To all of the men and women who have served, who continue to serve & who have paid the ultimate sacrifice, THANK YOU for fighting for our freedom!
It’s Monday morning and you’re catching up from the preceding week and preparing for the new one. As you review your cash flow, can you put your fingers on all your cash balances in a moment’s notice? With five different banks and maybe more than 20 bank accounts, how can you possibly know your entity’s whole cash position right now? What are you going to do? Scour through websites and bank statements and hazard a best guess?
You want a holistic picture to make disbursements and investments with total confidence. You need to capture all your liquidity data at the precise moment you need the information.
With interest rates rising, every penny of cash has a value. Today the average value of liquid funds (30 days or less) is over 1.50%—and that will continue to rise. For an entity with $5 million in cash, that equates to over $75,000 or more over a year. That’s enough to pay for a full-time position, enable staff pay raises, buy playground equipment, a new truck, a few generators. Whatever.
Can you account for every dollar that is sitting idle? At three+one, our liquidity models will find cash where others don’t see it. How do we do it? Our liquidity analysis is built on getting our “fingers into the dirt”and identifying all patterns of cash. Through a pure and independent process, we’re able to produce surprising results.
Yes, we can let you know where your cash is at any minute of the day and how it’s performing. So when those you serve ask, “Where’s all our money?” you can confidently answer that it issafe, liquid, and yielding the highest possible rate.
Bank deposit rates are becoming more competitive in our rising-rate environment. Does that mean the past strategy of bidding between multiple banks in search for the highest yield, (considered “hot” money), is back?
For many reasons, the answer is no.
First, with more public money in the marketplace, complicated regulations, and more paperwork, public deposits are simply less attractive to banks.
Second, banks can’t pay higher deposit rates long term if they’re unsure on how long the deposits will stay at the bank.
Third, the percentage required for banks to put aside for bank liquidity purposes—the Liquidity Coverage Ratio (LCR)—continues to mount. This gives banks very little room to use such deposits on their balance sheets for lending purposes. Layer that with collateral requirements and banks are less eager to seek such deposits.
Fourth, banks today want more transactional business—not just your deposits. Hunting for higher deposit rates will leave you with few, if any, bidders.
Fifth, a majority of public entities restrict their banking business to banks within their boundaries. With fewer community banks on the scene, the remaining ones don’t need to compete for public deposits.
Lastly, thanks to years of a low-rate environment, public entities have become less proactive in the “yield hunt”; safety and liquidity are now their main focus.
At three+one we can help public entities learn the true value of their funds in the marketplace. In turn, banks will appreciate what your deposits are worth; that can help you net higher long-term yields.
Last month, Wells Fargo announced that they will be closing hundreds of its bank branches as a result of the increasing trend of online banking and digital banking transactions. The use of online and digital banking is rising at a double-digit pace. As a result, the need to physically go to a bank branch is becoming more obsolete, especially in areas with smaller populations.
This is a trend that we have been blogging about since 2014, as we’ve seen the popularity of virtual, online, and digital banking methods increase dramatically.
As banking methods change, here are some steps you can take to stay in step with—or ahead of—these trends:
First, banking RFP templates from five or ten years ago are obsolete. Developing forward-looking RFPs is essential in order to capture all the services and technology needed today as well as those you’ll need in the future.
Second, with fewer bank branches in rural areas, you should consider using banks with a “virtual presence.” Those you serve are already doing just that.
Third, educate yourself and your staff on the new types of technology that are being used—and preferred—by those you are serving.
Fourth, adapt to the changes in how payments will be received and made, both online and at the counter.
Fifth, develop an electronic payment policy and update it annually. This policy should apply both to your organization and the banks you do business with; it should also include steps that enhance fraud protection.
Technology is evolving at a rapid pace, and that’s changing the traditional way the nation does its banking.
At three+one we can help you navigate this changing landscape. We can also assist in the development and evaluation of a banking RFP and electronic policies that include new and upcoming technologies.
Staying in step or ahead of these banking trends will be appreciated by your entity, its employees, and the clientele it serves.
Beginning this month, major credit card companies will no longer require a signature for most credit card purchases. This has become a standard practice for small purchases, but will become a more acceptable practice on all credit card purchases.
First, it will speed up the process at the counter.
Second, millennials—now America’s largest age bracket—do not like to sign their name, especially legibly in cursive.
Third, at the point of transaction, verifying signatures on the back of credit cards is rarely done; that effectively nullifies any level of fraud protection.
Fourth, it’s a way for plastic to compete with Near-Field Communication (NFC) and other digital technologies. Payment methods that don’t require plastic cards or signatures are fast becoming the preferred way to make payments.
In the changing landscape of banking, the world of making payments will continue to evolve. Public entities and higher Ed institutions that adapt to ongoing changes will be viewed as leaders by their clientele.
Fewer bank branches, digital technology options, and the desire to lower costs are all paving the way to over-the-counter and online innovations. The quicker your organization adapts to them, the better it will be viewed and appreciated by those it serves.