Do-It-Yourself MoneymakersDo-It-Yourself Moneymakers

Commercial banks are also turning to technology to set themselves apart. Many banks are enhancing their treasury-management services in response to the challenging commercial-lending environment and subsequent decline in interest-based income. Such services let them increase fee-based income, as well as improve customer acquisition and retention through more comprehensive product lines.

Today, the key success factor in the highly competitive treasury-management business is technology, which differentiates banks and lets them develop more compelling services. Web-based electronic banking, imaging, electronic bill presentment and payment, and machine-to-machine integration with customers' accounting systems are helping assure banks a consistent revenue stream that's unaffected by interest-rate fluctuations. And because treasury-management services let a bank further strengthen and deepen its relationships with its customers, the offerings can give banks a competitive advantage.

In many cases, the technology that drives those efforts can be the deciding factor in whether a bank acquires new clients or retains those it already serves. While banks want to increase market share, they also want to do more business with highly profitable customers. This is driving banks to aggressively pursue cross-selling initiatives to increase revenue-per-customer within their existing account bases, while deprioritizing less-profitable accounts.

But it's not all so simple. Most companies can easily justify outsourcing the management of the processes surrounding their receivables and disbursements, because those functions are nonstrategic. But they frequently outsource the disbursement and receivables portions of their cash-management business to multiple parties. In a recent Doculabs study on treasury-management trends, technology, and best practices, 85% of companies reported that they buy treasury-management services from more than one bank.

Another twist: Smaller banks are leveraging the cash-management infrastructure of the larger banks, but market and position it as their own solution; the bank's customers don't know the difference. This approach benefits both banks, since the smaller banks earn additional fee-based revenue and the larger ones reduce some of their variable costs by reducing excess capacity.

Regardless of their size, one thing is clear: Banks that innovate and provide best-of-breed systems will succeed in acquiring and retaining customers in this already commoditized services market.

Jeff Phillips and Gaurav Verma are senior analysts and Christine Klima is a technical editor with Doculabs, a research and consulting firm that helps organizations plan for, select, and optimize technology for their business strategies. Contact them at [email protected] or visit www.doculabs.com.

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