Typically, in-house banks are legal entities that are used to complete different types of treasury activities within a business. These treasury managment activities can include cash optimization, customer invoices, and foreign exchange management, to name a few.
One of the advantages of in-house banking is the ability to reduce costs by avoiding the use of a commercial bank for many day-to-day operation transactions. By transferring the banking process to an in-house bank, companies can use surplus cash saved from using traditional bank methods to pay off debts, reduce the number of business loans taken out, and increase profitability.
By using internal banking, companies doing business with foreign countries can save money on foreign exchanges. The costs associated with FX (foreign exchange) management can be significant if you use an outside source, which is part of what makes in-house banking so attractive. If you do international business with clients in several different countries, you should consider optimizing your treasury activities to include in-house banking.
Perhaps one of the most useful ways to take advantage of in-house banking is to allocate surplus funds for other operation functions, allowing you to reduce the lines of credit used for your company’s operating expenses. Reducing your company’s dependence on credit can increase profits and investment returns for shareholders.
In-house banking reduces your dependence on outside banking institutions, allowing you to save money and increase profitability by handling major banking functions on your own. Particularly helpful for international companies, this type of treasury management is another way to optimize business growth and profitability.