In house Banking: A Centralized Treasury Model for Corporates

Does your company deal with increasing headwinds to managing volatility and providing liquidity? With the growing uncertainty around the world over potential treasury management, many corporates are questing to improve their cash management productivity, visibility, automation, and regulatory compliance. All of this can be done through in house banking.

In house Banking A Centralized Treasury Model for Corporates
In response, to help you better and equip them with a better solution in the face of ongoing volatility and managing cash for various business entities, In-house banking came to light. This concept will help you improvise efficiency by aggregating subsidiary transaction flows and risks and centralizing core treasury functions to reduce the external banking functions.
Fortunately, advances in technology and AI lead customers to change old habits for treasury management. That’s where in-house banking became content and a powerful means of delivering value to the company’s operations with a host of benefits like cash pooling, intercompany netting, payments/receivables on behalf of (POBO/ROBO), and simplified account structures.
Don’t you feel amazed!

Let’s dive deep into this concept to gauge more insightful information to help you iron out the crazy wrinkles on your cash management operations!

What is In House Banking?

In simple terms, in-house banking offers an internal or virtual account structure to the group entities, which hold the pulse to replicate the services of the external bank facility. It’s just like embracing facilities like liquidity management, funds collections, and payment processing to various subsidiaries of large global corporations.

Let’s jot down this theory into a simple and easy-to-understand illustration:

Multigrain international account company has four regional branches and ten departments respectively. Having said that, every branch has external accounts to maintain the treasury effectively.

  • Don’t you think it is adding extra expense for the business to manage so many external bank account and peek at every supply chain to remain updated.
  • Honestly, this issue can be resolved with the incorporation of in-house banking. With the designated in-house banking, you can centralize both flows and balances by executing all the operating companies’ internal multicurrency current accounts. Just eliminate the unnecessary staff time for handling the external accounts when virtual accounts can make your work handier.
  • You can easily process collection through the virtualized company’s account and avail all necessary information for financial tracking and reporting. The IHB replaces bank accounts and acts as the correspondent for the operating businesses.

Reasons To Implement In House Banking

In-house banking brings opportunities like centralized cash management streamlines responsiveness, improved visibility, security protocols, and simplified processes. Do you want to learn more benefits of in-house banking? Below shared are some of them:

Enhance Operational Flexibility

Enhance Operational Flexibility

First and foremost benefit of implementing in-house banking is improving operational flexibility and providing expert banking transaction customer service to the participants/subsidiaries. The virtual account centralizes the liquidity in the cash pooling structure by lessening the need to sweep money from one bank account to another. In fact, it will also pave the way for the corporates who believe in managing two separate accounts for the same business entity, let’s say, account receivable and account payable. With the designated IHB entity, these corporates can manage virtual accounts to keep a separate line between the accounts receivable and payable without opening separate physical bank accounts. This concept will also work for those corporates who want to have multiple physical accounts but consider rationalizing and minimize the number of sweeps.

Intercompany Transactions

Intercompany Transactions

Instead of financing your company at a high-interest rate, you can deposit the surplus money at low interest rates. This helps you perform the intercompany transactions and concluding the external financing effectively. Another key benefit of intercompany transactions is building robust and potent internal bilateral relationships. The IHB solution completes multicurrency, multilateral intercompany settlement through STP end-to-end processing, concludes intercompany payment using accounting settlement.

Bank Independence and Lower Costs

Bank Independence and Lower Costs

Another key benefit of incorporating an IHB entity is reducing the transactional and managing fees for physical accounts. With a single technology, you can enjoy a greater degree of bank independence.

Fraud Protection

Fraud Protection

The IHB entity also holds the potential to tackle cybersecurity, and external fraud cases. There is no denying the fact that combatting treasury fraud is a priority for treasurers globally. When you employ the technology and incredible financial solutions for your business transactions, it maximizes the centralized control over the banking activities across the organization. You will have a clear picture of cash flows and make it easier to remain up to date with emerging risks.

Pivotal Considerations When Bidding For An In House Banking

When implementing in-house banking, legal regulations, compliance protocols, and taxation policies should be considered starting from the planning stages. The IHB entity just mitigates the requirement for handling its physical bank account with the implementation of the virtual bank account. It is worthwhile to note that some regulatory countries prohibit IHB structure or payment netting due to stringent tax regulations and compliance protocols. In this situation, a hybrid approach is adopted to reap the maximum benefits in this context. A hybrid approach of IHB adopts the regulations more gracefully.

In house Banking A Centralized Treasury Model for Corporates

Let’s say a country has tight regulations for exchange controls and inter-company lending. In this case, corporates can choose the hybrid approach using the operating companies’ bank accounts under the power of the IHB (either via Bankhub, an IMS solution and SWIFT connectivity). This arrangement will reduce cost efficiency and centralize all internal process efficiencies.

How Can ECS Fin Rescue You From Manual Intervention?

As stated above, the IHB entity offers profound operational and financial benefits for corporate treasury and subsidiaries. As a fintech company, we offer IMS in-house banking structure for your organization’s internal transaction processing; you can enjoy better reliance on efficient cash flow forecasting and plan to better the business activities.
Our IMS solution will help to achieve global cash visibility, supply chain transactions, increase productivity across their cash and liquidity, and risk management operations seamlessly!

Let ECS Fin Help You Get Rid Of Hard-To-Update And Process Inefficiencies

Or Add a new swiss watch to your treasury management systems, and start stimulating cash management structure with ECS Fin solutions to enjoy potent implementation of the IHB entity. After all you can process payments, gain real-time access to current and past cash positions, manage corporate liquidity, and leverage automated delivery tools for account management. Modernize your treasury management operations with our unparallel IMS in-house banking solution!