International Bank Fees: The Next Frontier

Transcription

1 International Bank Fees: The Next Frontier Stephan Ireland Managing Director Redbridge DTA Kris Filipkowski, CTP Director of Global Treasury Initiatives Henry Schein, Inc

2 Agenda Challenges of international bank relationships Collection of information Negotiation strategies Benchmarking Client Case Study How to optimize the process: BSB Why? What is it? Who is providing it? Update from the CGI-MP Taskforce

3 Global Transactions Market A Diverse Landscape United States and Canada Fragmented and heterogeneous market Cash and Check collection issues Complexity of the bank services billing

4 Global Transactions Market A Diverse Landscape Europe Countries' local specificities: "Commission de Mouvement" (France), RID/RIBA (Italy), "Bunchungposten" (Germany), BACS and CHAPS payments (UK), Boletino (Brazil), Stipandi (Italy) SEPA and cross-border payments: SEPA harmonized prices vs. non- SEPA payments (CCY transactions, intercompany payments) Electronic banking: many subscriptions to electronic banking needed in Europe due to numerous banks, optimizations possible

5 Global Transactions Market A Diverse Landscape APAC Countries' local specificities: limited number of banks in Australia/New-Zealand: few pricing efficiencies. Specific payment instruments in Asia, especially in China where some payment instruments are widely spread, such as Bank Acceptance Drafts Complexity of the liquidity management: tailor-made cash pooling structures needed, many tax issues Restrictive regulations: cash and liquidity management regulated by SAFE and PBOC in China but some regulations eased recently

6 It s Project Management Communication is Key! Coordination & leadership Monitoring and Supporting Need of local expertise ( Team / banks / 3rd party )

7 Collection of information

8 Gathering Data Before you can compare global banks, you must first gather all the data No consolidated statements Ask for the BSB! Data entry is very manual Extracting volumes from TMS is tricky Multiple currencies etc.

9 Gathering Data Preparation is Key Canada Mexico United States Western Europe APAC ENTITIES BANKS Bank 1 Bank 2 Bank 3 Bank 4 Bank5..Bank14 Bank 15 Division 1 X X Division 2 Division 1 Division 2 Division 3 X X Division 1 X X X Division 2 Division 3 Division 1 X X Division 2 X X Division 3 X Division 4 X X Division 5 X Division 1 Division 2 Division 3 Division 4 Division 5 X X X X X

10 If/When You Have Data Normalize currencies Sort fees into comparable Product Families by bank and by country Wire Fees Payment Fees Depository Fees, etc. Electronic Banking, etc.

11 Understanding Local Markets

12 Example With Italy Italian Service Name Cambiali RID RIBA Spese di Scrittura Stipandi Proportional Fee & Transaction Fee Float (not anymore??) Industry Standard Draft Direct Debit Payment Announcement Fee Per Line ACH Transaction fee

13 Aggregate the Data EFT0 EFT00000 EFT00001 ELECTRONIC FUNDS TRANSFER MAINTENANCE Funds Transfer System (RTGS) Maintenance General Domestic ACH Maintenance EFT00002 EFT00004 EFT00005 Payment Initiation Portal Maintenance - Automated SEPA Maintenance General Crossborder Maintenance

14 How to Benchmark? No database available outside US Do it yourself: RFP? Use 3rd party?

15 Henry Schein World's largest provider of health care products and services to office-based dental, animal health and medical practitioners. Fortune 500 Company Member of the S&P 500 and the NASDAQ 100 indexes, Employs more than 18,000 Team Schein Members Serves more than one million customers. The Company has operations or affiliates in 33 countries. The Company's sales reached a record $10.4 billion in 2014.

16 Henry Schein Case Study Henry Schein operated in 24 countries with $8.9 billion in sales in 2012 Around $3 million of fees to banks to manage its payments & collection operations, excluding credit cards. North America accounted for 2/3 of the global banking profit pool and 1/3 was widely spread in many foreign countries such as UK, Germany, Australia, France

17 Objectives Of The Engagement 1. Measure the total costs of its cash management operations in the world 2. Identify major areas for improvement 3. Decide how to achieve them

18 Execution 1. Map out banking relationships worldwide 2. Focus on the highest stake: UK, Germany, Canada, USA 3. Prepare dedicated questionnaires & provide all necessary support to fill them in 4. Compare Banks 5. Benchmark

19 Execution Prepare Create steering committee Map bank/entity into a matrix Identify key contacts per entity or country Communicate Present project to key contacts Provide data collection file per country Review with each contact to ensure understanding and identify missing info

20 Execution Collection and Qualification Single hotline at headquarters for questions Check consistency and quality of the data

21 Identify International Cash Management Cost 0,16% Cash management cost in % of local domestic volumes 0,14% Israel 0,12% 0,10% 0,08% Austria Asia (China, Thailand, Malaysia) 0,06% 0,04% 0,02% North America & Canada UK Australia New-Zealand France Germany The Netherlands Belgium Spain Portugal Italy Czech Republic Switzerland 0,00%

22 Understand Price Trends Main Pricing Trend in Europe: PSD & SEPA Impact 0,09 0,08 0,07 0,06 0,05 0,04 0,03 France Italie Espagne Allemagne 0,02 0,

23 Findings -20% to -40% -36% to -51% -20% to -40% -24% to -36% -20% to -35%

24 Findings UK Scope 10 entities 1 bank Audit & benchmark key findings The benchmark shows a range of - 22% (classic) to - 42% (aggressive) of achievable savings GERM 16 entities 3 banks The benchmark ranges from -33% to -50% of easily achievable savings (almost entirely from Bank 1) CAN USA TOTAL ($ equivalent) 1 entity 1 bank 32 entities 1 bank Lockboxes and paper disbursements represent 81% of the current annual bank charges and 78% of the identified savings Almost half of the current cost comes from lockbox services. The most important areas of savings come from lockboxes, ACH and EDI services 4 countries 59 entities 6 banks

25 Action Plan High Low Low High

26 Before Negotiation, Define Your Strategy If you don t ask, you don t get Recommandation Global Negotiation UK Germany Bilateral negotiations on: - domestic and SEPA transfers (Faster Payments, SCT ) - cash concentration fees Decrease the number of additional users and accounts for the Eb tool Renegotiate terms and conditions insisting on: - booking fees on credit of transfers - SEPA transactions - migrating all international transfers in EUR in the EU to SEPA format (quick win) Keep the current flat fee with bank 1 Pan European RFP can be considered to maximize savings and streamline European banking relationships Canada USA Bilateral negotiation on Lockbox and paper disbursement services, RFP can also be considered Bilateral negotiations may not be sufficient since savings are scattered across a large number of services RFP to consider North American RFP can be considered.

27 Conclusion All countries had a saving objective to realize (part of the performance management too) Global return for the Group was >15% savings all-in Savings could have been much more important but they have been limited on purpose (Taking into consideration Bank s profitability / RAROC) 3-5 yr bank pricing commitments No change in banking relationships No alteration of banking relationships

28 BSB Update TWIST/Camt086

29 BSB Why? Corporations do not know with any degree of accuracy what is being paid to international banks for treasury services because: Current billing provides little or no transparency Analysis of bank fees is labor intensive Bank relationships are locally managed

30 BSB Why? If you do not know what you are paying, you cannot: Provide management with global bank relationship metrics Accurately verify international bank fees (vendor due diligence) Control costs

31 What is the BSB? ISO standard, electronic bank bill format known as camt.086 Transmits bank balance, service charge, tax, currency & adjustment data Designed to be US 822 equivalent on global scale with the addition of tax & currency data Uses billing codes (Global AFP Service Codes) to standardize identification of bank services.

32 The Latest Standards 2015 SWIFT CGI MP Taskforce began January 2015 to harmonize implementation of the TWIST or Camt.086 Version of the Bank Services Billing statement for global bank fee reporting. CGI-MP: Common Global Implementation Market Practice CGI is driven by customer demand for multibank coordination of implementations

33 Objectives Corporate View Focus on finding potential gaps in the AFP Global Service Codes Enable banks to provide corporates with a 1:1 mapping Enhance BSB/camt.086 reporting to be used as e-invoice Define and implement standardized nomenclature/xml schema Motivate the banks to realize that a standardized billing landscape and comprehensive billing for corporates (and other FI) also generates bank internal benefits (business case)

34 Corporate Voice Corporations are frustrated by lack of progress. Petitions One was sent 2 years ago to global bank management. Time for another? RFPs Banks noticing increased requests through RFPs. Laws Germany passed a law requiring electronic invoicing by 2018.

35 Global Banks Providing BSB: Ask them! RBS, Bank of America Merrill Lynch, Barclays, BNP Paribas, Citi, Danske Bank, Deutsche Bank, HSBC, Intesa Sanpaolo, JPMorgan, SEB (Skandinaviska Enskilda Banken), Société Générale, Standard Chartered Bank, UniCredit

36 What you can do? Join the CGI-MP Task Force Ask your bank Electronic Files Join LinkedIn Discussion Group (coming very soon) Participate in industry surveys Raise your voice!!