Treasury Services: Innovating For The Next Generation May 23, 2011 Presented by: Tony Carfang, Partner Cathy Gregg, Partner Dave Wexler, Principal 2011 Treasury Strategies, Inc. All rights reserved.
Meeting Objectives 1. Discuss innovation, its importance in our industry 2. Understand the emerging client needs 3. Identify areas of potential opportunity /challenge 4. Prioritize these areas and agree on a way forward w w w. T r e a s u r y S t r a t e g i e s. c o m 2
Perspectives Treasury Strategies corporate, financial services, and technology practice area perspectives reveal marketplace inconsistencies significant to this discussion. Although our bank clients work hard and invest heavily to differentiate themselves, our corporate clients see similar-size banks as largely undifferentiated. Much recent transformative banking innovation originated outside the industry. The largest banks are focused on leveraging their processing scale but not truly leveraging their information scale or their network scale. Corporate spend on managing the working capital cycle can be 10x to 25x the spend on bank treasury management services. Virtually all corporate treasury operations are subscale. w w w. T r e a s u r y S t r a t e g i e s. c o m 3
Treasury 3.0 - Corporate Perspective Treasury Management Timeline HIGH Treasury 1.0 Treasury 2.0 Treasury 3.0 Treasury Influence & Value Add LOW Treasury Operations is an immature, fragmented or informal function, characterized by manual processes Treasury centralizes key roles, improving transparency and controls Greater access to data and computing power and consolidation of competency Treasury is a strategic advisor, more closely integrated with business units, supporting globalization, efficiency, trading partner/supply chain integration and greater sophistication in risk/return optimization Data Information Intelligence Data Information Intelligence Pre 1970 1970-2010 Now - Future w w w. T r e a s u r y S t r a t e g i e s. c o m 4
3.0 Treasury Capital Markets Board of Directors & C-Suite Business Segments Fund Managers Treasury = Nerve Center Regulators Banks Rating Agencies Financial Nerve Center view fulfills unrealized potential of ERP w w w. T r e a s u r y S t r a t e g i e s. c o m 5
Corporate Trends Risk Credit crisis revealed counterparty risk management gaps Firms coming to grips with country and political risk Fraud accelerating and diversifying Liquidity Payments Firms re-engineering treasury technology & banking structures for liquidity visibility / access Companies consolidating & optimizing global liquidity Cash & FX exposure forecasting continues to improve Payment ops consolidation improves efficiency & speed of financial value chain Data & analytics improving cash application speed and accuracy Increased adoption of financial supply chain solutions Globalization w w w. T r e a s u r y S t r a t e g i e s. c o m 6
Treasury 3.0 - Bank Perspective Treasury Management Timeline $1T + Treasury 1.0 Treasury 2.0 Treasury 3.0 Revenue Rapid scope and volume growth, but $0 revenues as industry fails to commercialize Approaching zero-sum game dominated by several global and regional players Comprehensive payment & liquidity solutions Supply chain solutions Increased segmentation and refined competitive identities Web solutions innovations $175B $0 Client Accommodations Cash Management Treasury Management TBD Data Information Intelligence Pre 1970 1970-2010 Now - Future w w w. T r e a s u r y S t r a t e g i e s. c o m 7
Banking Scale Today, transaction banking is a fragmented $175B+ industry; top 3 players each have roughly 5% market share. In the next decade, top players will triple in size and control larger shares of a $250B+ global industry USD B 30 25 20 15 10 5 0 Consolidation and Growth 1980s 1990s 2000s 2010s 12% 10% 8% 6% 4% 2% 0% Market Share Decade Top Player Share Top Player Revenue Source: TSI data and proprietary econometric modeling w w w. T r e a s u r y S t r a t e g i e s. c o m 8
Barriers to Innovation Financial barriers - inadequate funding Risk avoidance mentality Distraction Suffocation Wrong measures of success Constrained thinking Time commitment too short for success Unrealistic payback horizon Too few bets w w w. T r e a s u r y S t r a t e g i e s. c o m 9
Value Proposition Frame Consider white space that exists within the value propositions you deliver to customers Proposition Commercial Payments Financial Settlements Financial Supply Chain Liquidity Scale and footprint Success Factors Scale / monopoly of sector Very broad scope of services and solutions (including non-traditional) delivered broadly into customer organization Robust investment product set; understanding of how to optimize deposit balances; deeper client penetration Trading Partner Well-developed understanding of buyer/seller relationships and regulatory insights; solution approach; willingness to invest and customize w w w. T r e a s u r y S t r a t e g i e s. c o m 10
Treasury 3.0 Corporate Treasurer and banks work together to achieve this. Strategy Workflows Intelligence Metrics & Decision Support Risk Management Treasury Operations Capital Markets Cash Reconciliation Debt Cash Positioning Investments Cash Forecasting FX Payments Interest Rate Hedging Bank Acct Admin Trade Confirmation Order to Cash Procure to Pay Analytics & Business Logic Record to Report w w w. T r e a s u r y S t r a t e g i e s. c o m 11
Questions w w w. T r e a s u r y S t r a t e g i e s. c o m 12
About Treasury Strategies, Inc. Who We Are Treasury Strategies, Inc. is the leading treasury consulting firm working with corporations and financial services providers. Our experience and thought leadership in treasury management, working capital management, liquidity and payments, combined with our comprehensive view of the market, rewards you with a unique perspective, unparalleled insights and actionable solutions. What We Do Corporations We help you maximise worldwide treasury performance and navigate regulatory and payment system changes through a focus on best practices, technology, liquidity and controls. Treasury Technology We provide guidance through every step of the technology process. Our expert approach will uncover opportunities to optimise the value of your treasury through fully integrated technology solutions. Financial Services Our experience, analytic approach and benchmarks provide unique consulting solutions to help you strengthen and grow your business. www.treasurystrategies.com/ networking/netcommunity.htm @TreasuryStrat w w w. T r e a s u r y S t r a t e g i e s. c o m 13