This Month In Commercial Banking
Commercial net interest margin (NIM) is under pressure. Deposit costs are going up while balances are going down. And a flat / inverted yield curve and tightening credit standards are pressuring growth in interest income. Markets such as these reinforce the importance of treasury management (TM) fee income.
Payments sit at the heart of company’s cash management operations and remain a top priority for bank and industry innovation. Banks are increasingly investing in payments hubs, which incorporate personalization and payment-rail optimization based on speed and cost.
The payments ecosystem is poised for the next leg of innovation as instant payments such as real-time payments (RTP) and FedNow are in a position to take share. RTPs currently account for 2% of average bank TM fees, but with the imminent launch of FedNow and increasing awareness of use cases for instant payments, that figure is set to rise. (See Figure 1.)
Figure 1: Gross TM Fee Distribution By Product Family
Note: Real-Time Payments and Zelle Disbursements not reflected within payments, percentage is less than 5%
Banks are investing heavily in the payments space, with 40% of digital platform functional upgrades going to payments. Now’s the time to both review current payments capabilities and equip the sales force with use cases and sales tools to help clients optimize their cash conversion cycle by harnessing payments innovation.
