CGI Transaction Banking Survey 2017

1 CGI Transaction Banking Survey 2017

Table of Contents 2 Foreword 3 Client Experience and Satisfaction 5 Client Overall Satisfaction 6 Reviewing Banking Relationships 8 Bank Products Under Review 9 Changes in Banking Relationships 11 Client Overall Satisfaction with Specific Services 12 Bank Selection 13 Corporate Practitioner Perspective 14 Bank Activity 15 Number of Banking Partners 16 Banking Channels 19 Preferred Bank Access 23 Types of Access to Bank Services 25 Areas for Improvement 24 Challenges 29 Challenges Faced when Integrating with a Bank for Cash Management Services 30 Service providers 32 Challengers for Banks 33 Barriers to Growth 34 Reviewing Relationships 36 Drivers for Change 37 Rating Performance 40 Scope of Service 41 Future Growth Strategy 43 Models 44 Business strategy 46 Mobile App Services 48 Competitive Differentiation 49 Value Added Services 51 Other partnerships 54 Transaction services 55 Security 56 PSD: The Revised Directive on Payment Services 58 About the Survey 60 Conclusion 62

3 Foreword For the fifth year running, CGI is a proud sponsor of the GTNews Transaction Banking survey, which offers critical insight into the corporate-to-bank relationship. While 2016 survey results showed a dramatic drop in corporate satisfaction, this year the decline is bottoming out. Corporate satisfaction remains low, but there is a growing sense of opportunity and greater clarity for corporate and transaction banks in finding the pathway to increased corporate satisfaction and loyalty. Corporate satisfaction remains constant, with 54% very satisfied and satisfied with their current banking relationships for the second year running. However, there has been an 83% yearover-year drop in the use of non-banks from last year, and bank relationships appear to be contracting, compared to the increase in multi-banking we have seen over the last few years. Banks also seem to be more optimistic and responsive to the needs of corporates, with 43% now stating they are operating a global banking model, compared to 31% a year ago. This corporate preference to remain with traditional banks and the stabilization of multi-banking expansion sends a clear optimistic message to banks but less so for non-banks. However, while corporates may be turning from non-bank competitors, half of corporates are actively reviewing their bank relationships, especially small to medium enterprises (SMEs) and large multi-nationals for cost, technology, security and service reasons. Corporates are seeking to drive down their cost of banking and consolidate relationships. They are seeking greater integration of services and improved real-time capabilities. Their banks security and reputational capabilities also are under scrutiny, and they continue to seek better digital servicing. In terms of the cost of banking, leading banks are investing in efficiency initiatives, especially in vanilla services, to drive down costs and pass on the savings to their customers to address higher price competition in the market. Cost reasons are driving 66% of corporates to review their bank relationships. When comparing key bank relationship factors with bank performance ratings, we begin to see some clear messages about the pathway to improved corporate satisfaction and loyalty. In terms of security, technology and service factors, one in three corporates do not consider their banks to be performing excellently or very well. Current provision of technology services shows the biggest disappointment among corporates. Of greater concern, based on this year s results, is the mismatch between what corporates and banks view as priorities. Consequently, this year s survey provides valuable insight for banks who want to reprioritize to increase corporate satisfaction. Corporates place a bank s security record and financial crime capabilities at the top of their list for both existing and new bank relationships. Given well known security breaches and fines, as well as the move to open banking and new regulations, 89% of corporates rate bank security capabilities and track records as the most critical factor in their existing bank relationships; yet only 43% of banks view security as a source of differentiation. Both corporates and banks view security as a mutual responsibility, and corporates are looking for a much more proactive security approach from banks to protect the system as a whole. As we move to real-time payments, corporates believe the role of banks in ensuring end-to-end security is significantly increasing, so this is a key time to discuss security with corporates. The priority mismatch continues when we look at technology factors important to corporates in their bank relationships and the banks perspective. Over the last two years, corporates have placed great value on the harmonization of standards among banks. This year is no different. Over 50% of corporates report major challenges in onboarding, file formatting and process integration with new banks. While 62% of banks recognize ease of integration as a source of competitive differentiation, only 29% view conformance with industry standards as such. Forty-four percent of banks view the streamlining of onboarding and entitlement services as a priority investment to drive new revenue. While banks may view industry-wide standardization as enabling greater switching, the voice of corporates is clear, and the time to act is now. Integrated digital servicing continues to fall short of corporate expectations. Many banks are making a serious investment in new portals, and 50% of corporates report that they are offered multi-services portals. Another 37% percent benefit from portals that deliver services across multiple banks. Online service use and preference are not following. If we look at the provision of multi-services online, we see that many individual services are not currently integrated into this environment. In which case the treasurer s desire for integrated working capital management, for example, cannot be met. Likewise, the provision of trade finance in a multi-service online environment

Foreward 4 is very low at 28%. How can the treasurer conduct integrated supply chain finance in this instance? Driving a client-centric approach to portals, with the inclusion of related services, is now critical. Bank product satisfaction this year is poor, especially in terms of SMEs, with only 25% considering product services as excellent or very good. Satisfaction with real-time payments is below 40% across all geographies - a clear warning sign to banks that value-add services are needed over and above transactional vanilla services. Corporates that have turned away from non-banks are now looking for alternative lending and supply chain platforms from their banks. Multi-nationals and SMEs, in particular, are looking for enhanced working capital management services. Banks appear to be responding, apart from offering new lending options. Corporates also are looking for other value add - services - an area where banks can generate new revenue streams. The highest rated value-add service from corporates is bank support in understanding upcoming regulations and changes. This service also saw the biggest delta; while 62 percent of corporates rated this as a priority value-add service, only 39 percent of banks were aligned. Interestingly, the second largest discrepancy between corporate and bank priorities was security advisory services. Thirtythree percent of corporates view these as a priority area for innovation, while only 16% of banks agree. There is clearly an opportunity to add more value-add services and to benefit from the revenue streams associated with them. Bank value-add service innovation must be high on the agenda. demonstrating a real interest in receiving support in leveraging new technologies such as blockchain. Blockchain is the second top rated value-add service among corporates and the highest rated innovation area among banks in terms of its potential for generating new revenue. Moreover, banks are beginning to support their customers in this area, as the percentage of banks offering open APIs more than doubled from 15% to 32%. Over the past five years, the results of this critical market survey of corporate-to-bank relationships has provided important insight on how the market is changing, actions that banks should take in response, and the mounting frustration from corporates when it comes to the delayed change in the banking system that serves them. In this year s results, we see much more clearly that corporate expectations are maturing. Over the next three years, corporate and transaction banks will, on average, increase new technology investment by 24% to transform their business to become customer centric. Now is the time to ensure that this investment in a fully technologyenabled business covers the areas essential for driving corporate satisfaction and loyalty. CGI is a world leader in consulting, systems integration, outsourcing and software to wholesale banks around the world. We hope you find this report of value in helping you to prioritize initiatives that promote success. If you would like to discuss this research and how we can support you, please contact us at banking.solutions@cgi.com Jerry Norton Senior Vice President, Global Financial Services CGI The good news is that banks are aligned with their customers when it comes to the importance of innovation. Corporates are

5 Client Experience and Satisfaction

Client Experience and Satisfaction 6 Client Overall Satisfaction In today s increasingly challenging regulatory environment, and with a plethora of new digital products entering the market, it is crucial for corporate treasurers to maintain a strong relationship with their banking partners. This challenging climate equally means that treasurers need to demand more from those banking partners, namely more advanced solutions alongside the traditional services they receive from their banks. Although we saw a large fall in corporates satisfaction with their main banking from 2015 to 2016, and there has been no regaining of ground in this area, it does appear that the increase in disapproval has been arrested. Overall Satisfaction with Service Provided by Main Banking Partners (Percentage Distribution of Corporate Practitioners Rating Service 4 or 5 on a 5-point scale) 46% 54% Highly satisfied (service rated '4' or '5') Less than highly satisfied (service rated '1', '2' or '3') Overall, satisfaction for the service provided by main banking partners among corporate practitioners is almost the same as last year, with just over half (54%) of corporate practitioners rating the service they receive 4 or 5 on a 5-point scale (where 1 was not at all satisfied and 5 was very satisfied). Last year the figure was 55%. Although this marks another decrease in overall satisfaction with banking partners service, this decrease is far smaller than what was recorded between 2015 and 2016, when overall satisfaction fell 13 percentage points from 68% to 55%.

Client Experience and Satisfaction 7 Overall Satisfaction with Service Provided by Main Banking Partners (Percentage Distribution of Corporate Practitioners Rating Service) On a scale of 1 to 5, how satisfied are you with the service your organization receives from its main banking partners? Value All <$500M $500M-$5BN >$5BN Public Private Asia Pacific North America Western Europe 5 (very satisfied) 7% 7% 4% 17% 4% 8% 10% 8% 9% 4 48% 37% 63% 44% 50% 47% 50% 48% 45% 3 39% 43% 33% 39% 33% 37% 36% 40% 40% 2 3% 7% 0% 0% 4% 3% 0% 2% 2% 1 (not at all satisfied) 4% 7% 0% 0% 8% 5% 4% 2% 4% Corporates with annual revenues of more than $5bn are more than twice as likely as both smaller and mid-sized firms to rate their satisfaction with banking partners services as a 5. Where 17% of these larger businesses rated their satisfaction with banking partners as a 5, just 7% of smaller corporates (those with annual revenues of less than $500m a year) and 4% of mid-sized corporate treasurers (those with an income of between $500m and $4.9bn a year) did so. Mid-earning companies are the least likely group by earnings to rate the service they receive as very satisfactory, this is the lowest of any demographic surveyed alongside publicly held companies. Public organisations and medium income companies are also more likely to rate their satisfaction the lowest of all, with 8% and 7% respectively rating their banking partners service a 1.

Client Experience and Satisfaction 8 Reviewing Banking Relationships Review of Strategic Relationship with Main Banking Partner (Percentage of Corporate Practitioners) Yes 50% 50% No Overall, in 2017 exactly half of corporates are reviewing their organization s strategy with their main banking partners, and half are not. Far more corporates are choosing not to review their strategy this year, marking a 12-point increase on 2016 s figure. Review of Strategic Relationship with Main Banking Partner (Percentage Distribution of Corporate Practitioners) Are you reviewing your organization s strategy with your main banking partners? Value All <$500M $500M-$5BN >$5BN Public Private Asia Pacific North America Western Europe Yes 50% 53% 44% 72% 58% 50% 54% 60% 53% No 50% 47% 56% 28% 42% 50% 46% 40% 47% Overwhelmingly so, higher income organizations (those with annual income of more than $5bn a year) are most likely to be reviewing their strategic relationship with their main banking partner nearly three-fourths (72%). As larger organizations are, as we found in the previous section, generally more satisfied with the service they receive from their banking partners, it could be inferred that regular strategic review with main banking partners leads to greater satisfaction with the service they provide. Businesses based in North America and publicly held organizations are also more likely than the average to be reviewing their strategic relationship with their main banking partners, with 60% and 58% of these respondents selecting yes respectively.

Client Experience and Satisfaction 9 Bank Products Under Review Bank Product Areas Under Review (Percentage of Corporate Practitioners Planning to Assess Current Relationships with their Main Banking Partners) Cash Management Services Payments Liquidity solutions (including pooling / netting) FX (including hedging) Reporting Trade finance (letters of credit, collections) Receivables Payables Investment banking / capital markets Credit / lending Open account (supply chain financing) Depository services Forecasting Other 3% 33% 30% 29% 28% 24% 20% 19% 18% 18% 45% 48% 65% 70% 0% 10% 20% 30% 40% 50% 60% 70% 80% As was the case last year, cash management services is the bank product area most likely to be under review, with 70% of corporates highlighting this. However, this is a ten-point reduction on last year s figures. Nearly two-thirds (65%) of respondents selected payments, a new option for this year s survey, as the bank product area second most likely to be under review. The remaining options track reasonably closely with their positions last year, with the exception of payables. The number of corporates selecting this fell a third, from 42% in 2016 to 28% this year. In addition, the proportion of corporates selecting credit/lending for review almost halved, from 39% last year to 20% this year. And in another dramatic finding, Investment banking/capital markets climbed from the least cited bank product last year, selected by 17% of corporates, to 24% this year.

Client Experience and Satisfaction 10 Bank Product Areas Under Review (Percentage of Corporate Practitioners Planning to Assess Current Relationships with their Main Banking Partners) What bank product areas are you reviewing? Value All <$500M $500M-$5BN >$5BN Public Private Asia Pacific North America Western Europe Payments 65% 60% 63% 67% 46% 68% 66% 60% 68% Trade finance (letter of credit, collections 30% 27% 26% 44% 29% 32% 38% 33% 30% Open account 19% 13% 19% 28% 13% 21% 22% 21% 19% Cash Management Services 70% 57% 78% 89% 71% 68% 68% 81% 77% Reporting 33% 33% 44% 33% 38% 40% 36% 40% 36% Payables 28% 23% 33% 28% 25% 29% 36% 35% 28% Receivables 29% 23% 41% 28% 21% 32% 38% 35% 28% Liquidity Solutions (including pooling/netting) 48% 50% 33% 72% 50% 47% 52% 54% 53% Depositry services 18% 17% 26% 17% 13% 24% 20% 17% 21% Investment banking / capital markets 24% 20% 22% 33% 13% 26% 16% 25% 13% Credit / lending 20% 20% 22% 28% 13% 29% 24% 21% 23% FX (including hedging) 45% 37% 52% 78% 50% 45% 58% 54% 57% Forecasting 18% 13% 26% 22% 4% 24% 18% 27% 19% Other (please specify) 3% 3% 4% 0% 0% 5% 0% 2% 2% None of the above 10% 13% 7% 0% 13% 11% 8% 4% 4% Nearly all larger companies (those with an annual income in excess of $5bn) are reviewing their cash management services, with 89% of respondents citing this. On the other side of the spectrum, 57% of smaller businesses (those making less than $500m a year) are reviewing this bank product. Larger organizations are also more likely to be reviewing their liquidity solutions, FX and investment banking/capital markets than other organizations.

Client Experience and Satisfaction 11 Changes in Banking Relationships Overall, corporates are more likely to have increased the number of banking relationships they have over the previous 12 months to June 2017 than they were in the same period to June 2016. There was a ten-percentage point increase here. The percentage of corporates that decreased the number of their banking relationships fell modestly compared with last year, from 19% to 15%. In total, half of all corporate treasurers surveyed saw no change to the number of banking relationships they had over the last year. Changes in Bank Relationships in the Past 12 Months (Percentage Distribution of Corporate Practitioners) How has the number of bank relationships in your organization changed Value All <$500M $500M-$5BN >$5BN Public Private Asia Pacific North America Western Europe Increased 35% 33% 37% 33% 25% 32% 38% 44% 34% Decreased 15% 7% 22% 22% 25% 11% 18% 17% 19% Unchanged 50% 60% 41% 44% 50% 58% 44% 40% 47% Private businesses are more likely to have increased the number of banking relationships they have than their public counterparts. Across income bands, smaller companies (those with an annual income of less than $500m) are the least likely to have decreased their number of banking relationships, with just 7% saying this is the case compared to 22% of both mid-sized and larger organizations. Larger corporates (those with annual incomes of more than $5bn), as well as corporates whose treasuries operate in North America and Western Europe, are far more likely to have increased their number of banking relationships over the last 12 months than they were over the same period last year. Where 14% of larger corporates increased the number of banking relationships they had in the 12 months from June 2015-16, more than twice the proportion did in the 12 months from June 2016-17, at 33%. In North America, the proportion of organizations that had increased the number of banking relationships they have over the last 12 months more than doubled from 21% to 44%, and in Western Europe the percentage rose from 21% to 34%.

Client Experience and Satisfaction 12 Client Overall Satisfaction with Specific Services Overall, the level of satisfaction with banking partners for a range of different services has not changed significantly from last year. The chart below illustrates the proportion of financial professionals that rated their partners excellent or good in each area. Overall Satisfaction Provided by Main Banking Partners for Each Service (Percentage of Corporate Practitioners Rating Service as excellent or good ) Payments Cash Management Services Liquidity services (including pooling / netting) Credit / lending FX (including hedging) Trade finance (letters of credit, collections) Reporting Payables Real-time payments Receivables Investment banking / capital markets capabilities Depository services Open account services (supply chain financing) Forecasting 25% 29% 33% 32% 43% 41% 41% 40% 38% 38% 52% 49% 49% 48% 0% 10% 20% 30% 40% 50% 60% When it came to rating their satisfaction with specific services, most corporates (52%) rated payments either excellent or good. Close behind was cash management services and liquidity services, each with 49% of corporates rating them excellent or good. Corporate practitioners were least satisfied with forecasting services of the 14 options presented, as just a quarter rated this excellent or good.

Bank Selection 13

Bank Selection 14 Corporate Practitioner Perspective The chart below illustrates the proportion of corporates that rated the level of value for each factor very important or quite important. The picture here looks a little different from last year. In 2016 security was the factor considered most important to corporate practitioners when establishing a new banking relationship (87%), this year that option s counterpart security and financial crime policies and capabilities was the third most considered factor, with 81% selecting it, representing a fall of six percentage points. Factors Considered When Organizations Establish a Banking Relationship (Percentage of Organizations Rating the Level of Value very important or quite important ) Selecting the best-in-class providers of products or services Highly efficient, real-time and integrated technology systems and processes Security and financial crime policies and capabilities Selecting a provider that offers strategic financial and market advice Geographic footprint of the bank Credit facilities offered in addition to transaction services Historical relationship between the bank and the organization Selecting the lowest cost providers of products or services Expected digital customer experience Allocating bank services in proportion to credit facilities Access to third party non-bank services Other 28% 38% 42% 43% 52% 51% 50% 50% 67% 61% 65% 57% 61% 57% 89% 88% 87% 82% 81% 84% 75% 80% 77% 75% 0% 20% 40% 60% 80% 100% Corporate Bank The most selected factor this year was selecting the best-in-class providers of products or services, which was cited by 89% of corporates. Highly efficient and integrated technology systems and processes was once again considered the second most important factor to organizations establishing a banking relationship, with 87% of corporates selecting this. Notably, the proportion of businesses considering selecting a provider that best supports the organization from a strategic standpoint a very important or quite important factor when establishing a new banking relationship fell 10 percentage points, from 85% in 2016 to 75% this year.

Bank Activity 15

Bank Activity 16 Number of Banking Partners The number of banks a treasurer works with will depend on many factors, including availability of credit, geography, and the services offered. Treasurers must additionally consider counterparty risk, which can be mitigated by diversifying bank account relationships, and also security. Although more corporate practitioners have increased the number of banks they work with on a regular basis, the number of banking partners treasurers have today is largely the same as it was last year. More than one third (37%) of corporates have between six and 20 banking relationships, exactly the same percentage as last year, while 34% are working with two to five banks, compared with 36% last year. Number of Banks Organizations Work With on a Regular Basis (Percentage Distribution of Corporate Practitioners) 8% 21% 1 2-5 13% 34% 6-10 11-20 24% 21+ Just one-fifth (21%) of respondents works with 21 or more banks. Half (50%) of the corporate practitioners with more than $5bn annual income maintain 21 or more banking relationships.

Bank Activity 17 Number of Banks Organizations Work With on a Regular Basis (Percentage Distribution of Corporate Practitioners) How many banks does your organization work with on a regular basis? Value All <$500M $500M-$5BN >$5BN Public Private Asia Pacific North America Western Europe 1 8% 20% 0% 0% 8% 13% 8% 4% 4% 2-5 34% 47% 33% 5% 17% 40% 20% 21% 26% 6-10 24% 17% 44% 28% 29% 29% 32% 40% 30% 11-20 13% 7% 7% 17% 13% 8% 12% 8% 13% 21+ 21% 10% 15% 50% 33% 11% 28% 27% 28% Unsurprisingly, as was the case last year, larger corporates, or those that have a greater annual revenue, tend to have more banking relationships. Privately held businesses also have more banking relationships than their publicly traded counterparts.

Bank Activity 18 Centralized Treasury Functions For treasurers, the decision of whether to centralize or decentralize certain functions hinges on what model offers the most efficiency for them. Some functions may benefit from highly specialized, local knowledge, allowing corporates to make quicker decisions as conditions change. Functions such as these would benefit from decentralization. However, centralized functions allow for economies of scale, ensuring effort is not duplicated across treasury operations. The price of these gains in efficiency? Greater technological capabilities. In 2016 the three most commonly centralized treasury functions among corporate practitioners were FX (77% of organizations were centralizing this treasury function), risk management (74%) and cash pooling/netting (71%). This year FX fell into fourth position of the 12 options available, with 70% of corporate practitioners centralizing the function. Taking its place as the most commonly centralized treasury function was investment services, cited by 74% of organizations, up 12 points from last year. Centralization and Decentralization of Treasury Functions (Percentage of Corporate Practioners) Investment services 74% 8% 18% Cash pooling / netting 73% 11% 16% Risk management 72% 19% 9% FX 70% 14% 16% Forecasting 66% 30% 4% Regulatory reporting 61% 32% 7% Accounts payable 52% 41% 8% Credit services 49% 24% 28% Payment reconciliation 45% 49% 7% Accounts receivable 41% 49% 10% Trade finance 40% 22% 38% Supply chain finance 29% 20% 51% 0% 20% 40% 60% 80% 100% Centralized Decentralized / regionalized Not applicable / Do not use The treasury functions that are most likely to be decentralized are payment reconciliation, cited by 49% of corporates, and accounts receivable also cited by 49% of organizations. This was also the case last year (54% and 51% respectively).

19 Banking Channels

Banking Channels 20 Banking Channels Corporates may use a variety of different channels to access their banking partners services, which can be challenging in itself, as they must access multiple banks via separate channels, or multiple products from a single bank (or likely both). Each of these channels will request different credentials from the user, introducing inefficiencies where the need to complete a time-sensitive transaction is critical. As was the case last year, corporates most commonly use a single integrated bank portal providing access to multiple services from a single bank provider to connect with or access their bank. More than half (54%) corporates use this method, eight percentage points than last year. Channel Used When Connecting/Accessing Banks (Percentage of Corporate Practitioners) Single integrated bank portal providing access to multiple services from a single bank provider Multiple portals (separate channels for specific services at the same bank) 38% 65% 54% Via SWIFT solution Host to host connections Treasury workstation 33% 33% 32% Single integrated bank portal providing access to services from multiple bank providers Mobile apps Service bureau Paper based / fax 14% 14% 13% 19% 24% Third-party aggregator 7% 0% 10% 20% 30% 40% 50% 60% Overtaking host to host connections, via SWIFT solution and treasury workstation as a main channel for accessing banks this year is multiple portals. 58% more corporates are using multiple portals to connect to their banks this year than they were last year (38% vs 24%). Meanwhile, about a third of treasurers are using SWIFT solutions, host to host connections and treasury workstations to access their banks. The proportion of treasurers using SWIFT solutions (which offer corporates the ability to exchange financial messages with whichever banks they please) hasn t moved since last year, but the proportion of those using the latter two has increased, from 24% to 33% for host to host, and from 24% to 32% for treasury workstation.

Banking Channels 21 Channel Used When Connecting/Accessing Banks (Percentage Distribution of Corporate Practitioners) Which of the following channels do you use to access or connect with your bank(s)? Value All <$500M $500M-$5BN >$5BN Public Private Asia Pacific North America Western Europe Single integrated bank portal providing access to multiple services from a single bank provider Single integrated bank portal providing access to services from multiple bank providers Multiple portals (separate channels for specific services at the same bank) 54% 70% 37% 56% 33% 61% 40% 48% 43% 19% 10% 22% 33% 13% 21% 18% 25% 19% 38% 27% 52% 39% 29% 47% 48% 44% 40% Via SWIFT solution 33% 30% 22% 56% 33% 37% 34% 33% 34% Treasury work station 32% 10% 48% 50% 29% 37% 40% 40% 40% Host to host connections 33% 17% 30% 56% 38% 32% 36% 35% 38% Paper based / fax 13% 13% 11% 17% 8% 21% 18% 10% 11% Mobile apps 14% 17% 22% 6% 17% 18% 12% 10% 6% Third-party aggregator 7% 10% 7% 6% 8% 11% 8% 4% 4% Service bureau 14% 23% 7% 17% 13% 21% 14% 15% 17% The channels used by different sections of the sample varied greatly. For example, larger companies are far more likely than smaller organizations to use a single integrated bank portal providing access to service from multiple bank providers. They are also more likely to use a SWIFT solution, or host to host connections. Understandably, larger organizations are using more of these channels than smaller companies.

22 Preferred Bank Access

Preferred Bank Access 23 Preferred Bank Access As was the case last year, the corporates most popular method of accessing banks is through a single integrated bank portal that provides access to services from multiple bank providers. Just over a fifth (22%) of organizations selected this as their preferred bank access method. However, more than a third (34%) of corporates selected it last year. Falling a little out of favour from last year, single integrated bank portal providing access to multiple services from a single bank provider was selected by 19% of corporates this year, compared with 24% in 2016. Which methods are stealing share from single integrated bank portal providing access to services from multiple bank providers? Many more corporates prefer host to host connections to any other bank access method when compared with last year. The proportion of organizations selecting this method as their preferred nearly quadrupled from 3% last year to 11% this year. Similarly, the proportion of corporates selecting treasury workstation as their preferred bank access method doubled from 7% in 2016 to 14% in 2017. Preferred Bank Access Methods (Percentage Distribution of Corporate Practitioners Single integrated bank portal providing access to services from multiple bank providers 5% 4% 4% 3% 22% Via SWIFT solution Single integrated bank portal providing access to multiple services from a single bank provider 11% Treasury workstation Host to host connections 14% 20% Service bureau 19% Multiple portals (separate channels for specific services at the same bank) Mobile apps Third-party aggregator

Preferred Bank Access 24 Preferred Bank Access Methods (Percentage Distribution of Corporate Practitioners) Which of these would be your preferred method to access your bank(s)? Value All <$500M $500M-$5BN >$5BN Public Private Asia Pacific North America Western Europe Single integrated bank portal providing access to multiple services from a single bank provider Single integrated bank portal providing access to services from multiple bank providers Multiple portals (separate channels for specific services at the same bank) 19% 30% 19% 6% 21% 19% 13% 13% 19% 22% 20% 19% 24% 17% 22% 25% 19% 21% 4% 7% 0% 6% 4% 5% 0% 4% 2% Via SWIFT solution 20% 13% 19% 29% 21% 16% 25% 28% 28% Treasury work station 14% 3% 27% 6% 17% 8% 8% 19% 11% Host to host connections 11% 13% 4% 24% 13% 14% 17% 9% 11% Mobile apps 4% 3% 8% 0% 4% 5% 4% 0% 0% Third-party aggregator 3% 3% 0% 0% 0% 5% 2% 2% 2% Service bureau 5% 7% 4% 6% 4% 5% 6% 6% 6% This table shows that whereas smaller organizations (those with an annual revenue of less than $500m) are more likely to favour using a single integrated bank portal providing access to multiple services from a single bank provider, larger companies (with an annual revenue of at least $5bn) prefer by far a single integrated bank portal that provides access to service from multiple bank providers. Larger corporates are also more likely to prefer using host-to-host connections when connecting with their banks just under a quarter (24%) selected this method as their preferred option. For these businesses, with annual turnover of at least $5bn, the most preferred way of connecting to the banks is via SWIFT solution, with 29% citing this method. When comparing preferences across geographies, SWIFT solutions emerge as by far the most popular method of connecting with banks in North America and Western Europe, with 28% of organizations in both regions selecting it as their favourite. Two preferred methods came top of the pile in Asia Pacific via SWIFT solutions and single integrated bank portal providing access to services from multiple bank providers each cited by 25% of organizations in this region. Organizations in North America, compared with those in Asia Pacific or Western Europe, prefer to use their treasury workstations to connect with their banks 19% cited this in North America, compared with 8% for Asia Pacific and 11% for Western Europe. Public organizations are more than twice as likely as their privately traded counterparts to prefer to use a treasury workstation as a bank access method (17% of public companies cited it as their preferred method, compared with 8% of private companies).

Preferred Bank Access 25 Types of Access to Bank Services Once again, of the options given in the survey, mobile is the most widely provided method of access to corporate clients, with 58% of banking services providers offering it to their clients. However, it appears growth in this area has stalled 59% of banks said it was part of their package last year. The proportion of banks providing single sign-on as a type of access for their corporate clients increased by seven percentage points compared with last year, from 44% to 51%. This overtakes last year s second place type of access to bank services, integrated (one portal for the bank for all services), which climbed modestly from 47% last year to 50% this year. Types of Access to Online Services Offered to Corporate Clients (Percentage of Banking Services Providers) Mobile 58% Single sign-on Integrated (one portal for the bank for all services) 51% 50% Integrated (shared multi-bank portal access) 37% Open APIs 32% Separate sign-on (for specific services) 28% Do not provide online access 5% 0% 10% 20% 30% 40% 50% 60% The proportion of banks offering open APIs access to services more than doubled from last year s figure, from 15% to 32%. This is likely a reaction to the introduction of PSD2, which mandates that banks make customer data available to non-bank payment players, with a view to increasing competition and choice in the field. APIs will play a large role in enabling this development, which is expected to bring us closer to an open banking standard. APIs, or application planning interfaces, make it easier for software programmes to talk to each other, and can provide access to an organization s data and services. What this means for treasurers is faster connectivity, and real-time visibility of banking activity on their treasury management systems. The proportion of banking services providers not providing online access at all fell slightly, from 6% to 5%.

26 Areas for Improvement

Areas for Improvement 27 As we have already found, the majority of corporates is highly satisfied with the services of their banking partners. But do they believe there are any opportunities for banks to improve their offerings? For the third year running, harmonization of standards between banks was the most commonly desired area for improvement, though to a greater degree this year where half (50%) of corporate practitioners selected this as an area for improvement last year, 60% of organizations cited it this year. Desired Areas of Improvement for Banks (Percentage of Corporate Practitioners Harmonization of standards between banks More timely information (e.g., real time instead of next day) Integration of data from many banks Seamless integration of corporate to bank processes Single integrated point of entry for all services Automated payment remittance and receivables tracking and reconciliation Geographic coverage Greater support in service onboarding, including set-up and data input Availability of online and mobile tools SWIFT connectivity 33% 31% 30% 30% 43% 43% 46% 53% 53% 60% Integrated forecasting Proactive guidance and advice 26% 25% Additional services (please specify) 5% 0% 10% 20% 30% 40% 50% 60%

Areas for Improvement 28 Integration of data from many banks is seen as far more important as an area for improvement this year compared with last. Where 36% selected it in 2016, more than half (53%) did so this year, the joint second most cited area for improvement in this year s survey, along with more timely information. This increase in the proportion of corporates viewing integration of data as an important area for improvement may suggest that treasurers have a better understanding of the potential of data, or that they are closer to realising the potential big data holds. The ability to derive meaningful insights from data is a key differentiator among businesses across all sectors, offering gains in efficiencies and cutting organizational costs. For the treasurer, having access to different data sets and a means for analysing them in real time can make forecasting vastly more accurate. Desired Areas of Improvement for Banks (Percentage of Corporate Practitioners) What would most improve your banking services? Value All <$500M $500M-$5BN >$5BN Public Private Asia Pacific North America Western Europe More timely information (e.g. real time instead of next day) Harmonization of standards between banks Single integrated point of entry for all services Availability of online and mobile tools 53% 57% 52% 50% 42% 58% 56% 48% 53% 60% 53% 67% 72% 54% 71% 58% 67% 66% 43% 47% 44% 33% 33% 58% 44% 50% 43% 30% 43% 22% 17% 29% 37% 26% 21% 19% Geographic coverage 33% 27% 30% 44% 25% 42% 42% 42% 40% Integration of data from many banks Seamless integration of corporate to bank processes Automated payment remittance and receivables tracking and reconciliation Proactive guidance and advice Greater support in service on-boarding, including setup and data input 53% 47% 59% 56% 46% 61% 52% 56% 49% 46% 37% 52% 56% 50% 45% 44% 50% 45% 43% 47% 41% 44% 25% 53% 46% 35% 32% 25% 27% 19% 33% 17% 26% 20% 21% 21% 31% 27% 26% 50% 33% 32% 30% 27% 30% SWIFT connectivity 30% 20% 30% 44% 25% 34% 34% 33% 32% Integrated forecasting 26% 23% 26% 28% 29% 26% 26% 27% 23% Additional services 5% 3% 4% 11% 8% 5% 4% 4% 6% Harmonization of standards between banks is more of a concern for larger companies. In fact, the larger the organization, the more likely it is to cite this as a desired area of improvement.

Challenges 29

Challenges 30 Challenges Faced when Integrating with a Bank for Cash Management Services For corporate practitioners, the joint most significant challenges faced when integrating with a bank for cash management services are ease of integration into your environment and processes and KYC onboarding, each cited by 56% of organizations. Although the proportion of corporates citing KYC onboarding as a challenge fell slightly from 60% last year to 56% this year, ease of integration into your environment and processes has emerged as a challenge for more treasurers this year than it was in 2016. Where just over a third (34%) of organizations selected it last year, this rose by 65% this year. Challenges Faced When Integrating with a Bank for Cash Management Services (Percentage of Corporate Practitioners) KYC onboarding 56% Ease of integration into your environment and processes 56% File formatting issues 52% Differences between what was sold versus what is to be implemented 42% Testing procedures for new bank services including technology Ease of integration across and with your current banking providers Use of their security protocols and procedures 31% 33% 33% Other 4% 0% 10% 20% 30% 40% 50% 60% File formatting issues also emerged as a greater challenge this year than last year, with just over half (52%) of corporates selecting it as one of their biggest challenges when integrating with a new bank provider, compared with 45% last year.

Challenges 31 Challenges Faced When Integrating with a Bank for Cash Management Services (Percentage Distribution of Corporate Practitioners) What are the biggest challenges you face when integrating with a new bank provider? Value All <$500M $500M-$5BN >$5BN Public Private Asia Pacific North America Western Europe File formatting issues 52% 40% 70% 44% 42% 50% 55% 56% 49% Differences between what was sold versus what is to be implemented Testing procedures for new bank services including technology Use of their security protocols and procedures 42% 40% 37% 56% 42% 45% 43% 48% 43% 33% 33% 33% 28% 13% 45% 33% 35% 32% 31% 33% 26% 33% 21% 34% 29% 31% 30% KYC on-boarding 56% 57% 48% 61% 54% 66% 63% 56% 66% Ease of integration into your environment and processes Ease of integration across and with your current banking providers 56% 60% 59% 44% 50% 50% 49% 50% 47% 33% 37% 19% 44% 25% 34% 29% 33% 32% Other 4% 3% 0% 11% 8% 3% 4% 4% 6%

Challenges 32 Service Providers We asked corporate practitioners whether they were using, or considering using, different types of financial services beyond their banks. Our survey focused on four different types of non-bank service providers: FX providers, payment networks, supply chain finance, and on-boarding service providers. For each of the non-bank services, no more than about a third (37%) of corporates were currently using, or considering using them. Non-bank Service Providers Used (Percentage of Corporate Practitioners) 3% Non-bank FX providers 17% 13% 68% Non-bank payment networks 9% 7% 21% 63% 3% Non-bank supply chain finance 4% 17% 76% 1% Non-bank KYC and on-boarding service providers 4% 19% 76% 0% 20% 40% 60% 80% 100% Currently using Will use in the next 12 months Considering for the longer term Not considering Of these four options, corporate treasurers were most likely to be using non-bank FX providers 17% of treasurers are currently using this, with 16% considering using it in the next 12 months or longer term. However, a far greater proportion, 68%, is not considering using the service at all. Just 9% of respondents are currently using non-bank payment networks, though 28% plan to start using this service in the next year or beyond. Only 1% of respondents said that they were currently using non-bank KYC and on-boarding service providers.

33 Challenges for Banks

Challenges for Banks 34 Barriers to Growth Of the 14 barriers to growth highlighted in the survey, those centred around regulation were the most commonly cited. Regulatory complexity in new countries was the most cited barrier to growth by banking services providers, with more than half (51%) selecting it, while regulations in existing countries was selected by 47% of banks. Greatest Barriers to Bank Growth (Percentage of Banking Services Providers) Regulatory complexity in new countries 51% Regulations in existing countries Systems limitations / scalability of current infrastructure Fragmentation / silo of technology solutions and platforms Competition Multiplicity of legacy channels/ poor customer experience 39% 39% 42% 47% 46% Cost Disruption, new entrants and/or changing business models 31% 39% Entry costs to new countries Sales capability (availability, skills, training, tools) 22% 24% Discretionary funding / investment Changing or declining market demand Access to skilled labour, e.g. digital talent Cross selling in existing client base 19% 18% 17% 16% Other 4% 0% 10% 20% 30% 40% 50% 60% Beyond regulatory concerns, systems limitations/scalability of current infrastructure emerged as a significant concern, with 46% of organizations identifying it as a barrier, four percentage point up from last year. Disruption, new entrants and/or changing business needs was selected by slightly less than 50% more organizations this year (cited by 22% in 2016 vs 31% in 2017).

Challenges for Banks 35 Greatest Barriers to Bank Growth (Percentage Distribution of Banking Services Providers) What are the greatest barriers to your bank s growth today? Value All <$500M $500M-$5BN >$5BN Public Private Asia Pacific North America Western Europe Entry costs to new countries 24% 24% 38% 23% 23% 27% 29% 30% 30% Regulatory complexity in new countries Regulations in exiting countries Multiplicity of legacy channels/poor customer experience Systems limitations / scalability of current infrastructure Fragmentation / silo of technology solutions and platforms Discretionary funding / investment Sales capability (availability, skills, training, tools) Cross selling in existing client base Disruption, new entrants and/ or changing business models Changing or declining market demand 51% 53% 33% 62% 52% 57% 64% 63% 53% 47% 39% 62% 45% 48% 41% 55% 50% 53% 39% 43% 48% 30% 31% 48% 34% 30% 30% 46% 43% 48% 55% 45% 48% 46% 40% 43% 42% 45% 29% 43% 47% 34% 47% 45% 40% 19% 10% 29% 26% 21% 16% 21% 20% 21% 22% 29% 14% 15% 16% 25% 14% 17% 13% 16% 18% 19% 13% 14% 23% 16% 15% 11% 31% 29% 38% 36% 37% 27% 39% 35% 34% 18% 20% 29% 13% 24% 11% 17% 20% 16% Competition 39% 49% 38% 36% 42% 41% 46% 35% 36% Cost 39% 43% 48% 38% 37% 46% 42% 32% 36% Access to skilled labour, e.g. digital talent 17% 18% 24% 11% 11% 23% 13% 12% 13% Other 4% 4% 0% 2% 4% 2% 5% 5% 3% Comparing the responses across income bands reveals some stark differences in opinion about barriers to growth, particularly between mid-sized companies (those with annual revenues of between $500m and $4.9bn), and smaller and larger banks (which respectively make less or more than this band). For example, regulatory complexity in new countries appeared to be a greater barrier for the smaller and larger banks than for middle-sized organizations. However, mid-sized banks are more likely to see regulations in existing countries as a barrier, as 62% of these organizations cited this compared with 39% of smaller banks and 45% of larger banks. Mid-sized businesses are also more likely to find access to skilled labour a barrier nearly a quarter (24%) of these selected access to skilled labour, e.g. digital talent as one of their greatest barriers, compared to 18% of smaller organizations and 11% of larger ones.

36 Reviewing Relationships

Reviewing Relationships 37 Drivers for Change Cost emerged as the most significant reason for reviewing banking relationships among both corporates and banking services providers this year, with just over four-fifths (81%) of respondents selecting it. This is a 19-point increase on last year. The second most cited reason, bank stability and reputation, was selected by nearly two-thirds (62%) of respondents a dramatic increase on last year when the equivalent option, bank stability, was only selected as a driver behind banking relationship review for 35% of all organizations. Reasons for Reviewing Banking Relationships (Percentage of Corporate Practitioners and Banking Services Providers) Cost 81% Bank stability and reputation 62% Improving the integration of services into your systems Simplifying or consolidating your banking relationships 54% 52% Improving end-to-end real time capabilities 46% Improving digital customer experience / service 40% Business growth outside of your current banks geographic or industry coverage 33% Concerns with security 25% Lack of credit facilities 19% Forecasting Leveraging non-bank services, e.g. blockchain Other 10% 10% 14% 0% 20% 40% 60% 80% 100% Since last year, the proportion of organizations selecting improving the integration of services into your systems has fallen five points from 59% to 54%. One respondent said that their banking relationships were always under review.

Reviewing Relationships 38 Reasons for Reviewing Banking Relationships (Percentage of Corporate Practitioners and Banking Services Providers) What is driving you to review your banking relationships? Value All <$500M $500M-$5BN >$5BN Public Private Asia Pacific North America Western Europe Cost 81% 75% 92% 85% 86% 84% 82% 79% 80% Bank stability and reputation Improving digital customer experience / service Improving end-to-end real time capabilities Improving the integration of services into your systems 62% 56% 75% 69% 64% 63% 63% 62% 60% 40% 44% 50% 39% 43% 47% 48% 38% 36% 46% 44% 42% 46% 36% 58% 44% 35% 44% 54% 63% 58% 46% 43% 68% 44% 55% 52% Lack of credit facilities 19% 25% 17% 15% 7% 32% 22% 17% 20% Business growth outside of your current banks geographic or industry coverage 33% 31% 50% 39% 29% 42% 52% 41% 52% Concerns with security 25% 19% 33% 31% 14% 32% 19% 28% 20% Simplifying or consolidating your banking relationships Leveraging non-bank services, e.g. blockchain 52% 38% 42% 69% 50% 53% 48% 59% 52% 10% 6% 17% 15% 7% 16% 15% 10% 12% Forecasting 14% 19% 25% 8% 14% 16% 11% 21% 16% Other 10% 6% 8% 8% 14% 5% 11% 7% 8%

Reviewing Relationships 39 Cost was a greater consideration for mid-sized companies than it was for their smaller and larger counterparts, cited as a driver for banking relationship review for nearly all (92%) of thise surveyed. Smaller organizations are more likely to be driven to review their banking relationships due to a lack of credit facilities 25% cited this, compared with 17% of mid-sized organizations and 15% of larger firms. Publicly held and privately owned organizations appeared to have the most significant differences of opinion when it came to drivers for review. For example, where just 7% of public organizations selected lack of credit facilities as a driver, nearly one-third (32%) of private companies did. Private companies are more likely to be concerned with improving end-to-end real-time capabilities than public companies 58% of private companies cited this as a driver compared with 36% of public organizations. There were also significant differences in option between public and private organizations when it came to improving the integration of services into your systems (cited by 43% of public organizations v 68% of private businesses), business growth outside of your current banks geographic or industry coverage (29% v 42%), and concerns with security (14% v 32%).