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SWIFT Nordics Regional Conference 2015 Payments stream Trends in corporate to bank relationships Copenhagen, 4 5 March 2015
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Payments stream - Trend in corporate to bank relationships

Jul 17, 2015

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Page 1: Payments stream - Trend in corporate to bank relationships

SWIFT Nordics Regional

Conference 2015

Payments stream – Trends in corporate

to bank relationships

Copenhagen, 4 – 5 March 2015

Page 2: Payments stream - Trend in corporate to bank relationships

SWIFT Nordic conference

Søren Haugaard

Trends in corporate to bank

relationship

March 2015

Page 3: Payments stream - Trend in corporate to bank relationships

Warming up – show of hands

• Has it become easier or harder for customers to set up banking ?

• Will the waves of new regulation calm down and things go back to

the old normal ?

• Are customers continously looking for smarter banking ?

3

Page 4: Payments stream - Trend in corporate to bank relationships

Trends in corporate to bank relationships

CLASSICAL BANK

DISRUPTIVE MOVES

Page 5: Payments stream - Trend in corporate to bank relationships

What is happening out there ..

Page 6: Payments stream - Trend in corporate to bank relationships

Trends in corporate to bank relationships

• Regulation, technology, operational models, consumer behaviour

• Evolving requirements of multi-banked corporates

• Flexibility, security, real-time processing, international servicing

• Speedy and convenient access and connectivity

6

SWIFT for Corporates :

To be the most preferred secure network for multi-banked

corporates globally

Page 7: Payments stream - Trend in corporate to bank relationships

AB Volvo

WELCOME

Page 8: Payments stream - Trend in corporate to bank relationships

AB Volvo

Volvo Group Customer Credit Alternatives

Credit application submitted

to the credit committee

Credit control

Dunning process

Interest invoicing

Invoicing process

AR in GL / R3

Approved Rejected =

order cancelled

Customer

Parma

Limit

Payment term

Currency

Pre sales activities

Sales strategy

VFS

Credit committee

- Credit Policy

- VG-CMD

- Credit Portal

Open Credit

Export Finance

Trade Finance

Collection &

Dispute

AR in GL VFS

AR = Account Receivable

GL = General Ledger

Supplier Credit

Buyer Credit

External Bank

Cash & Bank

VFS has their own

process for credit control,

dunning, collection and

interest invoicing

Export LC

Page 9: Payments stream - Trend in corporate to bank relationships

AB Volvo

Background

Sales in 190 countries

Production in 18 countries

More than 70 production sites

More than 70 parts distribution sites

Page 10: Payments stream - Trend in corporate to bank relationships

AB Volvo

10

Background

Limited transparency in Trade Finance transaction

Various levels of competence in the respective markets/regions

Utilization of Banks not coordinated

Reactive process rather than proactive to sales & customers

Difficulties in presenting correct documents

Page 11: Payments stream - Trend in corporate to bank relationships

AB Volvo

11

Percentage of discrepant document sets @ 1st presentation

• Volvo present doc sets twice resulting in 4-6 extra working capital days

• Total flow estimated to 10-20 billion SEK

• Value of 1 day improvement 20-40 million SEK

Page 12: Payments stream - Trend in corporate to bank relationships

AB Volvo

12

Which documents are troublesome?

Page 13: Payments stream - Trend in corporate to bank relationships

AB Volvo

13

Corporate Finance, Working Capital Management

Project Trade Finance achievements so far

Implementing a “Multibanking Platform” for Trade Finance Products

Focused on Export LC

SWIFT connectivity with banks started

Volvo SWIFT address = ABVOSEGG

Also possible to use for Payments, FX-transactions and Account Statements

Predefined document templates for shipping documents according to LC

Training of personnel started

Standardisation of bank contracts

Page 14: Payments stream - Trend in corporate to bank relationships

AB Volvo

Volvo

MBP

Advising/Confirming

Bank

Issuing

Bank

Agreements:

- Price

- SWIFT

- E-presentation

Multibanking using SWIFT MT798

14

Templates:

- B/L

- Packing List

- Cert of Origin

- Ben. Cert

- Inspection Cert

- Banking Instruction

Page 15: Payments stream - Trend in corporate to bank relationships

AB Volvo

”Followers”

Volvo Car Corporation

FLS

Sandvik

Metsä

Ericsson

SAAB

Yara International

Ekman

Konecranes

ABB

Siemens

15

Billerud

Kinnarps

Cellmark

United Technologies

Halliburton

Nokia

ICC Austria

Essdocs

Corning

Kongsberg

Page 16: Payments stream - Trend in corporate to bank relationships

AB Volvo

Back up

16

Corporate Finance, Working Capital Management

Page 17: Payments stream - Trend in corporate to bank relationships

AB Volvo

Question Marks

What can Corporates and Banks do to address connectivity and on-

boarding challenges…?

Are new industry solutions emerging…?

How is the competitive landscape evolving…?

Are new entrants posing any serious threats to banks…?

What do we expect the role of the financial institution to be in the future…?

17

Corporate Finance, Working Capital Management

Page 18: Payments stream - Trend in corporate to bank relationships

AB Volvo

What is BPO?

A BPO (Bank Payment Obligation) is an irrevocable undertaking

given by one bank to another bank that payment will be made on a

specified date after a successful electronic matching of data

according to an industry-wide set of rules.

18

Page 19: Payments stream - Trend in corporate to bank relationships

AB Volvo

SWIFT

BPO

Exporter/

Seller

Seller´s

Bank

SWIFT/ Data

matching

Buyer´s

Bank

Importer/

Buyer

Importer puts order in order system

Data

Transfer

Irrevocable Undertaking / KYC

KYC

Input

KYC

Input

Swift Captive

Data

Transfer

Coverage

Invoicing process

VFS

Open Credit

Export Finance

Trade Finance

Supplier Credit

Buyer Credit

Page 20: Payments stream - Trend in corporate to bank relationships

10.3.2015 Company presentation November 2013 | Public 20

Petri Karjalainen SVP, OpusCapita Ventures

Page 21: Payments stream - Trend in corporate to bank relationships

1. What are the next step for productivity gains and at the

same time to increase control and compliance?

2. How to make low cost financing available for SME

companies and extend payment terms for large

corporations ?

3. How to boost the productivity of information workers in

such organizations as accounting or treasury ?

The finance world is getting shaped by

three fundamental questions arising:

Page 22: Payments stream - Trend in corporate to bank relationships

Typical corporate Purchase to Pay process “14-60 days payment time to supplier”

Supplier Ordering Buyer SAP MM

Hankintajärjestelmä

Payment tool

Inspection

Payment

instruction

Invoice check

and approval

Approver

Payment

Invoice

Page 23: Payments stream - Trend in corporate to bank relationships

In 89 % of top performers, finance and

procurement work together to streamline and

simplify purchase-to-pay process.

Collaboration ratio in Europe is 53 %, while

Nordic organizations coordinate only

moderately.*

World-class organizations process p2p

2.5 times faster than their peer group.*

Well over 50% of average companies cite

that getting timely feedback on process

issues is a major challenge.**

Only 6% of companies have highly

automated supply chains. Over 40% use

spreadsheets in integration.**

Purchase-to-Pay:

World class vs. average

Sources: *The Hackett Group, **Aberdeen Group

The big opportunity is reachable…

Page 24: Payments stream - Trend in corporate to bank relationships

First step in lowering the cost on the road towards better cash management…

• Increased productivity

through automation

• Harmonized processes to

lower risks and costs

• Full compliancy and proven

integration for bank

independency

• One centralized solution for

transparency

• Low cost outsourced labour

can be utilized for routine

tasks while maintaining

complete control

Page 25: Payments stream - Trend in corporate to bank relationships

In near future the role of payment is changing in a cash optimized supply chain…

Supply Chain Financing

• Payment to supplier in < 5 days

• Buyer gets 60 days DPO

• Low cost financing to supplier

• Extended payment terms to

buyer with more cash efficient

supply chain

• Low risk financing opportunity to

bank utilizing buyer irrevocable

payment guarantee

• Opportunity for platform vendors

who can enroll large SME

supplier networks

Page 26: Payments stream - Trend in corporate to bank relationships

Estimated potential economic impact of technologies from sized applications in 2025, including consumer surplus ($ 1000 billion, annual)

• Automation of Knowledge Work is characterized as

one of the key disruptive technologies within the

next 10 years with an estimated economic impact of

$5200-6700 billion in 2025.

• Oxford University estimates that 47% of the US

workforce are at high risk to be replaced by robots

within the next 10-20 years, accountants being

one of the first categories being affected.

• Utilization of early Automation of Knowledge work

technologies, like RPA in enterprises, can help

prevent the outflow of services jobs and revenue

streams into shared service centers located in low

cost countries.

Vision: Automation of knowledge work

Sources: McKinsey, Oxford University 2013, Etla , Eera analysis

Page 27: Payments stream - Trend in corporate to bank relationships

Robots as accountants and treasurers are now walking into finance operations …

Robotic Proces Automation, ie. virtual robots

from the cloud :

Are using a computer on behalf of a person or

with a person and they can:

See and interpret text and pictures

Move and click the mouse

Write text and numbers

Robots use several IT systems just like a

human would use them

Implementation does not require changes to the

existing IT systems. Are programmed with ”work

shadowing” and writing a logic for exception

handling

Work according to preset rules. Currently

operate as rule based, in the future utilize

statistical analysis and machine learning in the

first stages of artificial intelligence

Picture source: http://www.brainstormmarketingproductions.com/

Page 28: Payments stream - Trend in corporate to bank relationships

1. Talking only about payments is old fashioned, in

todays world maximizing the supply chain

optimization is the key to efficient cash management.

Therefore we are seeing increasing amount of Supply

Chain Financing programs rolled out.

2. The payment processing is getting industrialized by

centralizing the payment operations. Payment factory

approach enables efficient cash management with

low cost and provides better control and compliance

3. Robots are here already today, they are used for

replacing humans in processing simple tasks like

consolidation of payment files and implementing

control points.

We are about to see starting of the next big era of

automation, as big as industrialization or

establishment of information society…

Page 29: Payments stream - Trend in corporate to bank relationships

10.3.2015 Company presentation November 2013 | Public 29

Petri Karjalainen Twitter: @PetriKarj

Linkedin: www.linkedin.com/in/PetriKarj

Facebook: www.facebook.com/PetriKarj

Page 30: Payments stream - Trend in corporate to bank relationships

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” Where is banking going, how we embrace technology –

customer push or pull” Jesper Nielsen - Head of Personal Banking Business Development

Page 31: Payments stream - Trend in corporate to bank relationships

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Pope John Paul II - 2005

Scource: Michael Sohn

Page 32: Payments stream - Trend in corporate to bank relationships

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Pope Francis - 2013

Scource: Michael Sohn

Page 33: Payments stream - Trend in corporate to bank relationships

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Page 35: Payments stream - Trend in corporate to bank relationships

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Number of teller transactions

in the branch has fallen by 50%

the past 3 years

Number of incoming calls to

the contact centre has fallen

by 29% the past 3 years

Number of active eBanking

customers has increased by

30% the past 3 years

Proportion of mobile & tablet

log-ons has increased from 1%

to 51% the past 3 years

Measurable change of behaviour

Page 36: Payments stream - Trend in corporate to bank relationships

36

We are changing our distribution channel setup in accordance

with changed customer behaviour

eBanking / iPad /

iPhone

24/7

Danske

Direkte

Expanded

advisory

centres

Danske

Net Meeting

Expanded

opening hours

8

162326

41

Branch density per 100,000 adults1

1Source: IMF; 2010 figures for Denmark, Finland and Norway; 2009 figures for Sweden and United Kingdom.

Page 37: Payments stream - Trend in corporate to bank relationships

37

The latest launched of new digital products and services

Spending overview

Mobile Pay Business & Online

Online Meetings

Contactless Card

Danske Guide

Advisory

services

easy

banking

Contactless Card

Dedicated Private Banking channels

Page 38: Payments stream - Trend in corporate to bank relationships

38

MobilePay at a glance (Core facts January 2015)

MobilePay P2P MobilePay Business

Launched in Denmark in

May 2013

2.000.000 Users

2nd

Registered on every

Smartphone in Denmark

70% of active users are not

customers with Danske Bank

Launched in Denmark in

February 2014

+5.500

1.000.000.000 DKK per month

140.000 trx per day

KMD, Dansk Supermarked

and many others

Long pipeline of Business Banking and C&I clients, incl.

Online, AppSwitch and point of

sale

Solutions to support

670.000 More than

trx since launch

90.000.000 DKK since launch

Double digit growth Monthly

+11.000

More than

companies with access

companies have activated MPB

Page 39: Payments stream - Trend in corporate to bank relationships

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MobilePay has developed from an single consumer app for

P2P payments to a MobilePay family with multiple products

Parking

Transportation

Vending machines

… and many others

In app purchase

- AppSwitch

Large retailers –

Point of Sale

Online retailers

Small

businesses

Consumer

s

Page 40: Payments stream - Trend in corporate to bank relationships

40

Intro video

Page 41: Payments stream - Trend in corporate to bank relationships

41

Text

Transformational

new, better

customer

experiences

Improve

image

Attract new

customers

A more effective/

efficient bank

operation

Protect

current

business

Generate

new business

Desired

end-

deliverables

A dual track strategy will help us achieve our desired

end-deliverables Our dual track strategy; Transform classical bank and

Transform classical bank Disruptive moves

Page 42: Payments stream - Trend in corporate to bank relationships

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