The commercial deposit opportunity for U.S. financial institutions is in the trillions of dollars. That money is being stored and handled in ways that are inefficient for banks and inconvenient for clients. It seems strange that banks would use manual processes to handle money for their commercial clients, but digital transformation is happening more slowly in the commercial space than it happened in retail banking.
One reason for this delay is the complexity of business banking. Money movement and storage needs differ by industry and even by company. Commercial banking is ripe for automation. Thankfully digital transformation is happening, and banks can operate new, powerful tools on behalf of their clients. ZEscrow is one of those tools.
Managing commercial deposits can be painful.
When our team began planning the product that would become ZEscrow, we interviewed a lot of bankers and commercial clients to learn about their needs. We had heard that escrow and subaccounting were two arenas that caused headaches for bank staff and their clients.
As we listened to people familiar with the space, we uncovered two primary challenges:
- The core software providers offered minimal (if any) infrastructure to support three-party accounts or complex subaccounting processes. This left institutions managing funds on Excel spreadsheets and their staff working full-time to answer phone calls and administrate the accounts.
- Businesses had rigorous compliance requirements for managing security deposits and other funds. Few banks were equipped to meet the basic needs of those businesses, let alone keep the compliance burden manageable.
It’s possible to compete on something other than rate.
When banks compete for commercial deposits, they usually do it based on the rate they’re willing to pay. All of the so-called “solutions” for treasury management were equally poor, leading our team to ask: “what if we could help these institutions compete using technology to transform their processes?”
In one case, we asked a group of real estate developers in Georgia if they had access to a certain feature, “would they be customers of the bank for life?” They answered, “Absolutely, without a doubt.” We didn’t discuss the rate at all.
Practical ways that ZEscrow makes commercial banking easier.
We knew that ZEscrow would need to create new efficiencies for the bank, especially when it came to storing money over long periods for multiple stakeholders. To that end, we built the platform as a rules-based accounting engine that could be customized to meet lots of compliance requirements. That includes interest splitting, W9 collection, reporting, statement issuing, and preventing co-mingling of funds.
We also realized that subaccounting was a feature set that would give commercial clients unprecedented visibility and traceability for their funds. It would also provide banks and clients with a high degree of control.
For example, one of our partner institutions was struggling with a construction loan that included staged disbursements. They were looking for the best way to hold those funds on their general ledger and keep everything reconciled correctly. They asked us if they could use the ZEscrow to stage the funds using subaccounts, and we said, “absolutely, that is what you should do.” It allowed them to serve the client’s needs and simplify their internal process in a way that wouldn’t cost the client anything but would reduce manual processing over the life of the loan.
Occasionally someone will ask us what happens to the bank employees once ZEscrow automates all the manual processes. In virtually every case, the bank has redeployed those employees to expand the commercial portfolio, focusing on higher-value tasks like business development and client success rather than answering phone calls and stuffing statement envelopes.
What types of commercial clients use ZEscrow?
As we discussed at the beginning of the webinar, commercial bankers need to offer a wide variety of solutions to their diverse client base. ZEscrow is built to accommodate this variety while keeping everything compliant and easy to trace.
We certainly see banks using ZEscrow for common applications such as mortgages, security deposits, and trust accounts. We’ve also seen what a game changer it can be for other niche industries such as:
- Fintech companies that want to hook into the API and process transactions at scale.
- Qualified intermediaries that want to handle 1031 Exchanges.
- Nursing and retirement homes that need to store funds for residents over long periods of time.
- Aviation escrow for aircraft purchasing.
- Healthcare companies that need to hold and disburse funds for patients.
- Law firms that manage IOLTAs and other funds on behalf of beneficiaries.
- Municipalities with subaccounting needs, trust accounts, and developer escrow accounts where everything needs to roll up to the annual budget in a fully transparent fashion.
This isn’t an exhaustive list. We’re discovering new use cases and industries for ZEscrow all the time.
Your institution can serve valuable niche industries.
ZEscrow has the dual benefit of making your bank’s existing processes far more efficient. It also equips you with features that many banks can’t offer to their clients. In short, your commercial team can do more, do it better, and do it faster than your competitors, and it won’t require an army of employees just to administrate the accounts.
View the webinar recording, including the product demo.
If you missed the live webinar or would like to share it with your colleagues, use this link to access it. You can also watch it here on our blog. The recording will be available on demand and includes a full ZEscrow demonstration that starts around 33:00.