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Banking Based on Relationships
Relationship banking is a strategy that banks use to strengthen customer loyalty and provide a single point of service for a variety of products and services. Relationship banking is also known as relationship banking. Relationship banking entails a personal or business banker offering products designed to help customers attain financial goals while simultaneously increasing revenue for the financial institution. A customer of a bank may start out with a simple checking or savings account, but relationship banking can take their banking experience to the next level.
Acquiring Knowledge of Relationship Banking
Relationship banking involves taking a consultative approach with customers, learning about their unique circumstances and requirements, and adjusting to changes that may occur in their professional or personal lives. The relationship banking approach is not only practised in the retail branches of the large money centre banks, but it is also easily observable in the banks that serve smaller towns and communities.
Relationship Banking Is a Business
- Strategy that enables financial institutions to generate additional revenue, strengthen customer loyalty, and offer a wider variety of products to their clients.
- Relationship banking strategies are utilised by financial institutions of all sizes, including both small and large money centre banks.
- Customers are frequently approached by relationship bankers with a variety of products and services, including insurance, investments, and certificates of deposit.
- It is possible to go too far with relationship banking, as was the case with the Wells Fargo scandal, in which bank employees opened accounts for customers without first obtaining their permission.
The Pros and Cons of Maintaining Client Relationships in Financial Transactions
Customers may be able to take advantage of a bank’s desire to develop relationship banking by obtaining more favourable terms or treatment with regard to rates and fees, as well as to obtain a higher level of customer service. This is especially true in a smaller bank such as a community bank. Customers may be able to take advantage of a bank’s desire to develop relationship banking by obtaining more favourable terms or treatment with regard to rates and fees.
For instance, if a customer obtains a mortgage loan from a bank, that customer might be eligible to open a current account at the bank that does not incur fees if the account does not maintain a certain minimum balance. As a further illustration, if a small business obtains a revolving line of credit, it will be in a favourable position to negotiate a lower fee for merchant processing fees. This is because the revolving line of credit gives the business more financial flexibility.
Nevertheless, relationship management does come with a few drawbacks for customers, including the fact that they are forced to stick with a single financial institution for the majority of their banking needs and the possibility that they will develop a complacent attitude rather than shop around for the best prices and services available.
The services of the Treasury
The outsourcing of treasury functions is becoming an increasingly common practise in today’s global business environment. The idea of outsourcing treasury functions, including but not limited to liquidity management, payments and foreign exchange, receivables management, trade, netting, tax management, bank-fee reconcilement, and any other treasury task, is rapidly gaining popularity.
By utilising outsourced functions, finance teams are able to cut operating costs while simultaneously gaining access to the newest and most advanced treasury applications and TMS for the purpose of managing the outsourced function.
One of the advantages of outsourcing treasury functions that is frequently overlooked is the fact that the outsourced service is accompanied by highly skilled operators. Treasury professionals, or individuals who are familiar with the objectives and requirements of the organisation, make up the workforce of a quality outsourcing provider. In addition, the staff that is used for outsourcing has taken an additional step, which is that they have become an expert in one area of treasury.
Management of the Treasury
The management of an organization’s holdings is part of treasury management, also known as treasury operations. The overarching objective of treasury management is to manage a company’s liquidity while also mitigating the company’s operational, financial, and reputational risk. The activities of a company’s collections, disbursements, concentration, investment, and funding are all included in the Treasury Management function. It is possible for this to also include financial risk management in larger companies.
The majority of banking institutions have entire departments that are devoted to treasury management and catering to the requirements of their customers in this area. Because of the market opportunity afforded by the current economic environment (with banks of all sizes focusing on the clients they serve best), the availability of highly experienced treasury management professionals, access to industry standard, third-party technology providers’ products and services tiered according to the needs of smaller clients, and investment in e-commerce, smaller banks are increasingly launching and/or expanding their treasury management functions and offerings. Treasury management can be handled internally by businesses thanks to the availability of a variety of independent treasury management systems, also known as TMS.
The terms treasury management and cash management are sometimes used interchangeably for non-banking entities, despite the fact that the scope of treasury management being significantly larger than cash management (and includes funding and investment activities mentioned above). The day-to-day operations of an organization’s treasury are typically managed by the organization’s treasury staff, controller, or comptroller. In general, the CFO, Vice President/Director of Finance, or Treasurer of the company is responsible for overseeing the treasury operations of the company.
Conclusion
Relationship banking is a strategy that banks use to strengthen customer loyalty and provide a single point of service for a variety of products and services. Relationship banking is also known as relationship banking. Relationship banking entails a personal or business banker offering products designed to help customers attain financial goals while simultaneously increasing revenue for the financial institution.Relationship banking involves taking a consultative approach with customers, learning about their unique circumstances and requirements, and adjusting to changes that may occur in their professional or personal lives.Customers may be able to take advantage of a bank’s desire to develop relationship banking by obtaining more favourable terms or treatment with regard to rates and fees, as well as to obtain a higher level of customer service.The terms treasury management and cash management are sometimes used interchangeably for non-banking entities, despite the fact that the scope of treasury management being significantly larger than cash management.
