Cash Management and Treasury Services in Banking Sector

Cash Management and Treasury Services in Banking Sector


The banking sector has become increasingly dynamic and competitive in the recent years. The competitiveness of the banking industry has consequently lead to various trends in the industry aimed at improving customer satisfaction.  Cash management and treasury services remain the primary objectives of any bank. As a result, the banks are striving everyday to ensure that they have the most competitive services in the sector (“The retail banking industry in 2015”, 2007). It is imperative to point out that customers are increasingly demanding real-time data, consolidated information, greater straight-through processing and more global capabilities. The clients in the banking industry require more integrated services from their banks and thus making cash management an important area of competitive edge.  This report will have an in-depth analysis of the major trends in cash management and treasury services in the modern banking sector.

Cash management and treasury services in banking sector

As aforementioned, the banking industry is going through a massive transition resulting from the fierce competition in the industry. The ever-changing consumer demands have resulted in numerous changes in the service delivery in the banking sector. Also, the turbulent economic times experienced in the finance market have also brought about drastic changes in the banking sector service delivery.  The banks are trying to be risk aversive as they carry out their daily operations and service delivery to their clients (San-Jose, Iturralde, & Maseda, n.d.). The diversified offerings offered by the modern banks have also been a leading cause that has brought various changes in the bank’s service delivery. It is important to point out that the modern banks have diversified their services and they offer insurance, mutual funds and trading products in addition to traditional loans and credit cards. Besides competition with other banking institutions, the banking industry also faces stiff competition from other smaller lending institutions as well as insurance companies that have engaged in the money lending business.

The above challenges have forced the banks to look for ways to help them deal with the challenges. Banks are working day and night to ensure that they streamline and standardize their operating models to ensure competitiveness and utmost customer satisfaction. At the same time, they are trying to foster flexibility and business agility at the local level to provide increased customer satisfaction and sizeable market share from less flexible institutions. To standardize and streamline the banking processes, the banking industry has initiated process innovation and restructured information technology architecture to help improve cash management and treasury services in the sector.  The standardization process is aimed at eliminating siloed work processes, promote information sharing as well as ensuring standardized processes across all the sector’s operations. This has therefore necessitated information digitization which has resulted in increased efficiency and effectiveness in ash management and other treasury services offered by the bank. Also, government intervention and regulatory authorities have also been instrumental in the daily operations in the banking industry. Banks must be in compliance with the regulatory authorities to avoid conflict and all these factors have lead to the massive transition in the banking sector.

One of the major trends embraced by the banking industry is use of information technology in the cash management services. The globe is experiencing hard economic times, and the banking sector has not been spared.  As a result, the modern banks have been forced to pay closer attention to their bottom lines and also have a closer scrutiny of other business opportunities that may arise (San-Jose, Iturralde, & Maseda, n.d.). Unlike in the past where the information technology was accorded the least budget, the department has been reaping huge in recent years as banks strive to automate their services for increased efficiency and effectiveness in their cash management.  For several years, the banking industry has not been investing in technology, but the trend has changed in the recent years after the recognition of potential for cross-selling and fee-based income amongst its customers. Also, information technology has also been an instrumental source of diversification since business borrowing has stalled over the years (“INFORMATION TECHNOLOGY CHANGE MANAGEMENT IN NETWORKING”, 2016).  The number of corporate customers has significantly increased over the years, and hence banks are striving to automate their services to cater to the changing consumer demands. The banking industry has foreseen a situation whereby banks and vendors will stray away from traditional practices and hence prospective different market in future.  Consequently, the banking sector has invested heavily in the information technology to play a big part in cash management and treasury services in the banking sector.

Most banks are known to have different cash management solutions in place. However, it has been noted that a large number of the bank’s transactions are still being completed on Windows based solutions. In the recent years, the players in the banking industry have indicated plans to migrate all of their customers over to browser-based solutions.  Although the process has not been completed by all the banks, a good number of the big players have embraced window based solutions to cash management (“INFORMATION TECHNOLOGY CHANGE MANAGEMENT IN NETWORKING”, 2016). Most banks are sensitizing their customers on this approach, where most of the transactions are completed online, and the trend is expected to increase in the coming years.  It is worth to point out that the web-based transactions have made it easy for both the banks and their customers to track their daily operations. The customers can get real-time information concerning their transactions, and the bank can also easily track their day-to-day activities.

As aforementioned, the banks are increasingly looking for other revenue sources to increase their competitive edge. As more and more corporate embrace internet banking, the cash management solutions available to them are also receiving a makeover.  Financial service providers are focusing more on adding new capabilities that will increase fee-based revenues, as well as improving their usability by all-sized businesses including the intuitiveness of their menu-driven features. If the trend continues, it is likely that the market will experience a significant increase in the number of players abandoning the traditional cash management features (Anand & Gomez-Mejia, 2014).  Besides improving efficiency, most of the players in the banking industry have embraced internet banking to ensure that there is increased level of alertness in the industry. Alerts will also become more advanced and “smarter” and imaging will play a larger role in improving service as well as preventing fraud, than it has in the past. It is prudent to note that the banking industry is increasingly becoming more demanding and more sophisticated in their needs and hence making it necessary for this evolution (“INFORMATION TECHNOLOGY CHANGE MANAGEMENT IN NETWORKING”, 2016).  All players in the industry are forced to follow this trend to enhance customer loyalty. Failure to comply with the trend will ultimately lead to the banks losing on their most valued customer as they will be forced to shift their allegiance to the competitors embracing internet banking.

Furthermore, the banks are also striving to ensure that they cut on costs and also increase efficiency. The demand for cost reduction and increased efficiency has resulted to increased budgetary allocations in the banking information technology. In the recent years, most banks have indicated preference for vendors that can meet all of their banking needs online through a single integrated platform (Molitor, 2000).  This has therefore brought a trend where there is increased integration of the banking services where vendors can meet all their banking needs with a click of the mouse. It is imperative to note that most of the players in the industry are moving away from the past practices where most banks partnered with several other providers. While this scenario can still be found in several large banks, the majority of the market is attracted to greater integration and shared platforms. In essence, most players in the banking industry have been able to leverage their corporate banking solution relationships to cross-sell small business banking platforms and vice-versa. This approach has several advantages both to the customers as well as the banking institutions. For instance, the approach has been touted to lead to cost cutting as well as enabling the vendors to share functionalities in a common platform (Anand & Gomez-Mejia, 2014). Also, the integration process has also been instrumental in enabling the banks to grow together with their customers as there is increased sophistication in consumer demands. The integration process ensures that customers are not forced to migrate from one application to another hence avoiding customers hassles and saving the banks on costs involved in maintaining different applications.

Cash management in the banking industry has been a sophisticated and an expensive practice.  Many players in the banking industry have found it difficult to cope with the changing banking market.  For instance, the integrated platform is a sophisticated and an expensive procedure that most players in the banking industry have found difficult to implement. In an effort to comply with bank demands for integrated platforms, as well as troubled bottom lines due to the economy and longer decision cycles, the industry has experienced several mergers and acquisitions (Fuβ, Gmeiner, Schiereck, & Strahringer, 2007). With the level of competition is expected to increase and the need for integrated system on the rise, more mergers and acquisitions are expected to be conclude in the coming years. Most retail banking vendors are increasingly entering in the corporate banking space and are forced to get in mergers and acquisitions to ensure that they remain competitive in the dynamic banking industry.  By joining forces with vendors already established in the corporate banking space, they can more quickly achieve brand awareness and a proven track record in a new space, as well as gain access to new target markets and technologies.

Cash management role in any banking organization is also concerned with managing the liquidity of the organization. It is prudent to ensure that the organization maintains liquidity for both short term operations and its long-term growth aspirations. Managing liquidity is an integral part of a strong balance sheet and make sure that the cash balances in the organizations meet the daily financial obligations as well as maximization of the firm’s earnings. Nevertheless, most banks in the financial sector have found it difficult in ensuring that they have the right working capital. However, information technology has proved to be a valuable tool for ensuring that the banks have the right cash balances that help in effective cash management. Information technology has been actually used to help most banks to have a consolidated fund’s accounts where funds for investment and other payments are disbursed (Escobar, Cullen, & Gonzalez, 2004). Besides saving time, the process also reduces administrative time required in manual fund transfers. The level of accountability is also improved as there is enhanced and streamlined account monitoring. On the same note, the banks have been able to have access to detailed reports that are essential in managing the bank’s accounts.

Use of information technology in the banking sector has been widely used to reduce the unlimited number of risks faced by the banking industry.  Credit risk and market risks are the most prevalent forms of risks associated with the banking sector. Market risk is mainly caused by changes in market variables and this may at times lead to adverse impact on the bank’s earnings as well as its capital (“The retail banking industry in 2015”, 2007). On the other hand, credit risk is defined as the potential of a bank borrower to fail to meet their financial obligations as agreed.  As a result, many banks in the banking industry have invested heavily in the information technology to help them identify these risks and help put mitigation measures to ensure that such risks have minimal impact on the overall performance of the bank.  Most banks have recognized the importance of making and maintaining database of credit risk management system to ensure that banking institutions do not suffer from losses emerging from defaulters.  It is imperative to point out that most banks are striving to make sure that they avoid the banking practices which increase the risks in the bank. Information technology has been instrumental to risk managers in the banking sector as it helps the credit experts to identify when to accept credit application. This has helped the banks in the banking industry to maintain a good reputation and also help explore unavoidable credit risk which gives more profit to the bank. With a strengthened single-source of information local branches, not only substantially reduce lending lead times for credit but also can present a more compelling value proposition to customers. On-site proposal printing provides with the opportunity to cross-sell and up-sell based on complete customer picture for improved competitiveness (“The retail banking industry in 2015”, 2007). The process has also been instrumental in ensuring that the default rates in the banks are reduced to manageable levels.

On the same note, the federal laws and other regulatory agencies also requires the banks to put in place risk management processes. As a result, most banks have strived to ensure that they put in place internal controls to help them make sure that there are no incidences of inaccurate financial reports. The banks are also required to have processes that help in identification, measurement and assessment of aggregate risks. Such provisions have also had significant contribution to the cash management function in the banking industry.  The banks have ensured effective use of information technology to deal with any risk that may arise in the banking industry. Nevertheless, these requirements and regulations have led to high costs as banks invest in extensive business process re-engineering and information technology systems to ensure that they are compliant.

Cash management service in the banking industry is also expected to ensure that they avoid fraudulent practices that are likely to happen in the banking sector. It is prudent to note that there is an unprecedented increase in the level of frauds that ranges from unauthorized check writing to cybercrime. With this in mind, it has made it necessary for the bank managers to effectively manage the corporate financial assets and critical information associated with the bank. Many banks have in the recent years invested heavily to protect their assets from fraudulent activities that have been rampant in the past few years. The banking industry is aware that increased automation of the major services offered in the banking industry has only increased chances of cybercrime and other fraudulent activities in the industry. Consequently, the banks have been proactive in ensuring that they remain proactive to ensure that they reduce chances of fraud in their respective organizations. Also, the banking sector have also made tremendous efforts to ensure that critical customer information remain guarded and does not get into the wrong hands. This will ensure that customer satisfaction is maintained and thus customer loyalty is also maintained.  For instance, most banks have tried to strengthen barriers to fraud by increasing check payment verification. Dual signature review is a tool that is commonly used in the banking sector to ensure an effective control against internal and external fraud. The approach has been used to increase confidence levels amongst the firm’s clients as they are assured that their funds and information is safe with their respective bankers.

Treasury roles in the banking sector have also become an important aspect in the banking sector. Just like cash management, information technology has brought about drastic changes in the Treasury managements as banks try to cope with the ever-changing consumer demand (Anand & Gomez-Mejia, 2014). To start with, the industrial connectivity has increased the complexity of treasury management in the banking industry. It is essential to point out that as the level of technology increases, the corporate organizations are connected to their bankers through the web-bases internet banking applications. This is unlike in the traditional days where corporate organizations were connected to their banks through proprietary electronic systems, desk top software and terminal emulators (Escobar, Cullen, & Gonzalez, 2004). Most banks have in recent years embraced this development with particular interest in the security and reliability of the banking sector. Most players in the industry are striving to ensure that they have enterprise software that enables payment initiation and receivable files to ensure timely transactions between the banks and their corporate clients. For effective ERP systems of the organizations and the banks, it is prudent for the banks to ensure an effective connectivity between the bank and the company (Fuβ, Gmeiner, Schiereck, & Strahringer, 2007). Direct connectivity is essential to ensure direct transactions between the company’s bank accounts and the enterprise system. For large scale transactions, the banks have embraced a direct bank’s processing middleware and opt to bypass the web front ends. Nevertheless, it is prudent to point out that the connectivity process is faced with numerous challenges that the banking sector must be wary of and be proactive in ensuring that they deal with the emerging challenges. For instance, the banks have an obligation of ensuring that they ensure the authenticity and security of the files transmitted is guaranteed. Banks are working round the clock to make sure that they avoid substandard software that would have adverse effects on the success of ERP connections (“The retail banking industry in 2015”, 2007). Both the banks and the receiving corporate body must be proactive to ensure the safety and authenticity of all affected transactions. Most banks at the global front are actively laying foundations for industrial-strength connectivity to ensure flexible connectivity between ERP systems, of the different corporate bodies, and the banking systems. It is an approach that enables swift transactions between a bank and a corporate client any time and in any geographical location.  It is an approach associated with numerous payoffs, such as increased efficiency, control and visibility of the banking information systems.

As we have severally stated, the modern business world has become more dynamic and the consumer needs are increasingly changing every day. The banking industry must therefore understand the changing consumer demands to ensure that customer satisfaction remains their utmost and primary objective. For instance, it is essential to note that most clients want their banks to move beyond end-of-day balance and transaction reporting to providing value-added real-time analytics. It should be noted that meaningful, focused actionable information is critical to the bank’s treasury services.  Customers demand real and on-time information from their banks. Banks also need their customers to remain loyal to them and hence they must be proactive in ensuring that they meet the customers’ needs (“The retail banking industry in 2015”, 2007). Increased business activity between banks and corporate organizations will only be achieved if banks take a strategic approach that will support gathering and sharing information analytics. To achieve this, most banks are committed to provide information on current balance. Additional information that includes, future dated payments, feeds from receivables systems and time series analysis of historical data is also provided to enable Treasury to predict future cash flows. The process also enables the Treasury to determine optimal cash requirement and hence making it possible to budget for excess funds. Consequently, many banks in the market have given the Treasury the ability to aggregate, analyze and parse data to multiple users within their organizations (“INFORMATION TECHNOLOGY CHANGE MANAGEMENT IN NETWORKING”, 2016). The Treasury has a critical role of data aggregation, analytics and information distribution in most banks in the banking industry.

As aforementioned, it has become increasingly important for the banks to increase connectivity with their clients. This implies that there will be more than just data transfer thus making it prudent for the banks to embed their banks functionality to the firm’s ERP systems. It is imperative to point out that most corporate clients will always demand carte modules that will ensure an integrated into their in-house systems. It is for this reason that several banks have adopted lockbox check image viewer in the company’s internal customer service portal to enhance connectivity between the bank and its corporate clients. This improves efficiency and effectiveness as opposed to using different websites for both the bank and the client. The integration process has been a core function to the banks treasury as it ensures real-time cash deliveries and information sharing between the banks and their corporate clients. In essence, the banking sector treasuries are striving to ensure that they strengthen control and efficiency by consolidating the many different bank products (Molitor, 2000). This is made easy and efficient despite them having different user entitlements, infrastructure and security protocols through the universal multi-bank ERP-provided interface.

It is imperative to point out that most players in the banking sector are moving away from the traditional model of bank tools. These tools were typically designed as monolithic end-to-end software applications which the modern treasuries find them difficult to sustain the daily banking operations.  However, banks today are thinking of delivering web-services or advancing service oriented architecture in their daily operations. These web services are known to be moving away from the traditional monolithic model thus enabling more bite-size block of banking functionality that is embedded in the bank’s core tools (Escobar, Cullen, & Gonzalez, 2004). The integration with the clients systems enables the clients to pick and choose the pieces they need and where they need the chosen pieces. The treasuries also reap big since the workflow can be more streamlined and users do not have to jump from one system to another.  This integration requires that the banks must re-engineer their existing banking systems to meet the ever-changing consumer demands. User entitlements, security, and validity of the web-based service remains a major challenge that the banking industry ought to deal with. Nevertheless, the benefits of the approach, concerning agility and flexibility, and in the collaboration potential with banks and other partners are enormous.

Although there are major developments in information technology and digitization of the banking operations, there have been several challenges that the banking sector must deal with. One of the most prevalent challenges in the banking industry is the need for physical signatures on the documents. It is important to note that physical signature has been for several years as a requisite legal protection and non-repudiation to parties in a legal agreement. Nevertheless, the banking sector have embraced introduction of the digital signatures (Anand & Gomez-Mejia, 2014).  The banks are striving to ensure that they prevent fraudulent activities arising from digital signatures. Banks have long held a unique role in identity certification as regulated institutions.  In essence, the banking industry is straying away from the old days of paperwork to the modern paperless banking.

It is prudent to point out that there are several dominant players in the banking sector thus leaving a good number of the second tier players struggling to get new business. In addition, many of the cash management solution providers are faced with weak income statements, an inability to meet promised deadlines, and unsatisfied customers, making them prime targets for acquisition. However, moist banks are striving to ensure that their cash management and treasury services meet the customers demand. The cash management space has received little attention by banks in the past. While solutions were deployed and considered a necessity, businesses rarely saw the bells and whistles offered to retail banking customers. The advent of the Internet has been a huge driver of advancement however, creating several opportunities for banks to increase their operational efficiencies, provide better service, and put more control in the hands of their business customers (Fuβ, Gmeiner, Schiereck, & Strahringer, 2007). With greater demand from banks as well as the availability of more sophisticated and comprehensive cash management product suites, this space is ripe for change and we have already begun to see signs of that evolution.


In a nutshell, the banking industry has made tremendous progress in the recent years. They have become sophisticated financial organizations that offer a broad range of services in international markets and had to control over billion dollars in cash and assets. Competition levels in the industry have also increased significantly over the years and hence the players have to be strategic to ensure that they remain competitive in the sector. Supported by the latest technology, banks are working to identify new business niches, to develop customized services, to implement innovative strategies and to capture new market opportunities (Escobar, Cullen, & Gonzalez, 2004). As a result, cash management and treasury functions in the sector have been undergoing massive transition over the years to ensure that banks meet the demands in the dynamic banking sector. With further globalization, consolidation, deregulation and diversification of the financial industry, the banking industry will become even more complex. Treasury professionals and cash managers must be keen and should continue observing the emerging trends in the sector to ensure that they meet customer demands and consequently remain competitive in the dynamic banking sector.



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Escobar,, Cullen, & Gonzalez,. (2004). Impacts of the Implementation of ERP Systems on Cash Management The Redesign of Treasury Processes. IJDAR.

Fuβ, C., Gmeiner, R., Schiereck, D., & Strahringer, S. (2007). ERP Usage in Banking: An Exploratory Survey of the World’s Largest Banks. Information Systems Management, 24(2), 155-171.


Molitor, G. (2000). Trends and drivers in the information economy: strategic options for the insurance and banking industry. Foresight, 2(1), 55-68.

San-Jose, L., Iturralde, T., & Maseda, A. Treasury Management Versus Cash Management. SSRN Electronic Journal.

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