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P2P & Mobile Threaten Bank Treasury Services Revenue

2010 October 3

Mobile and electronic payments are important to us. Checks are inconvenient, expensive, and take longer to move around. Checks invite fraud as well. Bankers justify many internal business initiatives using these facts.

So when I founded this company, I made a point to use electronic payments whenever possible. Ironically, almost all our bank clients pay with paper checks. Banks are going to great lengths to reduce the number of checks, yet they cling to checks themselves, despite arguably having more expertise and infrastructure to handle electronic payments than any other industry.

What follows is a sordid and cautionary tale for bankers:

[Note: Skip ahead to avoid the whining about bank customer service]

We have two primary banking relationships (which the banks will thank us for not disclosing). One bank is a megabank. The other bank is a regional bank. We considered a number of community banks and credit unions but neither had the necessary infrastructure to support us (nearby branches, ATM network, mobile banking, online banking, billpay, etc.).

We went to both our banks to discuss payment options. Neither bank bill payment option worked for us. We couldn’t setup small vendors (like consultants) as payees without long payment delays and expensive fees — if it was offered at all.

We tried setting up treasury services. We understand wires and ACH payments. Ultimately it took two months of back-and-forth with both banks for them to give us the pricing and functionality available (we need international capabilities too). No one customer-facing bank employee knew the options or the pricing. Many simply didn’t return calls or even show up for meetings.

When we did select which bank to use for treasury services, it ultimately took another two months to go live. Despite good credit, the bank insisted we provide tax returns for the past two years. Once we were approved, the bank also required signatures from a number of internal employees to move forward. It took nearly a month, many emails, and six unreturned voicemails to get one manager to sign the form.

Once we got the welcome packet via FedEx, we waited another week for tokens that never came. We made another round of unreturned voicemails and phone calls to get tokens. After escalating the issue, two separate packages were overnighted on two separate days.

It also turns out that the treasury services web site is written so it will only work in Internet Explorer on Windows computers (we’re all Mac here). Furthermore it wasn’t that the web site doesn’t support Macs, it simply won’t work at all. With 10 years of software development experience, I can say it takes effort to make a web site this incompatible. But no worries, we found a software workaround to make it work.

[Note: It’s safe now. The whining is over.]

So, months later we were finally ready to send our first payment!

It turns out the international ACH capabilities the bank said they had aren’t really there. It also turns out the recipient’s bank charges $15 for incoming wires.

Add in the $30 outgoing international wire fee my bank charges and the monthly fees become far more expensive than the $35 I’d been paying in the interim to FedEx a paper check.

Meanwhile, PayPal removed all fees for bank-account funded P2P transactions.

I pulled out my phone and sent the money instantly for no charge while sitting in the parking lot.

I pulled out my phone and sent the money instantly for no charge while sitting in the parking lot.

P2P and mobile technology are becoming hugely disruptive. Banks need to rethink how they help customers move money around if they want to protect treasury revenue. Giant corporations will continue to pay the high fees for a while, but soon they’re going to start wondering what they’re getting for their money.

Banks have the opportunity to lead this transformation and attract highly profitable customers. If they don’t, banks risk everything.

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