Cash Management - An overview

Cash management is a corporate banking product that revolves around the business of cash. Cash management teams provide solutions to corporates to help otimise their cash flow and liquidity. They do this via different ways:

1) Account management

2) Payments and collections

3) Liquidity management for excess cash, e.g. investment of surplus funds

4) Cash flow forecasting and optimisation

Benefits for corporates: 

1) Proactive decision-making supported by having a real-time, consolidated view of the company/group's cash across all their accounts.

2) Reduced borrowing costs by understanding their cash cycle and when cash is required to bridge any working capital gaps.

3) Additional revenue via interest income for surplus cash.

How banks make money through cash management:

1) Service fees - includes account maintenance fees and transaction fees.

2) Cash deposits from these companies are used to fund the bank's lending activities which generate income, greater than the interest it pays on these deposits. 

3) Some other ways include interbank lending (e.g. overnight loans) which generate interest. Such overnight rates are typically higher than the interest it pays on these deposits due to the difference in risk levels. The difference is what the bank profits on these transactions.