A Flick of the Wrist

At three+one, we strive to keep you up to date on all trends that impact you, whether it be financial technology, banking regulations or cash management practices. Please note that I wrote the blog below back in September of last year. Now that our prediction has come to fruition, we want to revisit that blog. Two weeks ago, Fitbit, Inc. (NYSE:FIT), the leader in the connected health and fitness market, announced it had purchased the wearable payment assets from Coin, a Silicon Valley consumer electronics and financial technology company, to create a universal credit card replacement device.

 

A Flick of the Wrist

By Joe Rulison

September 15, 2015

A Flick of the Wrist

The world of banking is changing, just as the world of entertainment has. Over the last two decades we have all moved from the VHS cassette to DVD disks and now to “smart” technology–using computers, phones, and tablets for our music, movies, TV shows, and video games.

Going forward, access to money will be quicker, less expensive, and either right at your fingertips or at a flick of the wrist. Bank tellers and ATMs will be viewed as archaic as the bulky old VHS cassette tape, the credit card will be compared to the old CD-ROM disk, while smart phones and wristwatch/bands will become the norm. The development and rapid adoption of the “Fitbit®” style of wristband–used today to monitor our daily health and activities–will be the next direction of technology for conducting daily banking operations. The swipe of the wristband will become commonplace within the next three years.

The change in banking will not stop there, so the need to stay on top of these trends and adapt quickly to them will be important–because your customers and taxpayers will be asking for it and expecting it.

Jamie Dimon is Right on Point

In a country where it’s more in vogue to disagree rather than to agree, I find it very easy to agree with the comments made by Jamie Dimon, Chairman and CEO of J.P. Morgan, in a recent Wall Street Journal article.

Jamie Dimon is Right on Point

While I disagree with Mr. Dimon’s name calling, as a former banker, I do concur that bankers need to find a way work together as one industry rather than pitting one bank against another.

Some may consider size to matter—community banks vs. regional, top-tier banks vs. regional and/or community banks—but to me, one fact is clear: all banks, no matter what their size, are intertwined at the hip. The world of banking is small in many ways, whether by lending to one other, the mobility of talent between banks, or the frequent interchange of services.

While blame may be rightfully placed on the biggest banks for their role in 2008’s financial meltdown, others are starting to point fingers at small banks for creating a potentially new financial bubble with subprime auto loans.

Personally, I am tired of all the open bickering and name calling. It has truly become part of the culture rather than an exception.

A month ago, I talked to the chairman of a local community bank and all I heard were complaints about other banks. Midway through our conversation, I brought up how banks should partner on certain issues, but that fell on deaf ears. The conversation almost immediately reverted to the competitive and predatory practices of other banks.

A common issue that faces banks of all sizes is the monumental challenge of being a bank in today’s financial environment. Successfully serving the public is challenge enough. Then toss in government regulations, unprecedentedly low interest rates, and a demanding client base that always wants more.

Seems to me a common partnership would be a better solution—pointing out all the good that banking does at all levels—rather than stressing what competitive banks don’t offer.

My advice: all bankers to come together, shoulder to shoulder, and act sensibly—as one voice and one industry. Until that day comes, Mr. Dimon, keep voicing your opinion loud and clear. I listened, and others will too.

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Co-founder Peter Forsgren presented yesterday and was a panelist during the:
“Current State of Banking Technologies” session at the National GFOA Annual Conference in Toronto.

We hope you were able to see it! If not, we’ve posted our presentation online you can find it here.

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Have any questions or comments for the author? Reach out below!

Joseph Rulison
CEO and Co-Founder

Desktop or Mobile: Do I Have to Choose?

Desktop or Mobile: Do I Have to Choose?

Do you make purchases on your desktop computer when you’re sitting in your office? Or do you shop via some app on your smartphone? When doing one, have you wondered why you can’t do it on the other device? Or has there been information on the other device you wish you had access to? Perhaps it is not so much the information but the functionality that you wish existed on both options.

That time may be coming. People who monitor the big tech and payment companies (Google, Apple, PayPal, etc.) have found that Google appears to be preparing its various Android apps to function on its Chrome operating system. This has many implications, but the one we think will impact public entities and higher education institutions the most is for making payments.

Public entities and higher ed facilities do not sell tangible products like clothing or furniture. When people make payments to these institutions it is for services. As user experience making digital payments becomes easier and safer, more payments will migrate to electronic means and away from cash and checks. This is great news as electronic transfers can be cheaper and easier.

This trend is not going away. It may not be the way organizations have “always done it”—meaning how they’ve received payments—but it will be the way you’ll want to do it and, likely someday, need to do it.

It’s time to look at your systems. Do they have the flexibility to add additional payment options (whether receipts or disbursements)? Are your constituents already asking if other payment options are available? The requests may come slowly at first, but you can be sure they will come.

Will you be ready?

Have any questions or comments for the author? Reach out below!

Peter Forsgren
COO and Co-Founder

Top Five Cash Tips

This is a continuation of our blog from last week, “Cash is Not Just Cash”. Read it here.

Top Five Cash Tips

1.) Consider all cash as an asset that has worth. No matter how short or long your cash is needed, there are options to receive immediate income on those funds without jeopardizing safety or liquidity.

2.) Given new federal regulations, the top-tier banks will want your operating account, as referred in our past blogs. Community and regional banks will want both operating and capital reserve funds, unless they hit their cap level of public deposits.

How will you know which banks want your money? One was is by the rates they offer. Short-term deposit rates can range from .0% to .50% or more depending on the length of time. The farther you extend the maturity time frame, the lower the rate you will see from the top-tier banks, while you will see higher rates from local and regional banks.

3.) A strong banking relationship is essential to managing your cash. Take your banker’s phone calls and meetings. The stronger your banking relationship, the higher rates you may see for your deposits.

4.) Consider a state short term investment pool as an option; it automatically meets all state and local regulations. Such pools may or may not have different maturity options, but with the right liquidity data you can remain safe and liquid while achieving a steady stream of income on your cash.

5.) A Bank Deposit Investment Account (BDIA) should be considered as a viable liquidity option to maximize value in the marketplace while remaining safe. A BDIA is an actively managed portfolio of U.S. treasuries using your liquidity data. The safety of U.S. treasuries can be matched to the time needs of your cash, producing a greater level of cash. The funds still remain with your bank and managed by an RIA money transfer. The rates on a BDIA will vary based on average maturity. This can be used in all 50 states.

 

We hope to see you at some upcoming events:

GFOA Annual Conference of The United States in Canada in May

Last week we presented at the GFOA of South Carolina on “Trends Impacting Municipal Banking”.
We’ve posted our presentation online you can find it here.

Have any questions or comments for the author? Reach out below!

Joseph Rulison
CEO and Co-Founder

Cash is Not Just Cash

Over the last two weeks, I have had conversations with two different finance committees to discuss their liquidity and cash flow needs.

The conversations varied. One group saw their operating cash and reserves just as it is: “cash.” They keep their cash completely liquid so they have it available at all times, even if their cash flow numbers show that there will be no need for all of their cash for several years. Their idea is to just keep it safe and liquid.

Another group saw their cash as an investment opportunity with the ability to invest in mutual funds and long-term bonds, which could yield them over 3.0%. Though safety and liquidity were a concern, yield was their greatest priority.

I sat and listened in both cases and then they asked for my opinion. I think both groups were surprised with my answer: “cash is cash, which needs to be safe and liquid, but should be considered an income-producing asset that needs to be proactively managed with discipline and care.”

There’s a fine balance between having the safety and liquidity you need and achieving the yield you want.

Safety comes not just by following rules and regulations (externally or internally)—it also depends on your bank relationship. The more you communicate with your banker(s), the greater peace of mind on both sides of the relationship, while still staying current on all cash/deposit regulations.

Liquidity is defining the time value of your cash. This is where cash can become an asset while adhering to all principles of safety.

Yield is where you realize the value of your cash and its worth to your banks and the marketplace.

Consider this before and after scenario:

Before:
If you just sit on your cash, the “real” rate of return on your bank deposit ranges from a negative to a slight positive percentage return.

After:
An actively managed cash strategy with a percentage mix of bank deposit products, state pool options, and a BDIA will produce yields in the range of .40% to 1.00%+.

Both scenarios are safe and liquid, but yields are significantly different. The “before” scenario is cash being considered only as cash. The “after” scenario views cash as a performing asset.

At three+one, we can quantify your entity’s liquidity time/value and give your financial provider(s) the liquidity data they need. Our innovative, proven process is the link between safety, liquidity, and yield. Our data creates greater value on your cash and can turn it from a non-performing asset into immediate revenue to your bottom line.

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We hope to see you at some upcoming events:

GFOA Annual Conference of The United States in Canada in May
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Have any questions or comments for the author? Reach out below!

Joseph Rulison
CEO and Co-Founder