Today, we would like to discuss treasury services: where they’ve been, where they’re currently going, and what we think we’ll see in some of the industry’s long-term efforts. As a law firm, we’d also like to discuss the legal implications of these changes.
WHERE WE’VE BEEN
Since the 1980s, we have seen a lot of innovation with the advent of computerized banking, including a significant amount of computerized processing of payments and information. From there, we moved right on into online banking, remote deposit capture, and services that have really become staple services for today’s businesses. You can access your banking information remotely, see your payments and balances, order payments, structure payments, schedule payments, and do it all within an app or an online banking portal. These services have also become more in-depth. They’ve been more customizable and easier to reach as time has passed.
WHERE WE ARE CURRENTLY
We’re now seeing a shift from taking the banking services in an online banking portal, and we’re seeing them being wrapped into other services. For example, if you have a CRM, a relationship management piece of software for business, we’re taking a payment processing capability and sticking that into the CRM. So, the business can charge the customers, receive payments, reconcile payments, and follow invoices all within the same system.
It’s the same concept where you take the banking service and place it into another service. This might be an enterprise resource management program like Net Suite, where you take the banking services from multiple banks. You’re taking the payment information and making it so that Net Suite, or the ERP, can both receive information for the bank and push information regarding payment instructions to the bank. This allows you to manage your payments within one platform across multiple banks. It makes it super convenient for the treasury offices at a business, for management to see reports, to help reconcile matters from an accounting standpoint, and really simplify things for business. We believe if you think about it in that way, where you say we’re going from standalone services to making them faster, to making them more easily acceptable, to then taking it and wrapping them into other services, wrapping other services around the treasury services, A suite of activities becomes much more easily manageable for business. We think that’s where the trend is going to go.
“The next thing we’ll see is banking services being connected to more and more new programs, and we’ll wrap other services around them. This includes more and more pieces of the treasury side”
WHERE WE’RE GOING
The next thing we’ll see is banking services being connected to more and more new programs and having other services wrapped around them. This includes more and more pieces of the treasury side. When we say treasury, we think lockbox, wires, ACH, credit card and merchant processing. We’re going to take pieces of those services and wrap them into other outside services and vice versa. We’re going to see some of the outside services be adopted into the bank’s workflow so that some businesses can access not only treasury services but also some additional functions that let them run their business a little bit easier.
Accounting Service: This is where expense and payment information is taken and where a reconciliation process has to happen. We’ll likely see services where the software takes the banking and business side information and does much of the reconciliation work autonomously, allowing the bookkeeper to process those types of payments much more quickly.
Payment Integration: We expect to see where an enterprise source system manages the treasury, invoice and billing, and procurement sides. This way, you can get much more visibility on the status of various bank accounts and the cash position of a business. You can also build more scheduling, invoicing, billing, and procurement management into one platform. This provides more visibility for management and the professionals who manage that process.
Payroll Services: We expect to see payroll services, like advanced payroll being built into payroll services. So, if an employee logs into a Gusto or to a QuickBooks or Intuit-based program where they’re seeing the payroll information, they can then ask for a payroll advance right in the same system.
LEGAL IMPLICATIONS
You’re going to see bank data being transferred to third-party platforms, and customers will access bank services right through a third-party platform. So, there will be a transfer information loop of data transfer. This will be a real security issue that needs to be managed there. Therefore, the APIs and other connectors for information and payment instructions need to be strong and secure. Banks are going to need to be sure that their agreements define for the customers where the banking service ends and where the third-party service begins. They’re going to have to assign liability between the two. And most likely, a bank is going to start disclaiming liability for things that happen within these enterprise resource platforms.
Along the lines of what we already see with third-party center management, the bank probably wants to be careful about which actors and players it allows to adopt this sort of service structure. To some extent, new regulations may force data exchange to be allowed, but the manner and the method need to be carefully controlled to avoid a number of problems that would otherwise arise.
We’re happy to hear from you all. Send us a note outlining where you think treasury services are headed. Regardless, it’ll be an interesting time for financial institutions. We think that the innovation rate will continue to increase and multiply, and possibly be a real challenge to keep up with.
Farley Law specializes in working with both community banks and small businesses. If you are interested in learning more about these or any other income-generating activities for banks, please feel free to contact us at Farley Law, where we help our client financial institutions develop new products and financial services. Have a question or a comment? Send us a note at business@farleylawpllc.com, or set up an introductory call using our bookings service.