22 August 2017
George Ravich

FinTech Marketing Insights

George Ravich - Earnix, Inc.

7Posts 36,652Views 5Comments
Finextra community

Transaction Banking

A community for discussing technology trends, views and perspective in global transaction banking

Transaction banking: monetising the data goldmine

14 September 2010  |  5683 views  |  1

Lowly transaction banking – that backwater business that revolves around processing transactions –has only recently begun to receive proper recognition as a major contributor to the bottom line. Having produced steady growth and profits throughout the past several years it may just become a strategic asset for banks. With low risk and high return on assets, it’s just what the doctor ordered. 

Although estimates vary, transaction banking represents about a third of the banking industry’s revenue, and has a healthy margin of over 30%. Industry analysts at Celent and Aite Group are both predicting continued strong growth to a segment that will generate over $400 billion in annual revenue within the next five years. Driving this point home is a recent survey done by Aite Group showing that 44% of bankers see their commercial treasury clients as significantly more important to the bank, as a result of the financial crisis. 

Banks have many good options for expanding their transaction banking business. At its core, new expansion opportunities come from combining data with transactions. There have been great strides in this area recently among many of the industry groups that define transaction structures. For example, adding remittance data to both high and low value transactions becomes an important value-added service that improves the efficiency of corporate treasury operations. With greater efficiency in both accounts receivable (A/R) and accounts payable (A/P), corporates will welcome these services. 

Electronic invoice presentment is another lucrative opportunity for banks. By capturing this data for corporate clients, banks have the ability to develop all sorts of liquidity-related services that will optimize clients’ working capital. In times of tight credit, the bank that can eek-out the greatest financial leverage for its customers will be highly valued and preferred. Electronic invoice presentment and payment (EIPP) is a business that is ripe for expansion. Corporate treasurers who now have the mandate and the money to invest in new cost saving operations are more likely than ever to move forward with EIPP. On the supplier side, there are many options for banks to outsource to a service bureau, thereby eliminating the start-up costs and operational complexities. 

The challenge for banks is to realign their transaction banking business model from lowering costs through automation to increasing revenue through monetizing the goldmine of data they have access to. This is the new reality for banks that will drive new revenue and profits through deeper and more valuable corporate relationships. And by no coincidence, these are the kinds of information-rich relationships that corporates are in need of today.

TagsPaymentsSibos

Comments: (1)

Ketharaman Swaminathan
Ketharaman Swaminathan - GTM360 Marketing Solutions - Pune | 16 September, 2010, 08:25

Having observed many corporates' specific information needs from their banks around payments, remittance and reconciliations, I agree with George that transaction data is a goldmine waiting to be monetised.

At the same time, having witnessed typical responses from banks' transaction banking leadership to demands for such information from their corporate customers, I'm led to believe that there's a strong need to educate banks on how to use the incremental fee income from providing greater transparency with the perceived loss of float income that would accompany any reduction in opacity that such a measure would cause. 

As often is the case, the devil is in the details.

 

Be the first to give this comment the thumbs up 0 thumb ups! (Log in to thumb up)
Comment on this story (membership required)

Latest posts from George

The way to corporate banking customers' hearts? Go mobile!

03 June 2011  |  4426 views  |  1 comments | recomends Recommends 0 TagsMobile & onlinePayments

Transaction banking: monetising the data goldmine

14 September 2010  |  5683 views  |  1 comments | recomends Recommends 0 TagsPaymentsSibosGroupTransaction Banking

Corporate Treasury - The New Reality

12 July 2010  |  4500 views  |  0 comments | recomends Recommends 0 TagsPaymentsWholesale bankingGroupTransaction Banking

Digging for Gold - Winning in Transaction Banking

16 November 2009  |  8117 views  |  3 comments | recomends Recommends 1 TagsPaymentsWholesale bankingGroupTransaction Banking

George's profile

job title Chief Marketing Officer
location Westport
member since 2009
Summary profile See full profile »
Earnix integrated customer analytics software empowers financial services companies to achieve optimal business performance through data science and predictive analytics. For more information visit ww...

George's expertise

Member since 2008
7 posts5 comments
What George reads
George's blog archive
2015 (1)2011 (1)2010 (2)2009 (3)

Who's commenting on George's posts