If you want treasury management services to have a positive impact on your institution’s bottom line, you must charge fees for them. This seems like a basic principle, but many community banks provide treasury management services free of charge—either because they are afraid the fees will drive away business or because they have underestimated the value of the services themselves.
When banks compete against each other, they may waive fees for certain services in order to attract customers. However, instead of adding to a revenue stream, giving away a service like ACH origination will actually decrease its value—and could harm the customer relationship—since it costs the bank to facilitate and perform processes related to the service.
Sure, delivering free services can help jump start your treasury management market penetration, but this philosophy is hardly sustainable. The reality is that customers expect to pay for treasury management services, so your institution should not feel afraid to charge for them.
Yes, You Should Charge. But How?
So, how should you build your treasury management pricing structure? Whether you’re a community bank or a national institution, the key to effective treasury management product pricing is flexibility. Pricing does not have to be static—or even the same for every customer, because not every customer relationship is built the same way.
When considering what to charge a customer for a particular treasury service, you’ll need to take into account the lending relationship, the deposit relationship, total relationship profitability and volume usage of services. Although your bank will have fee schedules associated with treasury management products, the key is for the billing system to be flexible enough to price services based on relationship—and not a one-size-fits-all approach. Here are some guidelines on how you might tailor your approach:
Small to Mid-Size Businesses
Pricing Approach: “Package Pricing.”
Description: A simplified structure that provides all the treasury management solutions the customer needs for one flat price
Reasoning: No bank is too big or too small to offer treasury management as a beneficial service to its customers. For small to mid-size institutions, a packaged pricing structure allows the consolidation of your treasury management services. This decreases the operational burden on your institution while still providing your customers with useful services like ACH processing and remote deposit capture.
Pricing Approach: “A la carte.”
Description: Charge the customer for access to each individual service and occurrence needed.
Reasoning: The larger and more complex the customer, the more intricate the pricing structure. To these customers, volume is so great that small differences in fees can drastically influence treasury operations.
Now that you have some information to get started, it’s time to apply an appropriate pricing plan to your own treasury management program. For more information on implementing an effective treasury management initiative, take a look at CSI’s Implementing a Successful Treasury Management Strategy white paper.
Greg Aumann is the application product manager for NuPoint® ACH. He is responsible for ensuring the application remains competitive and compliant in today’s rapidly changing ACH environment. Greg also holds accreditations as an AAP—Accredited ACH Professional and CTP—Certified Treasury Professional. In addition, Greg is an active participant of EPCOR’s Education Committee working to help provide guidance, direction and support for EPCOR’s Payments Education offerings.