# $20 Billion in Bank Service Fees: Are You Overpaying? Author: Pal Sinha, Barnali Author URL: https://financedigest.com/author/pal-sinha-barnali Published: 2021-07-27 Category: BANKING Category URL: https://financedigest.com/category/banking Meta Title: Optimizing Bank Service Fees: How to Reduce Transaction Meta Description: Discover how accurate bank fee analysis and benchmarking can help treasurers reduce costs and build better relationships with banks for long-term savings. URL: https://financedigest.com/20-billion-in-bank-service-fees-are-you-overpayinghtml ![undefined](https://prod.superblogcdn.com/site_cuid_cm5qst7v3003gwirgwqtxn8i8/images/12-1736838119701-compressed.jpg) By Heena Ladhani, Ecosystem Manager, [GTreasury](https://gtreasury.com/) Twenty billion dollars. That’s how much corporate treasurers in the U.S. are now forking over to [banks in service](https://www.financedigest.com/how-to-enhance-banking-services-with-digital-performance-intelligence.html "HOW TO ENHANCE BANKING SERVICES WITH DIGITAL PERFORMANCE INTELLIGENCE") transaction fees every year. It’s a big number and it’s [growing every year](https://www.financedigest.com/the-next-upcoming-years-to-see-the-gastric-electric-stimulators-market-grow-kinetically.html "The Next Upcoming Years To See The Gastric Electric Stimulators Market Grow Kinetically"). But there’s also vast potential for [reducing that amount by optimizing the outlay for fee services](https://www.financedigest.com/home-start-lincolnshire-implements-flexible-unified-communications-service-to-reduce-costs.html "HOME-START LINCOLNSHIRE IMPLEMENTS FLEXIBLE UNIFIED COMMUNICATIONS SERVICE TO REDUCE COSTS") and becoming better-informed for price negotiations. ![](https://prod.superblogcdn.com/site_cuid_cm5qst7v3003gwirgwqtxn8i8/images/heena-1736838119680-compressed.jpeg) A recent survey from [Treasury Strategies](https://www.treasurystrategies.com/) determined that 70 percent of corporate treasurers are reviewing their bank service fees on a monthly basis. However, the same survey determined that a fraction – just 21 percent of treasurers – will actually benchmark those [service fees as part of their bank](https://www.financedigest.com/30-per-cent-of-uk-consumers-would-use-amazon-google-facebook-or-apple-for-banking-services.html "30 Per Cent of UK Consumers Would Use Amazon, Google, Facebook or Apple for Banking Services") analysis and management. Among those treasurers who do use benchmarks, many only do so on a line-item basis, rather than at the product category level. A majority also don’t have processes to recognize the [impact of volume on benchmark prices](https://www.financedigest.com/german-gas-commission-agrees-proposals-to-ease-impact-of-soaring-prices.html "German gas commission agrees proposals to ease impact of soaring prices"). In short there is room – a lot of room – for opportunities to trim costs. Accurate bank fee analysis [backed](https://www.financedigest.com/banking-turmoil-means-recession-fears-are-creeping-back.html "Banking turmoil means recession fears are creeping back") by correctly-applied benchmarking enables treasurers to preserve strong relationships with bank creditors as well. Too often, simplistic benchmark techniques give treasurers only a surface-level [analysis of whether fees are in-line with market](https://www.financedigest.com/dry-ice-market-2015-outlook-current-and-future-industry-landscape-analysis-2025.html "Dry Ice Market 2015 Outlook, Current and Future Industry Landscape Analysis 2025") averages. As a result, treasurers may falsely [challenge their banks](https://www.financedigest.com/big-banks-can-be-challengers-too.html "Big banks can be challengers too") over small sums, while missing out on more appropriate and fruitful interventions – a ‘can’t-see-the-forest-for-the-trees’ scenario. Incomplete analysis comes with its own costs, absorbing misapplied resources and eroding creditors’ good will over insignificant or erroneous concerns. Let’s look at two examples of how benchmarking, done right, can ensure treasurers’ accurate analysis and lead to optimized [bank transaction](https://www.financedigest.com/igtb-launch-digital-transaction-banking-available-as-saas.html "iGTB launch Digital Transaction Banking available as SaaS") costs: ## Example 1: Benchmark beyond what you know Wire transfer fees are an area in which effective benchmarking is especially ripe for opportunity. For example, suppose a treasurer’s initial internal benchmarking finds that the four [banks the company uses offer](https://www.financedigest.com/credit-suisse-54-billion-lifeline-offers-limited-respite-to-global-banks.html "Credit Suisse billion lifeline offers limited respite to global banks") rates spanning from $14 to $20. This self-benchmarking reveals the potential to move all wire transfer fees to the $14 rate. However, expanding benchmark horizons to the _market at_ [large makes clear that all the banks](https://www.financedigest.com/swiss-national-bank-makes-another-large-draw-on-fed-swap-line.html "Swiss National Bank makes another large draw on Fed swap line") are charging fees well above the median. There is no shortage of potential reasons for this, which should be investigated. The [company could potentially](https://www.financedigest.com/factbox-companies-potentially-affected-by-italys-election.html "Factbox: Companies potentially affected by Italy’s election") reduce fees by using a bank portal, streamlining Fedwire, SWIFT, or CHIPS costs, opting for digitized communications, and beyond. Importantly, though, a small cost on each wire can quickly add up to a significant savings. By benchmarking these fees at a more expansive scope, those savings can be found, pursued, and realized. ## Example 2: True treasury management services costs are multi-dimensional Take a hypothetical [corporate treasurer examining lockbox item processing fees at two different banks](https://www.financedigest.com/post-crash-banking-regulation-is-transforming-the-world-of-corporate-lending-for-the-better.html "Post-crash banking regulation is transforming the world of corporate lending – for the better"). Bank X charges $0.30 per item; Bank Y charges $0.50. The treasurer’s organization directs 500 items to Bank X each month, and 5000 to Bank Y. On the surface, the treasurer’s analysis is simple: [Bank Y is overly expensive and should be challenged](https://www.financedigest.com/5-things-to-consider-when-choosing-a-challenger-bank.html "5 Things to Consider When Choosing a Challenger Bank"). A deeper and more holistic analysis, however, clarifies a more accurate picture. Factoring in bundled remittance processing services – such as monthly lockbox maintenance, daily deposit ticket charges, image and hardcopy fees, and courier fees – rewrites the story. Now it’s clear that [Bank X provides a per item rate](https://www.financedigest.com/central-banks-hike-rates-again-but-a-pause-is-coming.html "Central banks hike rates again, but a pause is coming") of $4.00, but Bank Y is just $3.00. The more simplistic cost benchmark analysis missed this crucial information. That said, analysis must also consider that volume is crucial to accuracy. Bank fees often vary by volume. Checking [Bank X’s $4.00 per item rate](https://www.financedigest.com/bank-of-england-officials-split-over-future-path-for-rates.html "Bank of England officials split over future path for rates") against the market, the median benchmark price for a volume of 500 items a month is actually $5.00. The [bank’s price](https://www.financedigest.com/hsbc-ups-price-targets-on-greek-banks-with-eurobank-piraeus-top-picks.html "HSBC ups price targets on Greek banks, with Eurobank, Piraeus top picks") is quite favorable at that volume. Now looking at Bank Y, the median benchmark price at a volume of 5000 is just $2.00 per item. Suddenly Bank Y is exposed as the truly expensive one. There are a range of subsequent steps available to leverage this complete analysis into savings. The pricing may simply be too high, or [active services](https://www.financedigest.com/russian-services-activity-shrinks-for-third-month-running-in-dec-pmi.html "Russian services activity shrinks for third month running in Dec -PMI") may use overly expensive configurations. The treasurer should check for any unneeded services. Common redundancies can include receiving both electronic and hardcopies of checks, using packages featuring both electronic transmission and express mail, performing multiple daily deposits instead of a single batch, or using Fedwire rather than ACH. Accurate benchmarking makes each of these [wasteful potential expenses easier to identify](https://www.financedigest.com/paid-search-advertising-how-to-identify-wasted-spending.html "Paid search advertising: how to identify wasted spending"). Once recognized, streamlining such service costs can be simple. When it [comes to bank](https://www.financedigest.com/why-pay-by-bank-app-will-come-into-its-own-in-2022.html "Why Pay by Bank App will come into its own in 2022 ") pricing, treasurers also have a variety of options for optimization. For example, treasury could consolidate the lockbox items to [Bank Y’s lower cost](https://www.financedigest.com/factbox-global-banks-take-axe-to-jobs-as-cost-pressures-mount.html "Factbox-Global banks take axe to jobs as cost pressures mount"). It could then restructure [processing at that bank](https://www.financedigest.com/reckon-introduces-link-to-bank-data-to-help-small-businesses-streamline-the-reconciliation-process.html "Reckon introduces link to bank data to help small businesses streamline the reconciliation process ") to the market’s median price. Alternatively, it could request a bid from [Bank Yon the total volume and explore that offer](https://www.financedigest.com/first-abu-dhabi-bank-reiterates-not-eyeing-offer-for-standard-chartered.html "First Abu Dhabi Bank reiterates not eyeing offer for Standard Chartered"). ## Apply robust benchmark analysis across the board The same process for optimizing [bank offers and options based on complete and accurate benchmark analysis applies to all bank services](https://www.financedigest.com/73-of-employees-in-the-banking-and-financial-services-industries-are-looking-for-better-physical-and-mental-wellbeing-support-in-the-workplace.html "73% of employees in the banking and financial services industries are looking for better physical and mental wellbeing support in the workplace") used by corporate treasury teams. All transaction processing and information [services should be put to careful scrutiny to see what savings may emerge](https://www.financedigest.com/emergency-call-services-telcos-urge-eu-to-protect-telecoms-networks-from-power-cuts.html "Emergency call services, telcos urge EU to protect telecoms networks from power cuts"). In this way, implementing the right treasury [management strategy and processes to make robust benchmarking an integrated component of regular bank](https://www.financedigest.com/strategies-banks-use-to-manage-liquidity-risk.html "Strategies Banks Use to Manage Liquidity Risk") fee analysis is an investment that pays equally robust dividends. **_Author:_** _Heena Ladhani is the Ecosystem Manager at_ [_GTreasury_](https://gtreasury.com/) _, a treasury and risk management system.  She is a [FinTech professional with more than seven years of experience working with global clients to design solutions](https://www.financedigest.com/meet-tilak-joshi-the-fintech-ceo-building-modern-solutions-for-the-gig-economy.html "Meet Tilak Joshi: the fintech CEO building modern solutions for the gig economy") and improve processes utilizing treasury systems. She resides near Chicago._ --- This blog is powered by Superblog. Visit https://superblog.ai to know more. ---