Commercial Cash Management Opportunities for Community Banks

A backlash against the largest financial institutions is creating a prime opportunity for community banks to attract commercial deposits, according to results from a survey conducted by Abound Resources.

The survey of 55 CEOs at community banks in the US ranging in size from US$100m to US$3bn found that 54% have experienced an increase in fee income from commercial depository services in the last six months and 87% believe they can increase commercial fee income. While community banks see great promise in commercial deposits, the survey finds that there remains untapped potential in commercial cash management for most institutions.

“Many community banks already have the cash management products that most small and mid-size businesses need,” said Sharon Sokol, vice president and cash management expert at Abound Resources. “Many banks just don’t know how to package, market, deliver, and support these products effectively.”

The four primary factors are driving the growth of cash management programmes in community banks:

  • Flight to safety – many commercial customers are giving community banks a new look, but expect products comparable to what they had at their previous big bank.
  • Cost of funds – in a tight margin environment, cost of funds becomes more important and commercial deposits and public funds tend to be cheaper than most consumer deposits.
  • Portfolio diversification – many community banks are seeking to lessen their dependence on commercial real estate by increasing commercial and industrial (C&I) lending. Cash management products are central to C&I lending.
  • Fee income diversification – many community banks have seen sharp declines in overdraft fees and are looking for fee income from commercial customers.


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