CASH MANAGEMENT: HOW SALES, OPERATIONS AND …

CASH MANAGEMENT: HOW SALES, OPERATIONS AND TECHNOLOGY CAN WORK TOGETHER TO GENERATE MORE FEE INCOME

Marcia E. Malzahn President & Founder

Malzahn Strategic Maple Grove, MN

[email protected] 612-242-4021

August 9 & 10, 2018

Cash ManagementHow Sales, Operations and Technology

Can Work Together to Generate More Fee Income

August 8-9, 2018

Marci Malzahn

President & Founder

Marci Malzahn, Malzahn Strategic

• Professional Highlights:• 23 years in banking: from teller to EVP/CFO/COO and CRO• Started a bank in 2005 – Bank grew to $325MM in 10 years, $680MM now• 5 years in nonprofit:

• CFO overseeing Finance, IT and HR• Managed a $32MM budget, 28 employees

• 4 years with Malzahn Strategic

• Professional Awards:• 25 On The Rise – Hispanic Chamber of Commerce• Forty Under 40 – Minneapolis/St. Paul Business Journal• Top Women in Finance – Finance and Commerce Newspaper • Outstanding Women in Banking – North Western Financial Review magazine

• Education:• B.A. Business Management, Bethel University• Graduate School of Banking, Madison, Wisconsin

2018 Malzahn Strategic2

Marci Malzahn – What I Do Now

Consulting:

• Strategic Planning

• Enterprise Risk Management

• Talent Management

Speaking:• Banking/Business

• Inspirational/Motivational

• Faith based

Writing:• Devotions for Working Women – A Daily Inspiration to Live a

Successful and Balanced Life

• The Fire Within – Connect Your Gifts with Your Calling

• The Friendship Book – Because You Matter to Me


https://www.amazon.com/gp/product/1931945675

https://www.amazon.com/dp/product/0996797106

https://www.amazon.com/The-Friendship-Book-Because-Matter/dp/0996797130

http://www.malzahnstrategic.com/

https://www.amazon.com/El-Libro-Amistad-Importas-Spanish/dp/0996797165/ref=sr_1_4?ie=UTF8&qid=1513891594&sr=8-4&keywords=marcia+malzahn

Overview

• My Cash Management Story & What’s in it for YOU?

• Part I – Knowledge

• Part II – Marketing & Sales Process

• Part III – Implementation

• Part IV – The Future of Cash Management

• Group Work after each Part

2018 Malzahn Strategic 4

Cash Management SeminarPart I – Knowledge

• What is Treasury Management (aka Cash Management)?

• The Evolution of Cash Management/History/Background

• What is an Account Analysis and what is it used for?

• What are the products?


Cash Management SeminarPart II – Marketing & Sales

• Sales Process• The right Sales Process for your bank

• Needs Assessment Template

• Marketing Program• A simple program for your bank


Cash Management SeminarPart III – Implementation

• Implementation Process• New Product and Customer Risk Assessments

• Setting up the various products

• Establishing the right implementation process

• How Cash Management integrates with:• Technology, Operations, and Sales Teams

• Agreements, procedures, and processes – What do you have in place? What are you missing?


Cash Management SeminarPart IV – The Future of Cash Management

• Identifying new products

• New multi-factor authentication methods

• Assessing new risks

• Establishing new processes

• New marketing opportunities


My Cash Management Story

• 16 years in Cash Management

• Learned all the products

• Created Cash Management Manual

• Went through the merger to First Bank Minneapolis in 1993

• Managed 330 Cash Management Clients

• Established Cash Management and oversaw division for 10 years

• What’s in it for YOU to learn Cash Management?


Cash Management SeminarPart I – Knowledge

• What is Treasury Management (aka Cash Management)?

• The Evolution of Cash Management/History/Background

• What is an Account Analysis and what is it used for?

• What are the products?


Cash Management/Treasury Management

Financial definition:

• Refers to a broad area of finance involving the collection, handling, and usage of cash. It involves assessing market liquidity, cash flow, and investments.

Marketing definition:

• In banking, cash management or treasury management is a marketing term for certain services related to cash flow offered primarily to larger business clients.


Cash Management/Treasury Management

My definition:

Cash management comprises of all the banking services banks offer to business clients to help them handle their cash on a daily basis.


Cash Management Evolution


1836

Pneumatic Capsule Transportation

Deposits & Withdrawals from car

Drive-up Tellers

1950

The Credit Card

Diners Club

2005 Capital One: “instant issuance technology” (on the spot printing)

1967

The ATM

Barclays Bank UK

Chemical Bank US (1969)

“ITM’s” 2013



1973

FTP (File Transfer Protocol)

Created by the US Defense Department ARPANET

1974

ACH Network

Largest, safest (secure), most efficient

Uniform operating rules and standards for payments

1980

Electronic Cash Counters

Self-serve coin counters

Cash Recyclers (1997)

Cash Management Evolution –Online Banking


1981

Online Banking

NY City Banks test “At-Home” Banking

Available to customers of banks

Previous day data

1983

Homelink (UK)

First Internet Banking Service - Connects using TV and phone to send transfers and pay bills (Foundation for OLB today)

1994

Money & Quicken

OLB is built into MS Money (100K homes)

The Standford Credit Union creates 1st OLB

Yodlee –Acct. Aggreg.



1989

Tablet Computers

Samsung GRiDPad

Mobility within branch or Client’s office

1998

PayPal

User-friendly money transfer service

P2Ps: Venmo, Popmoney, Zelle

User experience

2004

Digital Ck Clearing

Check 21 Act

Process digital copy of checks electronically

Remote Deposit Capture begins

Cash Management Evolution –Online Banking


2001

OLB Grows

8 US Institutions have at least 1 million users

19 million US households access bank accounts online

2005

FFIEC Rules & Regs

Risk based Assessments

Customer awareness programs

Multi-factor authentication starts

2007

Apple iPhone

Shift from PC banking to smartphone banking



2007

Apple iPhone

Shift from PC banking to smartphone banking

Foundation for Mobile Banking

2009

Bitcoin

First virtual currency

Based on lack of trust in banking system

Uses Blockchaintechnology

2010

Mobile POS Devices

Can plug in to mobile phones or iPads

Allowed small retailers to accept payments

RDC takes off



2011

Facial Recognition

Panama was first country (at airport)

OLB goes mainstream

Biometrics evolution

2015

EMV Chip

Increased credit card security (information is encrypted and tokenized)

2017 & Beyond

Biometrics & RTP

Increased use of biometrics

Real Time Payments

Fast new client onboarding

Treasury Management Products


Account Reconciliation/Positive Pay Business Check Card

Accounts Payable (AP)/Accounts Payable (AP) Automation

Business Credit Cards

ACH Origination Services Business Online Banking

Armored Car Services/Cash Collection

Digital Disbursements

Treasury Management Products


Escrow and Sub-Accounts Remote Safe/Cash Recycling

Health Savings Accounts Sweep Services

Merchant Credit Cards Wholesale Lockbox

Multi-Currency Accounts Wire Transfers

Remote Deposit Capture Zero Balance Accounts

Account Analysis Statement

• What is it?

• Why you need to understand it

• Explain it to customers and know how to read one

• See bottom line fee income from your business customers

• Discover opportunities for additional fee income

• What is your Earnings Credit Rate (ECR)?


24Some banks no longer charge Reserve Requirement

2018 Malzahn Strategic

ECR Poll

What’s your bank’s ECR today?

Do you have plans to raise it in 2018?


Account Reconciliation

• System automatically matches checks presented for collection to client’s issued file (client uploads a list of all the checks issued)

• Streamline client’s account reconciliation process while strengthening internal controls

• Monthly bank statement shows checks cleared and outstanding

• Currently business clients can download bank information directly into their systems – not used very much anymore


Accounts Payable (AP)/Accounts Receivable (AR) – Newer Product

• Cloud-based application that helps with invoice processing, matching, approval and workflow management

• Banks can have the main operating account for the business and get the increased deposits

• This product is an evolution from Lockbox

• Payable automation service (bulk mixed payments and invoice presentment)


ACH Origination Services

• Electronically send and collect payments through the Automated Clearing House (ACH) network

• Streamline clients’ payment processes and eliminate costs associated with manual check processing

• Provides control over cash flow by allowing clients to specify the effective date of collections and disbursements

• ACH is gaining territory over wire transfers—even Int’l ACH (originating int’l debits to Mexico and Canada already)

• Example products: ACH Manager (Fiserv), Direct Deposit, Automatic Payments, ACH Positive Pay, ACH Block/Filter• Same Day ACH – How is it affecting community banks?


ACH Poll

Has your bank implemented SAME DAY ACH?

Do you accept same day DEBIT ACH?

Do you make funds available for WITHDRAWAL the same day?


Armored Car Services/Cash Collection

• Large retailers who collect a great deal of cash

• Avoids employees going to the bank with large amounts of cash (safety and fraud prevention)

• Banks can charge additional fees by contracting directly with armored car services • Examples of retailers: Golf Clubs, Bars, Restaurants

• Examples of armored car companies: Brink’s, Garda, Loomis


Business Check/Debit Card

• Allows businesses to make purchases anywhere VISA (or MasterCard) is accepted with funds from the client’s checking accounts (most banks do not charge an annual fee)

• Offers convenience for purchases with no need for checks

• Flexibility for each employee to have its own daily spending limit and limited access to cash at most ATMs


Business Credit Cards for Employees

• Banks offer a variety of credit card options

• Cards are issued to designated employees with a specific monthly spending limit for business expenses only

• Account repayment responsibility lies with both the employee and the company with either individual or central billing and payment options

• Comprehensive set of reports is provided each month showing a summary of activity for all card users

• Use it as marketing tool as credit cards can be branded to your bank


Business Online Banking

• Web-based online banking system available 7/24

• OLB is the foundation and delivery mechanism through which the cash management services are available

• Includes current and previous day information, bank statements (e-statements) for the prior 18+ months, transaction details – including check images

• Ability to initiate stop payments, internal transfers, and wire transfers

• Allows multiple users with multiple security levels


Digital Disbursements

• Will replace check payments

• Business-to-business and Business-to-consumer digital disb.

• Payments are routed from one company to many customers securely directly to payee’s bank Acct. or prepaid card using mobile number or email address as identifier

• Benefits: Cost reduction for issuer, customer receives payment faster, privacy (no need to disclose account number), secure, better control of fund disbursements, mobile friendly, eco-friendly

• Examples: refunds, warranty payments, reimbursements or pay vendors


Escrow and Sub-Accounts

• Offers a user-friendly way to segment funds (either in a custodian capacity or without) to small businesses

• Banks provide digital reporting and control

• Some accounts are interest-bearing

• Examples: law firms, homeowners associations, IOLTA accounts, funeral homes/burial services, real estate development, schools, construction and some types of consultants

• Providers: First Banking Services http://www.firstbankingservices.com/EscrowAccounting.aspx


http://www.firstbankingservices.com/EscrowAccounting.aspx

Health Savings Accounts

• H.S.A.’s are offered to employees of companies that offer a high deductible health insurance package

• Employees can access their H.S.A.’s via a bank online portal offering opportunities for banks to cross-sell

• Excellent non-interest sensitive accounts that can generate additional deposits

• Can integrate direct deposit of contributions to H.S.A. checking accounts


Merchant Credit Card Processing

• Most banks partner with a merchant credit card processing vendor and offer the merchant services to its business clients

• Competitive rates

• Detailed reporting available

• Next-day deposit availability

• Liability lies with the credit card processing (most often)

• Cards with the chip should be the norm now


Multi-Currency Accounts

• Enables customers selling or manufacturing overseas to hold foreign currency in a US account

• Eliminates frequent currency transaction costs while maintaining FDIC insurance and the safety of a US bank

• Banks provide currency conversion, wires, foreign check processing and other services to these companies


Positive Pay• Customers upload list of checks issued and the bank matches

them to cleared items. Can be automated or manual process. Evolution from Account Reconciliation.

• System produces a daily exception report and client decides and notifies bank staff if an exception item should be paid or returned

• Enhance cash control and minimize risk from unauthorized or altered checks (identifies fraud)

• Reverse Positive Pay – Bank sends a list of exceptions and company matches cleared items to issued and notifies the bank which ones to pay

• Issueless Positive Pay – Client prints a barcode containing all specific check information


Remote Deposit Capture

• Ability to conveniently deposit checks without leaving the office

• Utilizes a computer and desktop check scanner

• Clients create and send check images to the bank for deposit

• Transactions may be submitted 7/24

• Clients could benefit from increased productivity

• Some banks offer a later deposit deadline. However, because of Branch Capture, the branch deposit deadlines are now extended.


Remote Safe/Cash Recycling

• For businesses that receive and give cash from/to the public on a regular basis (i.e. grocery stores, retail stores, amusement parks)

• Clients (and banks) install secure safes and cash recyclers onsite

• Cash is recycled and given back to the business based on their cash needs or picked up by an armored car

• Saves transportation costs to pick up or drop off cash

• Eliminates the need for deposit tickets, helps with counterfeit detection, automates the end-of-day process for merchants and provides point of sale data

• Same day deposit. Considered “vault cash” for banks.


Sweep Services

• Maximize returns, minimize interest expense, and simplify clients’ daily funds management

• Products include Investment Sweep, a Loan Sweep, a ZBA Sweep, or a combination of the three (also H.S.A.)

• Funds swept using an Investment Sweep usually leave the bank (not FDIC insured)

• Funds can be swept from a checking account into a Line of Credit after a minimum balance has been reached in the checking account

• Funds swept through a Zero Balance account are usually kept in the bank and are swept to a higher interest bearing account


Lockbox – Wholesale

• High dollars – low volume

• Clients remittances are directed to a PO Box and deposits are processed by the bank or the bank’s service provider

• The Bank handles the entire deposit process, from collecting the mail to providing remittance detail information, thus eliminating the need for in-house remittance processing

• Banks can require Lockbox for loans collateralized by Receivables• Examples: manufacturing companies for large machinery


Lockbox – Retail

• High volume – low payments

• Imaged Lockbox Services is another service

• Community Banks usually work with a correspondent banks to offer Wholesale Lockbox

• Special Instructions: Some companies that need detailed requirements for processing

• Examples: health insurance companies, association dues, property management companies, municipalities, utility companies


Wire Transfers

• The Wire Transfer network provides an efficient and secure way to provide accurate delivery of clients funds

• Banks offer domestic and foreign wire transfers

• Community Banks work with correspondent banks to offer foreign wire capabilities

• Example products: WireXchange acquired by Fiserv and uses correspondent bank’s system


Zero Balance Accounts (ZBA)

• Old product but few banks have it setup

• A ZBA is subsidiary account or “child” account that gets consolidated up to a “parent” account

• Account is zeroed out each day after transactions posted

• Reduce overdrafts, minimum balances and negative balances

• Examples: hospitals, schools (deposit-rich businesses)


Old Cash Management Services

• Balance Reporting: • Secure web-based reporting of clients’ account and transaction information

at their lead bank. • May include balances in foreign currencies, as well as those at other banks. • Include information on cash positions as well as “float” and offer transaction-

specific details. • Still offered by most large banks but has been mostly replaced with Online

Banking. The most used.

• Cash Concentration: • Large or national chain retailers located in areas where their primary bank

does not have branches open bank accounts at various local banks. • To earn interest, clients set up an agreement with primary bank to

electronically “pull” money from these banks using ACH into a single interest-bearing bank account.

• Still offered by some banks for specific clients. Mostly replaced by Remote Deposit.


Old Cash Management Services

• Controlled Disbursement: • Bank provides daily report, with disbursements that will be charged to the

client’s account at the end of the day.

• Clients have opportunity to invest surplus funds for that day.

• Different from delayed disbursements, where payments are issued through a remote branch of a bank and client is able to delay the payment due to increased float time.

• Float time these days is reduced to almost zero.

• Still offered by some banks for specific clients.


Part I – Knowledge – Group Work

• What products does your bank offer? • (highlight the ones on slides 20 & 21)

• Which products are you missing?

• Who are the in-house experts? (Who wants to? Who should be?)

• Who needs training?


Cash Management SeminarPart II – Marketing & Sales

• Sales Process• The right Sales Process for your bank

• Needs Assessment Template

• Marketing Program• A simple program for your bank


Cash Management Sales Process

• Teamwork (ideal): Business banker and Cash Management specialist, together, have initial conversations with prospective client, OR

• Prospect sends bank Request for Proposal (RFP)

• Business banker works with Cash Management Specialist• Request Account Analysis Statement

• Copies of two or three months of bank statements


Cash Management Sales Process

• Specialist assesses the needs and sees what their current bank is doing for them

• Bank offers a customized proposal

• Establish the best practice of delivering RFP to client within two weeks maximum (promise one week and surprise them in 3 days)


Do Not Bundle – Customize!

• Listen to your prospect/customer needs first

• Place customer at the “right level of services” from the start

• Go through the Needs Assessment Process in detail

• Don’t be afraid to charge the appropriate fees

• Pricing is rarely the only factor that customers consider when switching banks

• Resource: www.csbcorrespondent.com/blog


http://www.csbcorrespondent.com/blog

Cash Management Needs Assessment Template

• Understand and get to know your prospect/customer


What type of company are they? (C Corp, S Corp, Sole Proprietorship, LLC, etc.)

What types of products do they offer to their clients?

What type of industry are they in? Company tenure?

Are they cyclical business? Company projections?

Who are their suppliers? Have Succession Plan?

Who are their customers? Do they have relationship concentrations?

Cash Management Needs Assessment Template – Cont.


Deposit Accounts: Company credit/debit cards:

Average account balances Does the client take credit/debit cards?

Average monthly transactions Who is the Processor and what are the costs?

Cash needs What are their existing credit facilities?

Cash Management Needs Assessment Template – Cont.

• Team Needs Assessment


Why are they looking to move banking relationship?

How does prospect pay vendors?

What other banks is prospect looking at? (your competition)

Any cash needs?

How do they deposit checks? (Remote Deposit?)

What are their challenges?

Marketing Program - Ideas

• Perform an analysis of your current business customers to see which ones would qualify to have an Account Analysis

• Educate your clients on how to read the Account Analysis• So they can maximize their cash position

• Cross-sell Remote Deposit and other new services

• Use Earnings Credit Dollars to their advantage

• Identify your “largest depository business clients” and treat them just as special as your largest loan clients

• Resources: RateWatch, Informa


Cash Management and the Sales Team

• The importance of the sales team to have knowledge of CM

• Once you understand CM products, you can meet the needs of your business clients and increase fee income

• Review of your business customers’ activity on the Account Analysis

• Discover the biggest opportunities for additional fee income:


Deposit Account pricing Remote Deposit Capture

ACH activity Per item fees (ATM fees)

Wire Transfer fees Mobile deposits

Part II – Marketing & Sales – Group Work

• What is your Sales Process?

• What do you do to sell more CM products?

• How do you identify additional fee income opportunities?

• Do you have marketing procedures?

• How do you know the break even cost of deposit products?

• Are you competitive? Compare deposit account pricing and other products to market.

• Do you review your core processor’s pricing at least annually? What’s your process? Are you making money on products?


Cash Management SeminarPart III – Implementation

• Implementation Process• New Product and Customer Risk Assessments

• Setting up the various products

• Establishing the right implementation process

• How Cash Management integrates with:• Technology, Operations, and Sales Teams

• Agreements, procedures, and processes:• What do you have in place?

• What are you missing?


New Product Risk Assessment

• What are the new risks to the bank?


Operational Technology

Reputational Financial

Credit Strategic

Customer Risk Assessment (ERM)

• Criteria for customers to use the products:• Have been a customer for at least 3 months

• No overdrafts

• Credit worthiness of customer

• Products that need Risk Assessments: • ACH (NACHA requirements)

• Mobile Banking (FFIEC guideline)

• Remote Deposit (FFIEC guideline)

• Who in your bank monitors risk/conducts assessments?


Cash Management and Sales TeamImplementation Process:

• Banker or Cash Management Specialist:


What information do you need from customer?

OFAC check?

Who will be using the services at the company?

What are the multifactor authentication choices?

Who sets up checking accounts?

Are Agreements signed?

Cash Management and Sales TeamImplementation Process:

• Operations: • Enter everything in system

• Assign user names, passwords

• Customer training


Cash Management and Technology

• Every Cash Management Product is based on technology

• IT personnel needs to know how CM products are supported behind the scenes and what technologies each product uses

• IT needs to be involved in the setup of CM products –whether that’s through the core system or external vendors (vendor management)

• Examples of how CM Products interact with technology:


Remote Deposit Capture Mobile Deposit

ACH ATM’s

Wire Transfers Digital Disbursements

Cash Management and Operations

• The IT personnel works very closely with the Operations team to install the Cash Management products

• Operations works closely with the core system vendor:• In-house or

• Service Bureau

• Operations personnel puts together the policy, procedures, and process to install Cash Management products for clients.

• Deposit Operations customer service personnel talk to the business clients and resolve their problems


Operations Best Practices for Cash Management


Perform an in-depth analysis of your core processing fees

Involve the IT personnel in all operations meetings relating to products

Ensure you are paying for the right services

Establish a “termination” Checklist Process

Ensure volumes are accurate at all levels and that you are paying appropriately

Monitor potential errors

Create a risk analysis process to ensure new products are carefully and strategically implemented

Work together as a team

Part III – Implementation – Group Work

• From the products you’re missing, which ones do you needto implement? What are your customers asking for?

• How do you implement CM products (what’s the process)?• Cash Management and: Operations, Technology and Sales

• Do you have agreements, procedures, and processes in place – for each product? (Resources: www.cbancnetwork.com)

• How do you set up the various products?


http://www.cbancnetwork.com/

Cash Management SeminarPart IV – The Future of Cash Management

• Identifying new products

• New multi-factor authentication methods

• Assessing new risks

• Establishing new processes

• New marketing opportunities


New Products

• Digital Payments/Mobile Wallet Services:

• Cardless/Contactless ATM’s


Apple Pay Android Pay

Samsung Pay PayPal

Blockchain (using Bitcoin) Apple P2P

The Clearing House Real-Time Payments System (NEW)

Zelle, Venmo

New Products: Digital Payments

• Digital Payments/Mobile Wallet Services:• Apple Pay, Samsung Pay

• Android Pay, PayPal

• Zelle, Venmo, Apple P2P

• How do they work?

• Why are they more secure?

• How can banks make fee income using these payment systems?• Promoting merchant services to your existing customers


New Products: Blockchain & Bitcoin

• What is Bitcoin?

• What is Blockchain?

• How will their use affect Cash Management fee income for community banks?

• What’s the expected future of Blockchain?

• Benefits and Risks

• Should community banks get involved?



• What is Bitcoin?• Electronic cryptocurrency that uses Blockchain technology to

transfer funds from one party to another (2009)• Designed to “securely transact and exchange value without the

need of a costly intermediary”

• What is Blockchain?• A disruptive technology that will/may change banking (2009)• Uses distributed databases • Uses math and cryptography to record “encrypted” transactions

(using mathematical algorithms)• Programmers/Coders create the databases and the algorithms to

encrypt each transaction (or block) using regular computers



• What is Blockchain?• A “chain” of “blocks” called “hash”

• A “database” made out of “transactions” organized in chronological blocks that is “shared” between multiple “nodes” (user) in a network and are “linked” to each other (chain)


Block 1 Block 2 Block 3…

New Products: Blockchain & Bitcoin Definitions

Banking Terminology = Blockchain Terminology

Block = Hash

Currency (Dollar) = Bitcoin

Purchase = Buy into it

Saving = Mining

Bank Account = Electronic Wallet

$8,215.00 US Dollars = 1 Bitcoin (as of 5/16/18)

User = Node

Maintainers = Miners (maintain Bitcoin Blockchain)

Programmers/Coders = Wallet Providers (write software)


As of May 16, 2018

Bitcoin Price Valuation Last 6 Months



Characteristics of Blockchains:


Peer-to-Peer payment model (person to business, business to business, business to person)

Uses public key cryptography method to verify digital identity (using private and public keys)

Used to purchase and to pay for services and products

Uses “Proof-of-work” – a piece of code appended to data that validates that data’s authenticity

Based on “lack of trust” Proof-of-work also controls when it can be written into the system


Characteristics of Blockchains:


Not regulated by anyone Not traceable and could be anonymous

It’s global Irreversible yet still hackable (programmed by humans)

Uses the Internet Pseudonymous (bearing of, or written under false or fictitious name)

Transparent (everyone can see the transaction)

Unique 30+ character alphanumeric address


Some uses of Blockchain:

• Record Keeping: automated, low cost mechanisms, requires user specific keys to access ledgers

• Transfer of Value: secure, near real-time, low-cost transfer of value, decentralized, no intermediary (bank) needed

• Smart Contracts: programmable to transfer value when certain triggers/conditions are met, contracts can be developed, exchanged, and automatically executed

• Other: payroll disbursements, interbank settlements



How will using Blockchain affect Cash Management fee income (risks) for community banks?

• Consumers and businesses may choose to use Blockchainto make payments and transfers and bypass banks

• Reduce bank fee income from credit card interchange fees, wire transfers, and ACH

• Reduce bank fees from issuing contracts (if applicable)



How do banks get in? There are three ways:

• Public Blockchain

• Permissioned Blockchain

• Private Blockchain

• Join a consortium for $50-$70K

• Create a Blockchain for approximately $250K

• About 40 consortia have been formed globally(Source: Deloitte.com)


Robocoin’s first bitcoin ATM in the US – Feb. 2014, Austin, TX


Future of Blockchain: Benefits & Risks

• 90% of major US, Canadian and European banksare considering Blockchain technology for payments

• Could also be used for asset management, insurance,and compliance

• Could save banks money (approx. $20 billion/year) by reducing processing costs and amount of paper used

• Working with Fintechs


New Products: Blockchain & Bitcoin Sources

• Article “What Blockchain Will Mean for Banks?” https://www.bookingbug.co.uk/blog/what-blockchain-will-mean-for-banks/

• “Blockchain in Banking” presentation by Deloitte Development

• Article “Big Data, Blockchain, and More” ICBM Magazine

• Articles “Business in the Era of Blockchain” (Harvard Business Review) https://hbr.org/insight-center/business-in-the-era-of-blockchain

• https://en.wikipedia.org/wiki/Cryptocurrency

• https://hbr.org/2017/03/how-safe-are-blockchains-it-depends

• https://hbr.org/2017/03/the-promise-of-blockchain-is-a-world-without-middlemen


https://www.bookingbug.co.uk/blog/what-blockchain-will-mean-for-banks/

https://hbr.org/insight-center/business-in-the-era-of-blockchain

https://en.wikipedia.org/wiki/Cryptocurrency

https://hbr.org/2017/03/how-safe-are-blockchains-it-depends

https://hbr.org/2017/03/the-promise-of-blockchain-is-a-world-without-middlemen

New Products: Cardless/Contacless ATM’s

How do they work?

• Near-Field Communication (NFC) using Radio Frequency Identification (RFID) technology

• “Contactless withdrawals” work the same way as contactless payments – placing ATM card or smartphone near the ATM

2018 Malzahn Strategic 86Photo by Daily Express Photo by Telenor Banka

New Products: Cardless/Contacless ATM’s

Benefits:

• Potential elimination of certain security threats (card trapping and skimming) http://banking.com/analysis/banks-embrace-contactless-atm/

• User convenience (no longer need to carry card) to take cash out or make transfers between accounts

• International money transfers (from ATM to ATM)

Risks to Banks:

• Cost of machines

• Further reduced traffic at branches


http://banking.com/analysis/banks-embrace-contactless-atm/

New Products: TCH – RTP (Real-Time Payment)

• Real-Time Payments System (out 11/14/17)

• Meets objectives of the Federal Reserve Faster Payments Task Force https://www.theclearinghouse.org/payment-systems/real-time-payments

• Open to all US depository institutions

• Goal of reaching ubiquity by 2020

• Uses: pay bills, issue invoices, payroll, settling insurance claims (similar to Wires and ACH –part of core infrastructure)

• Benefits: faster, safer, truly online, two-way, 24/7 payment and messaging system


https://www.theclearinghouse.org/payment-systems/real-time-payments

RTP Poll

Has your bank implemented Real-Time Payment?

If not, do you plan to implement it in 2018?

If not, do you plan to implement it at all?


New Multi-Factor Authentication Methods

Biometrics:

• Voice recognition (i.e. Schwab)

• Fingerprint sensors

• Retina readers

• Selfies as identification (face recognition)

• “The death of the password”


New or Increased Risks

• Cyber Security

• Identity Theft

• Internal Fraud

• Increased Costs

• New Technologies: • Virtual currency (Bitcoin)

• Blockchain

• Advanced Analytics

• Artificial Intelligence


New Marketing Opportunities


Branding – Time for a change? Are your Cash Management products branding aligned with the rest of your bank’s brand?

Do you have a marketing budget to promote Cash Management products?

Do you coordinate efforts with business banking to promote products through bank statement banners or Account Analysis?

Example: Bank’s art and logo to populate the mobile wallets

Example: Bank’s logo for mobile banking app

New Marketing Opportunities


Fully implement same-day ACH for Businesses

Strengthen your Wire and ACH processing systems

Introduce Contactless ATM’s Integrate your cash management systems to the core system and to your customers’ management systems

Expand use of Cash Recyclers Become your customer’s advisor by providing detailed analysis of their transaction flows, payables, receivables, and financial assets and liabilities (you have the data)

Part IV – The Future – Group Work

• What types of new technology products does your bank offer?

• How are you training your business clients on Cybersecurity risks?

• What types of multi-factor authentication options does your bank offer for existing products?

• How are you assessing the new risks?

• What new marketing opportunities are you taking advantage of?


Next Steps and Conclusion

• Identify which Cash Management Products you want to offer

• Follow up with a plan and recommendation on which products to implement, cost, and timeline

• Marketing, Sales, and Cash Management teams work with Operations and IT teams to implement new products

• Bank staff is trained so everyone feels comfortable talking about any of the CM products offered by the bank

• All teams work together to meet your clients’ needs and generate more fee income!

• Don’t be intimidated by new technology – learn it & embrace it!


Certified Treasury Professional

• Association for Financial Professionals www.afponline.org

• Treasury Learning System – Teaches the essential principles and functional practices of corporate cash and treasury management.

• Includes:• Forecasting and short-term investing and borrowing activities

• Working capital strategies and tools to manage assets/liabilities

• Monitor and control corporate exposure to financial and operational risks

• Capital structure management

• Coordinate financial functions with other departments

• Manage cross-border funds movement/international trade financing methods


http://www.afponline.org/

“Cash in the face of change: How cash management will become the bank’s

greatest asset.”

“Serve more as advisers than transactors”

Graham Seel, BAI (article)

“If you ever wondered about the future of banking, we can tell you it lies directly in

the path of treasury management.”

Chris Nichols, Chief Strategy Officer, CenterState Bank Correspondent Division

Marci Malzahn, President

www.malzahnstrategic.com

[email protected]

www.marciamalzahn.com

https://www.facebook.com/MarciMalzahn/

https://www.linkedin.com/pub/marcia-marci-malzahn/1/6/729@marcimalzahn

612-242-4021

http://www.malzahnstrategic.com/

mailto:[email protected]

http://www.marciamalzahn.com/

https://www.facebook.com/MarciMalzahn/

https://www.linkedin.com/pub/marcia-marci-malzahn/1/6/729

CASH MANAGEMENT: HOW SALES, OPERATIONS AND …

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