For decades, the function of account analysis in American banks has been considered a basic operational tool for managing pricing and billing for corporate treasury services — a function for billing the services consumed by corporate treasury customers. While other banking functions have been undergoing deep transformation and modernization, account analysis has largely been ignored, as most banks did not think it could deliver any value beyond tracking fees and services. But as the sector faces significant disruption on multiple fronts, the question arises if account analysis can evolve into an effective customer-centric tool for service differentiation.
Understanding Account Analysis
At its core, account analysis is a mechanism banks use to price and bill for the services provided to corporate customers. It involves a detailed statement that breaks down banking services consumed, the costs associated with these services, and often includes an earnings credit rate (ECR) that offsets service charges based on the balances maintained in the account. For most banks, this is a complex process that is important only because delivering an error-free invoice can plug revenue leakage. In fact, 49 percent of the respondents to the American Banker’s survey on account analysis said that it was an important essential service. There is no question that this is a critical element of the account analysis process. The modernization approach will just change the perspective to consider this function from a customer’s lifecycle point of view and their requirements. After all, 45 percent of banks say that their corporate treasury customers find their account analysis function frustrating.
What Do Customers Want?
Treasury customers seek ways to manage their liquidity, and they want a bank who can act as their partner and not just a vendor. In addition to error-free billing, transparency by way of fair and visible pricing, real-time account balance information, seamless contract renewals, and accurate cash flow forecasting are some key factors that can help treasury customers. But for over 50 years, account analysis has functioned in the same way. Transaction volumes are collated, appropriate pricing applied, earnings credit applied to the balances, invoices raised monthly, and bills shared with customers. Corporate customers have no real-time visibility into liquidity positions or on charges as they happen. It almost serves as a mere audit of service charges. By allowing treasury customer visibility into real-time account analysis, banks can help them forecast their balance positions for normal cash management purposes. They may even look at transforming their earnings credit by participating in the carbon offset market with their treasury products.
Unfortunately, only 38 percent of banks can fully meet client needs for cash flow forecasting, only 32 percent can ensure transparency, and only 41 percent can ensure error-free billing. As competition increases, and banking revenues come under pressure, a bank that can deliver on each of these requirements will have a key service differentiator to attract and retain their corporate customers. To deliver on these fronts, banks need to improve their agility and speed. They need to be able to not just offer customers transparent insights into their account activity, but also offer advice on alternative ways of balance management and more. They need to be able to collate data from across different functions and gain a comprehensive view of transactions in real time.
The Modernization Challenge
None of this is possible with legacy banking systems. But even before we get to the technology aspect of modernizing account analysis, there is the question of perception. For most banks replacing their account analysis systems is akin to replacing their core banking or deposits management system. They are often intimidated by the prospect of change management. Defining a standard catalog of products, billable codes, bundles, and even the pricing structures is a marked deviation from how they have been doing business until now. This may seem to be a significant challenge and roadblock for many banks. The third key challenge that banks face is integration. Account analysis solutions need to aggregate data from different sources and systems across the bank. Integrating these sources and addressing new data sources that must be considered can prove to be difficult, especially since the team must ensure the data is accurate before it can be reconciled. Modern account analysis solutions must be able to integrate data in real time and many banks are adopting new methods such as streaming-based integration or online integration via APIs. The good news is that modernizing account analysis is possible without a complete overhaul of legacy systems. A cloud-native, composable, microservices-based platform that can sit over the legacy core can help banks quickly modernize this function with minimal risk.
Account analysis a multifaceted tool that transcends the simple monitoring of banking fees. It is a strategic asset that, when effectively utilized, can significantly enhance a company’s financial operations and strategic planning. The future of account analysis, propelled by technological advancements, promises even greater insights and efficiencies, making it an indispensable tool for businesses aiming to navigate the complexities of the modern financial landscape.