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Survey shows NBFIs’ top three focus areas: security, compliance and efficiency

Willie Sutton, the famed American bank robber, responded to a question about why he robbed banks by simply saying, “Because that’s where the money is.”

The 2022 NBFI Survey Report imagines the corollary in response to this in a similar question-answer style: “Why are you (non-banking financial institutions or NBFIs) focused on security/fraud prevention?” “Because there are many more Willie Suttons out there with far more automation and sophisticated tools trying to rob us.”

NBFIs are a unique grouping of organizations with a unique set of pain points and goals, along with numerous competing demands. Priorities help determine the emphasis and order for which initiatives are staffed, funded and completed at NBFIs.

To better understand the priorities, plans and activities that NBFIs were focused on, Kyriba and Strategic Treasurer partnered to produce the 2022 Non-Banking Financial Institutions (NBFI) Survey Report. The NBFI Survey asked 40+ questions and was taken by over 70 CFO, treasury, and cash manager respondents.

Steve Bullock, Vice President of Financial Services & Insurance at Kyriba, notes, “This year’s survey builds upon the previous iteration and extends the respondent pool to include the entire NBFI industry vertical, generating more detailed and focused results compared to the previous year, which only looked at insurance companies.”

The survey results clarify where NBFIs are currently in their operational structure and where they hope to be in the near term. It captures a greater breadth of perspectives from treasury-intensive non-bank financial companies, aspects that are not only compliance focused, but range from account use to waterfall payments and collateral management.

Highest priorities: security, compliance and efficiency

Increasing security threats demand greater attention, and combating fraud remains a key priority for NBFIs. According to the survey report, 66% of respondents ranked “security and fraud prevention” as their top priority. Forty-five percent rated “compliance” as the second-highest priority, and  33% chose “efficiency” (process-related) as the third. 

Source: 2022 NBFI Survey Report

Disbursement preferences: staff, technology and structure

Most NBFIs are payments-intensive. So how are NBFIs organizing their staff, leveraging payments technology and using payment structures?

Almost half (49%) of the NBFIs surveyed are using or implementing centralized staffing (payment factory, shared service center of excellence) for payments disbursement activity. These can be either regionalized or centralized on a global basis.

Payment hub technology (a common name for the technology that can support all aspects of payments) is highly popular, with 48% using or implementing these tools and another 11% indicating that they are evaluating the use of this technology.

The use of pay-on-behalf-of (POBO) structures is demonstrating strong signs of likely growth and is expected to achieve a one-third adoption level within a few years. The POBO structure allows a company with many subsidiaries or affiliates to use a single structure for disbursements for efficiency of capital and time purposes.

Source: 2022 NBFI Survey Report

Measurements: financial performance wins over staff development

The survey comments on an important determinant for the success of a treasury-intensive company: “What gets measured, we are told, gets improved.” What then is being measured by NBFIs?

It is not surprising that in the treasury and finance arena, measuring financial performance is of greatest significance and takes the top spot in the metrics aspect of this survey. Two-thirds (66%) of NBFIs trace various financial performance metrics. However, why is it that not even 3 out of 10 companies (28%) measure staff professional development, given that employees are considered the most valuable asset of an organization? Why is it that staff professional development measurement is placed at the bottom of the ranking?

The survey asks, “Is there little correlation between staff development and success? Is it related to the fact that measuring staff development is highly challenging? What is the benchmark?” These are pertinent questions that need to be considered by NBFIs.

NBFIs also track other measurements, namely staff performance (review by peers, management, subordinates), which is a distant second at 41%, followed by quality-related performance (errors, defects, up-time, accuracy) measures at 38%.

Source: 2022 NBFI Survey Report

Benchmarking: achieving a personal best

What do NBFIs benchmark against – themselves (internal), similar companies (external), equal-sized companies (external), or none at all?

Sixty-two percent of NBFIs compare their current performance to their historical data to measure internal progress. The external benchmarks consist of two types of NBFIs – 41% who measure themselves against companies in similar industries (Insurance, NBFI), and 24% who measure their performance against financial institutions of a comparable size or complexity level. One-fifth (21%) of NBFIs said they don’t benchmark externally.

Note: unsure responses not displayed

Source: 2022 NBFI Survey Report

Conclusion

The survey delves into several other areas of interest for NBFIs as well, ranging from waterfall payments to the noteworthy adoption of artificial intelligence (AI) and machine learning (ML). On the latter results, Bullock (Kyriba) observed, “The results are clear, AI and Machine Learning are critical growth areas for companies who are prioritizing security and fraud prevention.”

The survey helps us understand what is happening and what professionals are thinking and doing in the NBFI space and aids NBFI treasurers as they consider how to adjust their priorities and initiatives and mitigate their pain points, particularly when it comes to compliance and security/fraud prevention.

Craig Jeffery, Founder and Managing Partner of Strategic Treasurer, shares his thoughts about NBFIs’ ranking security and fraud prevention as their most significant prerogative.

“Cost and reputational damages are serious concerns for any company. NBFIs are highly regulated, and the fines, fees, and reputational damage that come with ignoring that make compliance a major priority. Seeing companies that are payment intensive rank security and fraud prevention as such a high priority is significant for this industry vertical and instructive to other industries,” remarked Jeffery.

For more extensive results, please download the 2022 NBFI Survey Report at strategictreasurer.com/2022-non-banking-financial-institutions/.

To watch the webinar replay discussing the results of the 2022 NBFI Survey, please visit strategictreasurer.com/webinar-non-banking-financial-institutions-survey-results/.

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