Full-service banking Featured

8:00pm EDT March 26, 2009

Innovations in the banking sector have transformed the way that business is conducted. In order to fully take advantage of such technological advancements, it is imperative to partner with a bank that communicates how new products and services on the market can improve your company’s efficiencies.

“If it’s been over a year since you’ve had a conversation with your bank about new innovations and the banking services you should have at your disposal, then you are probably being underserved,” says Syd Saperstein, senior vice president, division manager of Comerica’s Special Corporate Financial Services Division.

Smart Business spoke with Saperstein about what products and services should be expected from one’s financial institution.

How would you define the term ‘underserved’ as it relates to banking?

The banking industry has grown, as all industries do, and has come up with innovations, new cost-effective services and labor-saving solutions to handle problems that businesses face in the electronic age of the 2000s. We have consolidated and developed a lot of services that used to be spread around many different banks or many departments within a bank — now they are often seamlessly available in one place. Most customers, however, have not been given a road map on how to interface with their financial institution. And most financial institutions have done a relatively poor job of educating their customers about what improvements have been made. Consequently, customers are not getting the full benefit of the banking relationship that they could.

How can a business determine if it is being underserved by its bank?

Start by asking some questions: When was the last time my bank spent the time to educate me on the improvements in their world? When was the last time they pointed out improvements to the interface between businesses and banks? How can changes in treasury management services and the work that banks do internally translate into cost savings for me by taking over some of my work?

If you haven’t had a conservation like that, then chances are — just by the sheer increase in new products and services that banks develop and the passage of time — you are probably being underserved.

What advancements in the industry have occurred in the past decade or so?

Complicated multilevel transactions are now handled electronically, and there are advanced methods for batch file handling and consolidation. Internal accounting and subaccounting systems have developed within the most progressive banks. These sophisticated systems enable a bank to slice and dice their customers’ business and deposit relationships into regions, territories and sales offices, for example. In the past, a company’s employees used to have to keep track of all this information. Now, it can be handled within the bank, which saves the customer on personnel expenses.

What specific industries are most commonly underserved?

The ones we find most underserved are either the newest industries or the oldest industries. A company that starts today may ‘think small,’ go to a local branch and find the expertise that exists on the street level within a banking structure is not sophisticated enough to handle its needs.

On the other end of the spectrum are old companies with a lot of mature management, such as law firms or insurance companies. Law firms are often run by a management committee composed of the most senior partners. While their skill sets were probably well suited to manage a banking relationship 25 years ago, they may be very different from the skill sets that are being taught and used most effectively today. In order to keep their company as progressive as possible, they could very well benefit from partnering with a bank that is able to give them some up-to-date advice about what should be improved.

What products and services should be expected from one’s bank?

First, businesses need to take a look at the nature of the relationship. If they’re not having a conversation with their bank about innovations at least once every six months then something is wrong. Innovations within the banking world happen that frequently.

Second, you should investigate how the bank can take over labor-intensive transactional activities that are currently being handled internally. A specific example is processing 1099 Interest Income statements. Law firms frequently have to dedicate lots of staff time or even add staff in January and February so they can handle the processing of 1099 forms for the individual taxpayers whose funds are sitting in trust accounts with them. In today’s world, the 1099 work can be done by the bank for each component of a trust account. What’s worse is that, based on our experience and what we have learned by survey, the error rate on 1099 work done by nonfinancial institutions is around 20 percent, which can be very costly. Our error rate, for example, is far less than one-tenth of 1 percent. This is an area where businesses could avail themselves of using a bank’s services at low or no cost and replace a cost that is very high to them.

SYD SAPERSTEIN is senior vice president, division manager of Comerica’s Special Corporate Financial Services Division. Reach him at (415) 477-3246 or ssaperstein@comerica.com.