Treasury Hot Topics Seminar Building the business case for a payment factory and in-house bank 19 February 2009

Treasury Hot Topics Seminar Building the business case for a payment factory and in-house bank

19 February 2009

Agenda

Next Generation Payment FactoryMaking the best use of SEPA, SWIFTNet and Systems

1. Most promising developments within the Treasury world2. Evolution from Traditional to Next Generation Payment Factory3. Summary of Benefits 4. Conclusion

Agenda



Slide 4 PricewaterhouseCoopers

Promising developments

The future

Main promising developments in treasury that will add value

to the business

In-house banking – 11,0%

Payment factories – 10,0%

Straight through processing – 10,0%

Shared service centres – 8,7%

Global banking – 6,5%

New concepts and ideas to increase knowledge and understanding of risk – 6,3%

Innovative financial instruments/structured finance solutions – 6,2%

Credit risk management tools – 6,0%

On-line dealing platforms – 5,8%

SWIFTNet – 5,7%

Webservices – 4,0%

Euro capital market – 3,0%

Alternative risk transfer products – 2,5%

Other – 2,5%

Bank industry consolidation – 2,2%

IFRS – 2,0%

Basel II – 1,5%

CLS (Continuous Link Settlement) – 1,5%

Outsourcing – 1,3%

Sarbox – 1,2%

Decreased market volatility – 1,2%

Increased market volatility – 1,0%

Agenda




Example Payment(s) Process without Payment Factory

Multiple Processes

Multiple Payment Formats

Multiple Interfaces

X Multiple locations

Multiple Accounts

Multiple Bank Statements

Multiple Signatories

Business Unit A A/C A Vendor A

Bank AEFT A

PaymentsBusiness

Unit B

Payments

A/C B Vendor B

EFT A2

Payments

Business Unit C Payments

Bank B

A/C C

Vendor CEFT B

Manual Payment

Business Unit D

Bank C

A/C D


Example Traditional Payment Factory

Payment Factory

Business Unit A

Business Unit B

Business Unit C

Business Unit D

Internal Interfaces

A/C A

A/C B

A/C C

A/C D

1 Standard Process/ Team

1 set of formats internally

1 standard (internal) interface

EFT A

EFT B

EFT C

Vendor A

Vendor B

Vendor C

Bank B

Bank C

Bank A

ExternalInterfaces


Example Traditional Payment Factory

Payment Factory

Business Unit A

Business Unit B

Business Unit C

Business Unit D

Internal Interfaces

A/C A

A/C B

A/C C

A/C D

1 Standard Process/ Team

1 set of formats

1 standard (internal) interface

EFT A

EFT B

EFT C

Vendor A

Vendor B

Vendor C

Bank B

Bank C

Bank A

ExternalInterfaces


Example Next Generation Payment Factory

Payment Factory

Business Units

Business Units

Business Units

Business Units

Internal

Interface

A/C A

A/C B

A/C C

A/C D

SWIFTNet interface

One EFT System

One Set of Formats (SCORE)

Direct Connection to your banks

Multiple Accounts

Multiple Bank Statements

Multiple Signatories

Bank C

Bank A

Bank B

Vendor A

Vendor B

Vendor C


What is Payment on Behalf ?(a) Own Payments – V – (b) Payments on Behalf

• BU1• $ a/c in

Country A

• BU 2• $ a/c in

Country B

• BU 3• $ a/c in

Country C

• Vendor a/c in USA

Cross Border Payments

Straight Through Process

• BU 1• Belgium

• BU 2• United

kingdom

• BU 3• France

$ Payment Requests

• BU 4• $ a/c in

Country D

• BU 4• Sweden

• Straight Through Process

• Multiple External Accounts Required

• Expensive Cross Border Payments

Traditional Payment Factory

(a)

Conversion to Domestic Payments

• BU 1• USA

• BU 2• United

kingdom

• BU 3• France

• Treasury • $ a/c in

USA

• Vendor a/c in USA

Domestic Payments

$ Payment Requests

• BU 4• Sweden

• Value Added Transaction Processing

• One Treasury payment account per country

Reduced risk of fraudulent payment from external accounts

• Significant reduction in Cross Border payments

From XX,000 @ approx $5 each, to X,000 =

Next Generation Payment Factory(b)


Example Next Generation and Payment Factory

Payment Factory

Reporting

Business Units

Business Units

Business Units

Business Units

Payments

Payments

Cash Settlements Centre

In-HouseBank

Corporate Treasury

Reporting

Operating Parameters

SWIFTNet interface

Bank B

Bank A

Treasury A/C

Country A

Treasury A/C

Country B

Vendor A

Vendor B

Vendor C

Vendor A

Vendor B

Vendor C

SEPA

Reduce number of bank accounts even

further

Agenda




Potential benefits

• Reduce bank fees and/or number of bank accounts• Convert x-border payments to cheaper products• Reduce the number of payment systems/bank interfaces to be developed

and maintained • Overall reduction in FTE’s involved in the payments processes • Consolidated/Accurate information to reduce cost of liquidity:

a. Improve daily cash managementb. Improve quality of L/T cash forecast for risk management.

Quantitative


Summary of Potential benefits

• Single technology for communication with the banking environment with a lower cost and greater degree of bank independence

• Minimise corporate risk by reducing locations where cash leaves the co.• Consolidated information for bank fee management & reconciliation• Improved operational flexibility, especially when integrating multinational

businesses.• Improved centralised information and ease compliance for IFRS/Sarbox• Achieve critical mass to improve segregation of duties in high risk areas.• Along with an in-house bank, constitute the building blocks for a shared

service centre. • Opportunity to build a centre of excellence offering expert [banking]

transaction related Customer Service to the business

Qualitative

Agenda




Conclusion

Costs:

• Implementing IHB module• Implementing SwiftNet• Connect TMS to SwiftNet• Develop payment format &

Interface to PF• Change management

Savings:

• Reduce number of bank accounts

• Reduced number of X-border payments

• Less external payments• Less banking fees• Reduced number of interfaces

and payment systems needed• Reduced number of FTE’s

needed• Better visibility on outgoing

cash

© 2009 PricewaterhouseCoopers. All rights reserved. “PricewaterhouseCoopers” refers to the network of member firms of PricewaterhouseCoopers International Limited, each of which is a separate and independent legal entity. *connectedthinking is a trademark of PricewaterhouseCoopers LLP (US).

Damien McMahon Director – Finance & Treasury Solutions [email protected]+32 2 710 9439

Gunter Geysen Manager – Finance & Treasury Solutions [email protected]+32 2 259 3163

Thank you!

Documents

Treasury Hot Topics Seminar Building the business case for a payment factory and in-house bank 19 February 2009