NJ Ramesh Nair Partner +1-973-410-7673 [email protected]
New York

Brodie Dixon Principal +1-212-551-6549 [email protected]

Mehul Desai, Paul Sturgess, and Ron Wade also contributed to this Leading Research.


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