“Revenue is vanity … margin is sanity … cash is king.” -Anonymous
My heart goes out to the hard working professionals who run the Treasury Services or “Cash Management” divisions at community banks. For a long time, these rock-solid bankers have seen loan officers patronize them with passive encouragement while rarely referring a customer their way and never taking the time to understand their product offerings. Yet for more than a decade, cash management professionals have shown their resiliency. They have made it a daily ritual to shrug off credit officer arrogance and scrap together a pretty damn fine business of core deposit funding and fee income. It’s not always pretty, but these bankers have learned to package their offerings with duct tape and wire and land the latest big new deal with a health care group, municipality or homeowners association. And they have never asked for much of the bank’s capital to win these big deals.
But lately, there are deeper lines and fatigued expressions on the faces of cash management professionals. Their software vendors are letting them down and wearing them out in a big way. Let’s call it out, GonzoBankers. Most innovation, quality support and healthy competition has left the cash management vendor market, and it’s making it very hard for the resilient community banker to compete with the too-big-to-fail players upstream.
Every morning across America, cash management officers have to hit the streets and do battle with the mother of them all: Wells Fargo’s Commercial Electronic Office (CEO). Sure, it’s easy to poke fun at the big banks for being slow and bureaucratic. However, any banker peering into the screens of the Wells cash management portal has only one thing to say: “That is some very slick stuff.”
Community bank cash managers have long depended on major outsourcers and independent software providers to arm them with the tools to compete with larger players. There are several factors contributing to the malaise in the cash management solution market today:
1. The big vendors have not invested in big cash management solutions.
For such a critical product line to community bankers, it’s sad to see the Big Three outsourcing providers (FIS, Fiserv, Jack Henry) with more than $12 billion in combined revenue coming to market with such halfhearted solutions. Fiserv has been schizophrenic in its cash management offerings: a no-show on a Corrillian version for business customers, slow improvements to its Business Online (formerly E Corp) solution in the Premier core group, and a virtual burying of the former Banklink cash management offering. FIS has acquired solid products from its Metavante acquisition (BEB), but the company moved slowly to interface this solution across all core products. Jack Henry has catered its offerings to community banks but now must address solutions for its growing multi-billion dollar clients. It’s hard to believe somewhere in these behemoths there’s not $10 million to do some major league investing in innovative solutions for one of the most important product lines in bank software.
2. Integration and usability are still pain points.
The value in cash management is unlocked with strong integration and features for the customer such as multi-level security and single sign-on. Today’s cash management vendors are failing to deliver the slick portal offering that large banks are using to solidify commercial relationships. With mobile and web services technology, there has never been a better time to innovate usability. Unfortunately, cash management vendors have been slow to develop mobile and tablet versions of their products. Bottomline Technologies, which acquired Intuit’s cash management offering in 2012, has partnered with Malauzai to deliver business mobile solutions, but there is still a long way to go in integrating and reconciling web and mobile offerings. At Cornerstone Advisors, we applaud the efforts and hope more vendors will be able to deliver on these solutions soon.
3. The unified payments hub is more theory than reality.
For a decade now, cash management providers have been issuing PowerPoints regarding the “payments hub,” which integrates automated clearing house, wire, Check 21 and international settlement into a single, least-cost routing solution. The challenge has been that most banks use separate modules for these payment channels and no easy migration path has been laid out by one vendor. Cornerstone gives credit to ACI Worldwide for doing the most work to further this vision, but the proof will still be in the implementations. ACI has the skills and resources to create a best-in-class offering, but it clearly must address a somewhat bitter client base from its S1 acquisition, which feels it has been given too many empty promises or changes in product direction from too many different owners.
4. Compliance and implementation challenges have frustrated bankers.
In the middle of trying to compete with large bank cash management offerings, community bankers have been smothered with compliance concerns around cash management security, business continuity, anti-money laundering and fraud. In the midst of these challenges, bankers see their own vendors coming under regulatory scrutiny. In the fourth quarter of 2013, the Federal Deposit Insurance Corporation entered a consent order along with the Office of the Comptroller of the Currency against cash management vendor Fundtech. The company was ordered to assess its information security risk and create a better vendor management program that meets agency guidelines. Bankers have also reported that cash management solution providers seem alarmingly scarce on resources to address new upgrade, integration and deployment projects. As one technologist at a $9 billion bank said to me, “They just nod their heads and ignore us.” To some extent, vendors have been able to get away with starving development and project resources because of the technology “lock in” effect – it’s just too big a pain and too much customer impact to switch cash management providers. However, frustration levels are becoming so high that many large community banks will be seeking new solutions and partners in the years ahead.
An opportunity for disruption?
To every vendor or software developer in their garages today, a gonzo wealth opportunity awaits you! With mobility coming to business banking in full force and web services providing new ways to build portal interfaces and facilitate integration, the industry is dying for the next big thing in cash management. It’s encouraging to see retail e-commerce providers like Q2 putting their sights on developing a more robust cash management offering. We applaud when an upstart like Online Banking Solutions snags a big fish like Iberia Bank with its Messenger product. We love when Malauzai CEO Tom Shen promises he will progressively build deep commercial functionality into the mobile platform with Bottomline. These are all encouraging starts, but so much more needs to be done and more resources need to be allocated to this part of our industry. Twelve years ago I wrote a Gonzo column titled “Cranking Up Cash Management” that signaled a new growth era for this product line in community banking. For the past decade scrappy cash managers at community banks have been working their tails off on this crank up effort. It’s time for the major outsourcers and innovative technology companies to do their part.
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