The 2011 guide to. Cash management. October Published in conjunction with: BNP Paribas Deutsche Bank

Transcription

1 The 2011 guide to Cash management October 2011 Published in conjunction with: Deutsche Bank

2 SEPA: reality dawns SEPA is now in place across Europe and the final hurdles to broader use of SEPA instruments will hopefully be cleared in the coming months. Jean-François Denis, head of payments and local offers at, explains why clients need to consider SEPA now, even if they do not plan to migrate in the near future The decade-long saga of the Single Euro Payments Area (SEPA), which applies to euro payments across 27 EU member states, three European Economic Area member states, Switzerland and Monaco, is finally drawing to a close. Both banks and clients are waiting on a decision regarding an end date for existing national payment instruments for credit transfers and direct debits. This move will provide necessary momentum to the SEPA project and help it achieve critical mass. All that stands in the way of the completion of SEPA is political will. Two texts one passed by the European Parliament (EP) in July, the other proposed by the European Council of the member states are now being debated. The EP plan proposes a single end date for national credit transfer and direct debit schemes in February 2014 while the other text proposes an end date of February 2013 for credit transfers and February 2014 for direct debits. The hope is that these two plans can be reconciled by the end of the year and a final plan adopted by the EP. As the imposition of an end-date is a regulation, no translation into local legislation is necessary and banks and clients could then get on with preparation for implementation. Next to the dates, the final text of the regulation is also awaited by the industry to end uncertainty that may still exist on some detailed requirements. Moreover, given the precarious economic and financial circumstances of some member states of the eurozone it is entirely feasible that the EP will be distracted by events and could delay the final decision for some months. More optimistic observers suggest that increasing concerns about the sustainability of the eurozone in its current form could prompt both member states and the EP to push for a final end-date plan to demonstrate their long-term confidence in the currency. Should an end date with either a single deadline for a move to SEPA Credit Transfer (SCT) and SEPA Direct Debit (SDD) in 2014 or separate deadlines in 2013 and 2014 be set before the end of 2011, the banking industry and clients will still face a significant challenge in ensuring readiness. Ordinarily, changes of the magnitude of the move to SCT and SDD have a preparation and investment lead-time of at least three years, rather than the one or two years proposed as an end date for existing national payment instruments. To be sure, many banks across Europe have made the necessary investments for SEPA. However, the EP s final plan may include additional requirements like consumer protection measures that will require further work by banks. Furthermore, many clients especially small and medium-sized businesses have made few preparations. The current state of SEPA instruments Uptake of the SCT, introduced in January 2008, has been relatively slow. Jean Francois Denis, Head of Payments and Local Offers, About 4,700 banks offer the SCT across Europe covering roughly 97% of payment volume in Europe and the remaining 3% will become SEPA-ready on 5 December, when the STEP2 XCT Service will be closed. However, adherence to the SCT does not necessarily mean that clients can use the instrument: the number of banks that have implemented SCT in their channels is much lower and overall SCT still accounts for only around a quarter of all credit transfers. Nevertheless, progress is being made: SCT as a proportion of all credit transfers is now around 45% in Belgium. Moreover, the migration of public entities in France at the end of 2010 ( is one of the banks processing SCT for these institutions) has proved a major boost for the instrument. Significantly, the move to SCT is relatively straightforward: from a client perspective, it just requires the addition of BIC and IBAN information and some technical changes. In contrast, SDD volumes remain low at an interbank level and are growing much more slowly than SCT volumes. Some countries such as Germany and Belgium have higher than average SDD volumes but in general the instrument is currently only used by early adopters and accounts for significantly less than 1% of all direct debit volumes. Part of the reason for this is that the SDD is a more complex product than the SCT. As importantly, it requires a change in processes especially for creditor clients some may have to reconsider their entire contracting process compared to legacy direct debit schemes. Client readiness Volumes for both SCT and SDD remain below original expectations and it is clear that many clients are prioritizing their investments in other initiatives than the migration to SEPA. However, that does not mean that clients should assume that moving to SEPA instruments is not worthwhile. For a sizeable number of clients there may be significant benefits to using SCT. Many of the benefits to be gained from moving to SEPA are

3 The Cash Management University SEPA is a major focus for. The topic will be discussed during the Cash Management University. Group in partnership with Equity, Fiserv, IBM, PricewaterhouseCoopers, SAP, SunGard and SWIFT are pleased to announce the 5th Cash Management University on 1/2 December 2011 at Le Pré Catelan in Paris. This year the university will focus on: Using Cash & Treasury Management to Improve Business Performance. Over 250 treasury professionals and key cash management experts will experience the unique and convivial atmosphere of the Cash Management University where they will have the opportunity to exchange ideas and debate solutions to the most important financial challenges facing corporates today. The university will spotlight the following areas of interest: Learn about the future of the Eurozone from one of the leading economists in Europe Listen to and learn from 20-plus practical, innovative and strategic corporate case studies Maximize the SEPA opportunity Explore how to optimize your regional liquidity management Exploit new business opportunities using supply chain financing Network with peers while gaining insights on cash management trends & economic challenges Strategies and tools to maximize return on surplus cash Reap the benefits of EBAM: account maintenance is no longer a nightmare! Participate in interactive sessions designed to structure and operate cost-effective domestic, regional and global cash management solutions For further information, please contact the organisers: cashmanagementuniversity@bnpparibas.com not necessarily technical or do not relate specifically to SCTs themselves. Rather they derive from the broader potential to rationalize payment flows, reduce costs of payment initiation and account structure, implement payment factories and facilitate standardized ways of working with banks using XML. Readiness among clients differs significantly. Large corporates may have a SEPA project manager or, at the least, might have an individual focused on end dates and necessary preparation. Inevitably, most medium-sized and small companies have paid less attention to SEPA and some have not considered its impact on their business model at all. Similar benefits are possible in relation to the SDD. While the use of collection factories has historically been less prevalent than payment factories because cross-border collections have been more problematic, SDD can play a major role in implementing new strategies for collections. More generally, much of the uptake of SDD has been for the B2B scheme, which enables clients to avoid the refund mechanism of the core SDD scheme. Leading banks, such as, are well placed to help clients overcome their challenges in relation to SEPA. In addition to the core processing capabilities for SCT and SDD, has developed value-added services that can make the move to SEPA easier and more beneficial for clients, including a BIC and IBAN conversion service for SCT and a mandate management solution for SDD. Hints and tips for clients l Before making any plans in relation to SEPA, clients must take a hard look at their level of readiness towards new SEPA schemes and at the potential benefits of moving to SCT or SDD. l Even if an analysis of the benefits of SEPA reveals no immediate benefits to migrating in advance of SEPA becoming mandatory, it is essential to recognize that migration does not occur overnight. A plan for migration should be devised in advance of any change. Clients should solicit the help of their bank to help them build a strategy for migration. l If migrating to SDD, clients must conduct a broader review of the impact of such a change on processes. An analysis may reveal benefits and opportunities that had not previously been considered, such as the potential to de-materialize the contract process. Even if a client is simply moving from a domestic direct debit to SDD, it is important to understand the implications of a change in an execution date (when the collection is credited), for example. In case of B2B SDD adoption, do put in place a strict follow up to the mandate s confirmation a key point to make the collection process start efficiently l Set up a correct database for bank identifier codes (BICs) and international bank account numbers (IBANs). This is a basic item, but without a reliable BIC and IBAN database you cannot use SDD or SCT. has already accompanied several migrating clients and has also created an on-boarding desk to support clients moving to SEPA, which can offer detailed advice and migration plans based on real-life examples and detailed knowledge of individual country and market readiness for SEPA. A typical example is the need to control the level of rejects when migrating to SDD, can provide advices in terms of the client migration plan based on past experiences and can provide statistics and data to help them achieve this objective. For further information, please contact: Anne Dugied, Deputy Head of Communication for Cash Management, anne.dugied@bnpparibas.com BNP PARIBAS SEPA: reality dawns 3

4 Creating a Seamless Offering Through successful integration of its Corporate and Investment Bank, Deutsche Bank has developed new synergies to improve efficiency and control for its clients In conjunction with the closer integration of businesses within Deutsche Bank s Corporate and Investment Bank, the Capital Markets and Treasury Solutions group was created with a view towards more closely aligning and integrating the coverage of clients with Treasuryrelated needs. This produces tangible benefits for both corporates and financial institutions as already demonstrated by the seamless integration of FX and transaction banking services offerings. The rationale for the integration was straightforward: it was in direct response to the needs of clients, which overlap considerably between the two business areas, explains Christian Westerhaus, global head of cash management product management, in Global Transaction Banking at Deutsche Bank. There is a broad business context between market transactions and transaction banking. FX, liquidity management and market transactions are needed by many of our clients and integration allows us to provide consistent service. FX4Cash One way in which the integration of the Corporate and Investment Bank s Markets group and the Global Transaction Banking group is delivering advantages for clients is in the areas of foreign exchange and cross-currency payments. Deutsche Bank s global cross-currency payments solution, FX4Cash, leverages Deutsche Bank s expertise as a leading cash management provider with its renowned capabilities as a truly global FX trading powerhouse to offer a broad range of solutions for cross-currency payments and receipts for corporations and financial institutions. FX4Cash gives clients access to a large number of currencies through a single platform, says Westerhaus. Deutsche Bank has invested in cross-currency payment solutions over many years and the result FX4Cash caters for the growing needs of clients to make payments in more than 120 currencies. Having launched three years ago, in advance of the integration of the Markets and the Global Transaction Banking areas, FX4Cash now has more than 1,000 corporate and financial institution clients. The integration of the two businesses has helped to further enhance the geographical reach and currency scope of FX4Cash, and enabled the addition of funding and debit functions and payables and receivables capabilities, says Westerhaus. FX4Cash is fully integrated into Deutsche Bank s client access channels, including the Bank s online cash and liquidity management platform, SWIFT, Host-to-Host and Eurogiro. Clients have the flexibility to initiate real-time trades via the Bank s proprietary platform with the corresponding payment sent via SWIFT or Host-to-Host. Through the online platform, Deutsche Bank delivers real-time, competitive FX rates as well as fast and reliable execution of the currency payment. FX4Cash makes managing incoming foreign currency commercial Christian Westerhause, global head of cash management product management, Global Transaction Banking, Deutsche Bank receipts more straightforward and less expensive. Often, there are multiple manual steps along the payment chain, little rate transparency, manual processing and limited options on settlement, says Westerhaus. With FX4Cash Receivables, Deutsche Bank delivers order and choice for incoming commercial receipts. For each currency, Deutsche Bank can convert and remit funds to a designated account in up to 39 predefined target currencies. FX4Cash uses the latest technology to ensure operational excellence straight through processing rates exceed 95% and quality customer service. Moreover, it offers a full audit trail and information reporting. FX4Cash offers a full suite of solutions to support all clients cross currency payable and receivable flows, says Westerhaus. It s a single solution for all cross-currency payment needs that can significantly improve efficiency, lower costs and is simple to implement. Since launching FX4Cash, Deutsche Bank has noticed a rapid and sustained increase in clients making payments in emerging currencies such as Chinese yuan, Indian rupee and Russian roubles. Westerhaus notes, The growing volume of trade between regions such as BRIC and also the rest of the world is key in energizing this demand for payments in emerging currencies. Until now, the vast majority of these trade flows would have been settled in US dollars or the euro because the importer was able to dictate the currency for payment to the vendor. This is beginning to shift now. Treasury platform on Autobahn Since 1996, Autobahn has been connecting clients to Deutsche Bank s innovative electronic products and services. The latest addition is the Treasury platform on Autobahn, the bank s award-winning electronic distribution service which delivers treasury services in an integrated way. Clients now have a single tool with a single sign-on for liquidity information and planning, FX and investment services, says Westerhaus. For corporates in particular that not only makes for a more efficient user experience but also enables visibility and control across liquidity and working capital, which is essential in the current environment.

5 The Treasury platform on Autobahn provides real-time liquidity data, including Deutsche Bank and third-party bank account information, allowing treasurers quickly to identify foreign exchange exposures, potential liquidity shortfalls and investment opportunities at a glance. Integrated with this is the ability to produce flexible liquidity forecasting across a number of scenarios through the input of planning data allowing treasurers to determine liquidity positions that may result from future transactions. The platform also offers clients all the tools required to view rates, initiate active trades and manage their investment portfolio. Clients can select from a range of short-term money market instruments in various countries and currencies, as well as a mix of mutual funds to fulfil all risk/return profiles. In addition, by leveraging Deutsche Bank s FX expertise and leading market position clients gain real-time access to FX rate capture and deal initiation. Clients can actively manage and hedge their FX exposures throughout the day in various accounts held around the world. The Treasury platform s post-execution services, which include automated matching and reconciliation tools, form part of a system of checks and balances designed to ensure that liquidity positions are accurately forecasted and implemented. These value added services can also be used to support regulatory reviews and enhanced documentation. This is crucial as it supports Deutsche Bank s clients with their information retrieval and reconciliation needs in connection with their end-of-day workflow, explains Westerhaus. Overall, the Treasury platform on Autobahn ensures an integrated approach to treasury and liquidity management which reduces complexity and improves efficiencies across the value chain of a treasurer, according to Westerhaus. The ability to view a consolidated liquidity position across regions, currencies and banking relationships provides greater transparency and control and the ability to mitigate risk exposures and maximize investment returns, he adds. That makes it a powerful management tool that can help clients increase efficiency and transparency of transaction flows within their organization. US dollar and euro clearing Deutsche Bank continues to leverage its unique position as a leader in euro and US dollar clearing by investing in tools and products that support clients in monitoring and managing their payment streams, account balances and liquidity positions. Westerhaus says, We are committed to introducing new services which provide tangible benefits for our corporate and financial institution clients along with their end clients. For financial institutions, Deutsche Bank has recently enhanced its world-class services for the world s most popular currencies, US dollar and euro. Specifically, Deutsche Bank s new Asia Accelerator tool offers accelerated processing of US dollar-denominated payments during US night-time hours. That means that clients in Asia can have their payments processed during their own early business hours, says Westerhaus. Asia Accelerator was developed to address inefficiencies in the settlement of Asia s high volume of US dollar-denominated payments US dollars are the dominant currency for trade within the region as a result of different clearing time-zones. The industry practice of processing payment instructions received on a first-come, first-served basis has historically resulted in delays in processing intra-asia US dollar payment Treasury Platform on Autobahn Post-Trade Pre-Trade Payments Forecast In & Out Clearing & Cash Management Monitor Reconcile Information Cash Former day s & position Activities Analysis Reconciliation & Settlement Treasury Identify Invest Borrowing & Risk FX & MM Surplus Investment Identification & Exposure Cash Services Mitigation Manage Borrow to fund FX & MM Short-falls Exposure Trade Source: Deutsche Bank requests until the next working day. Existing industry solutions such as extended clearing hours and the creation of offshore US dollar clearing systems for intra-asia regional settlements were unable to address fully the need for same-day execution of increasing intra-asia US dollar volumes while maximizing liquidity efficiency. Deutsche Bank s Asia Accelerator leverages sophisticated algorithms and text-recognition technology to identify and prioritize intra-asia US dollar payments within the standard payments architecture of the banking system. Auto-repair capabilities facilitate straight-through processing to ensure that financial institution clients can have their intra-asia US dollar payments processed within the same working day in Asia. As a result of intelligent prioritization, liquidity is automatically directed to active market participants and effectively recycled among Asian participants. Deutsche Bank s clients in the region can therefore reduce the liquidity required for their payment book or grow their business without attracting incremental liquidity costs. More generally, Deutsche Bank has continued to invest in its longestablished global platform to enhance its capabilities further. Global consistency is at the heart of our offering, says Westerhaus. We know how important it is for clients to use a single global platform and for their provider to have a single operating model and state of the art electronic inquiry system. At the same time, it is essential to offer local and regional service support. Westerhaus says that the growing trade between emerging markets countries reinforces the importance of this model. Emerging market clients want an internet-based channel for information and enquiry but they also want local service, he says. As international payment streams in emerging markets become more significant, the benefits of our approach will become ever more apparent. For further information, please visit: DEUTSCHE BANK Creating a seamless offering 5