Why treasury management is table stakes for banking primacy

Scott Earwood is head of the community banking division at White Clay, a company that helps banks and credit unions build deeper and more profitable relationships.

Financial institutions today are under immense pressure to grow non-interest income, protect their operating relationships and compete against larger players. While especially true for community banks, one of the most powerful tools available for them that can do all three of these is often treated as an afterthought. That tool is treasury management. 

Treasury clients generate around three times the profit of non-treasury clients, yet penetration for most community banks is roughly half that of regional banks. It’s clearly not that treasury management doesn’t work or isn’t effective, but rather it’s often misunderstood, underpriced or worse, simply given away entirely. 

Treasury management is no longer a product enhancement. It has become core infrastructure for winning and retaining commercial relationships, yet many community banks still price and position it like an optional add-on.

At a high level, “good” treasury management simply means having the basic capabilities a growing business expects: ACH, wires, positive pay, fraud protection and a digital interface that makes it easy for business owners to see, move and protect their money. For many community banks, especially those between $1-10 billion in assets, building out that foundation has been a focus lately. They’ve made good progress, which matters, but “great” treasury management goes beyond just having the tools. It’s about how those tools are leveraged, positioned, priced and ultimately integrated into the relationship.

Why treasury management drives primacy

For a business of any meaningful size, the primary banking relationship is almost always where the operating account lives. Loans may move more easily than people realize, but primary operating accounts rarely do. Moving things like payroll, vendor payments, reimbursements and incoming cash flows is complex, risky and time consuming for a business owner. Once those systems are embedded, they create stickiness that rate alone really can’t match. 

And that’s why treasury management can often be such a big or even the deciding factor when a business outgrows a smaller institution. Community banks do a great job serving their local businesses, right up until those businesses reach a point where the bank can’t support how they move money. When that happens, the client won’t just move a single service, but the whole primary relationship. 

This isn’t a hypothetical situation. I’ve seen it firsthand many times. In one case, a business moved its loans to follow a trusted banker at a community institution but couldn’t move its operating account because the treasury tools weren’t there yet. Until those capabilities were built, the primary relationship stayed behind. That’s just one example of how critical treasury management has become.

Don’t give It away

One of the worst, and most common, mistakes community banks will often make with treasury management is treating it as a giveaway, viewing it as little more than a way to “take care of” good clients. 

Reasonable discounts are fine and have historically been part of the business. Waiving the cost completely, however, is the problem. Like all banking services, treasury management has real costs, everything from technology and fraud protection to support and ongoing maintenance. When banks waive fees, they aren’t just reducing non-interest income, they’re diluting the profitability of relationships that may already include discounted loans and elevated deposit rates.

But the issue for many community banks when it comes to discounting treasury management is that they can lack the right guardrails when applying them. Commercial bankers naturally want to help their most valued clients. Yet treasury teams will often hear “take care of them” and interpret it as “make it free.” Over time, that behavior becomes embedded (or worse invisible) because few banks actively track all their waived fees or discount levels.

A better approach is setting clear pricing guidelines, allowing measured flexibility and tracking their exceptions. Even modest structural changes, like implementing defined discount ranges and more visibility into how often they’re used, can go a long way towards preventing treasury management from becoming a black hole for revenue.

Moving from ‘free’ to ‘fee’

One of the toughest questions for any community bank is deciding whether to begin charging for services that have historically been free. And once they do, it’s difficult to determine exactly how to go about it, especially where high-value clients are concerned. Some institutions choose to grandfather existing clients and apply pricing only to new relationships. Others may take a more proactive approach, applying it to every account, but communicating changes clearly and well in advance.

Regardless of the path forward, offering context and value always works better than simply adding the fee. Banks that have successfully made this shift have educated their clients early and often on how the new pricing aligns with the broader market, highlighting the investments in new capabilities and their benefits, and showing them how they can offset costs through balances or usage. When done thoughtfully, client attrition is often much lower than most banks fear.

It’s also far easier to raise a discounted price later than it is to go from zero. That’s another big reason institutions launching new treasury services should resist the temptation to start at “free.” Charging something, even if it’s a small amount, creates more flexibility in both the short and long term.

Where community banks should start

The good news is that for community banks looking to improve their treasury management performance over the next few quarters, the path forward doesn’t require perfection, only some additional focus.

The first step is to identify their low-hanging fruit. A great place to start are those clients with high transaction volumes who aren’t currently using treasury services. The reality is these relationships often already behave like treasury clients; they simply haven’t been positioned that way (yet).

Second, they need to break down the silos. Treasury management data often lives in separate, disparate systems, making it hard for bankers to clearly see pricing, discounts or usage. When bankers have better visibility, conversations naturally improve and, in turn, behavior changes. 

Third, community banks must train both their bankers and treasury specialists on the value of treasury management. When bankers understand the details behind how these tools actually help their clients run their businesses, they’re much more likely to bring treasury teams into the conversation early on in the relationship. This small shift can not only help drive revenue, but it often becomes a competitive advantage.

Table stakes, but also a differentiator

Truthfully, banking today is largely a commodity and to stand out, community banks often differentiate themselves through their service and relationships. But great service doesn’t require giving everything away. 

Treasury management sits at the intersection of value for both the client and the bank and it’s no longer a “nice to have.” It’s table stakes. While institutions don’t necessarily need to lead the industry, they also can’t afford to lag at the bottom either. Falling behind increases the risk of losing those critical primary relationships, especially as clients grow and their expectations rise. 

For community banks that can find the right path, treasury management becomes exactly what it should be: a powerful tool that deepens relationships, improves client outcomes and supports sustainable profitability. That’s a win on all sides.