payments stream - trend in corporate to bank relationships
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SWIFT Nordics Regional
Conference 2015
Payments stream – Trends in corporate
to bank relationships
Copenhagen, 4 – 5 March 2015
SWIFT Nordic conference
Søren Haugaard
Trends in corporate to bank
relationship
March 2015
Warming up – show of hands
• Has it become easier or harder for customers to set up banking ?
• Will the waves of new regulation calm down and things go back to
the old normal ?
• Are customers continously looking for smarter banking ?
3
Trends in corporate to bank relationships
CLASSICAL BANK
DISRUPTIVE MOVES
What is happening out there ..
Trends in corporate to bank relationships
• Regulation, technology, operational models, consumer behaviour
• Evolving requirements of multi-banked corporates
• Flexibility, security, real-time processing, international servicing
• Speedy and convenient access and connectivity
6
SWIFT for Corporates :
To be the most preferred secure network for multi-banked
corporates globally
AB Volvo
WELCOME
AB Volvo
Volvo Group Customer Credit Alternatives
Credit application submitted
to the credit committee
Credit control
Dunning process
Interest invoicing
Invoicing process
AR in GL / R3
Approved Rejected =
order cancelled
Customer
Parma
Limit
Payment term
Currency
Pre sales activities
Sales strategy
VFS
Credit committee
- Credit Policy
- VG-CMD
- Credit Portal
Open Credit
Export Finance
Trade Finance
Collection &
Dispute
AR in GL VFS
AR = Account Receivable
GL = General Ledger
Supplier Credit
Buyer Credit
External Bank
Cash & Bank
VFS has their own
process for credit control,
dunning, collection and
interest invoicing
Export LC
AB Volvo
Background
Sales in 190 countries
Production in 18 countries
More than 70 production sites
More than 70 parts distribution sites
AB Volvo
10
Background
Limited transparency in Trade Finance transaction
Various levels of competence in the respective markets/regions
Utilization of Banks not coordinated
Reactive process rather than proactive to sales & customers
Difficulties in presenting correct documents
AB Volvo
11
Percentage of discrepant document sets @ 1st presentation
• Volvo present doc sets twice resulting in 4-6 extra working capital days
• Total flow estimated to 10-20 billion SEK
• Value of 1 day improvement 20-40 million SEK
AB Volvo
12
Which documents are troublesome?
AB Volvo
13
Corporate Finance, Working Capital Management
Project Trade Finance achievements so far
Implementing a “Multibanking Platform” for Trade Finance Products
Focused on Export LC
SWIFT connectivity with banks started
Volvo SWIFT address = ABVOSEGG
Also possible to use for Payments, FX-transactions and Account Statements
Predefined document templates for shipping documents according to LC
Training of personnel started
Standardisation of bank contracts
AB Volvo
Volvo
MBP
Advising/Confirming
Bank
Issuing
Bank
Agreements:
- Price
- SWIFT
- E-presentation
Multibanking using SWIFT MT798
14
Templates:
- B/L
- Packing List
- Cert of Origin
- Ben. Cert
- Inspection Cert
- Banking Instruction
AB Volvo
”Followers”
Volvo Car Corporation
FLS
Sandvik
Metsä
Ericsson
SAAB
Yara International
Ekman
Konecranes
ABB
Siemens
15
Billerud
Kinnarps
Cellmark
United Technologies
Halliburton
Nokia
ICC Austria
Essdocs
Corning
Kongsberg
AB Volvo
Back up
16
Corporate Finance, Working Capital Management
AB Volvo
Question Marks
What can Corporates and Banks do to address connectivity and on-
boarding challenges…?
Are new industry solutions emerging…?
How is the competitive landscape evolving…?
Are new entrants posing any serious threats to banks…?
What do we expect the role of the financial institution to be in the future…?
17
Corporate Finance, Working Capital Management
AB Volvo
What is BPO?
A BPO (Bank Payment Obligation) is an irrevocable undertaking
given by one bank to another bank that payment will be made on a
specified date after a successful electronic matching of data
according to an industry-wide set of rules.
18
AB Volvo
SWIFT
BPO
Exporter/
Seller
Seller´s
Bank
SWIFT/ Data
matching
Buyer´s
Bank
Importer/
Buyer
Importer puts order in order system
Data
Transfer
Irrevocable Undertaking / KYC
KYC
Input
KYC
Input
Swift Captive
Data
Transfer
Coverage
Invoicing process
VFS
Open Credit
Export Finance
Trade Finance
Supplier Credit
Buyer Credit
10.3.2015 Company presentation November 2013 | Public 20
Petri Karjalainen SVP, OpusCapita Ventures
1. What are the next step for productivity gains and at the
same time to increase control and compliance?
2. How to make low cost financing available for SME
companies and extend payment terms for large
corporations ?
3. How to boost the productivity of information workers in
such organizations as accounting or treasury ?
The finance world is getting shaped by
three fundamental questions arising:
Typical corporate Purchase to Pay process “14-60 days payment time to supplier”
Supplier Ordering Buyer SAP MM
Hankintajärjestelmä
Payment tool
Inspection
✓
Payment
instruction
Invoice check
and approval
Approver
Payment
Invoice
In 89 % of top performers, finance and
procurement work together to streamline and
simplify purchase-to-pay process.
Collaboration ratio in Europe is 53 %, while
Nordic organizations coordinate only
moderately.*
World-class organizations process p2p
2.5 times faster than their peer group.*
Well over 50% of average companies cite
that getting timely feedback on process
issues is a major challenge.**
Only 6% of companies have highly
automated supply chains. Over 40% use
spreadsheets in integration.**
Purchase-to-Pay:
World class vs. average
Sources: *The Hackett Group, **Aberdeen Group
The big opportunity is reachable…
First step in lowering the cost on the road towards better cash management…
• Increased productivity
through automation
• Harmonized processes to
lower risks and costs
• Full compliancy and proven
integration for bank
independency
• One centralized solution for
transparency
• Low cost outsourced labour
can be utilized for routine
tasks while maintaining
complete control
In near future the role of payment is changing in a cash optimized supply chain…
Supply Chain Financing
• Payment to supplier in < 5 days
• Buyer gets 60 days DPO
• Low cost financing to supplier
• Extended payment terms to
buyer with more cash efficient
supply chain
• Low risk financing opportunity to
bank utilizing buyer irrevocable
payment guarantee
• Opportunity for platform vendors
who can enroll large SME
supplier networks
Estimated potential economic impact of technologies from sized applications in 2025, including consumer surplus ($ 1000 billion, annual)
• Automation of Knowledge Work is characterized as
one of the key disruptive technologies within the
next 10 years with an estimated economic impact of
$5200-6700 billion in 2025.
• Oxford University estimates that 47% of the US
workforce are at high risk to be replaced by robots
within the next 10-20 years, accountants being
one of the first categories being affected.
• Utilization of early Automation of Knowledge work
technologies, like RPA in enterprises, can help
prevent the outflow of services jobs and revenue
streams into shared service centers located in low
cost countries.
Vision: Automation of knowledge work
Sources: McKinsey, Oxford University 2013, Etla , Eera analysis
Robots as accountants and treasurers are now walking into finance operations …
Robotic Proces Automation, ie. virtual robots
from the cloud :
Are using a computer on behalf of a person or
with a person and they can:
See and interpret text and pictures
Move and click the mouse
Write text and numbers
Robots use several IT systems just like a
human would use them
Implementation does not require changes to the
existing IT systems. Are programmed with ”work
shadowing” and writing a logic for exception
handling
Work according to preset rules. Currently
operate as rule based, in the future utilize
statistical analysis and machine learning in the
first stages of artificial intelligence
Picture source: http://www.brainstormmarketingproductions.com/
1. Talking only about payments is old fashioned, in
todays world maximizing the supply chain
optimization is the key to efficient cash management.
Therefore we are seeing increasing amount of Supply
Chain Financing programs rolled out.
2. The payment processing is getting industrialized by
centralizing the payment operations. Payment factory
approach enables efficient cash management with
low cost and provides better control and compliance
3. Robots are here already today, they are used for
replacing humans in processing simple tasks like
consolidation of payment files and implementing
control points.
We are about to see starting of the next big era of
automation, as big as industrialization or
establishment of information society…
10.3.2015 Company presentation November 2013 | Public 29
Petri Karjalainen Twitter: @PetriKarj
Linkedin: www.linkedin.com/in/PetriKarj
Facebook: www.facebook.com/PetriKarj
30
” Where is banking going, how we embrace technology –
customer push or pull” Jesper Nielsen - Head of Personal Banking Business Development
31
Pope John Paul II - 2005
Scource: Michael Sohn
32
Pope Francis - 2013
Scource: Michael Sohn
33
34
35
Number of teller transactions
in the branch has fallen by 50%
the past 3 years
Number of incoming calls to
the contact centre has fallen
by 29% the past 3 years
Number of active eBanking
customers has increased by
30% the past 3 years
Proportion of mobile & tablet
log-ons has increased from 1%
to 51% the past 3 years
Measurable change of behaviour
36
We are changing our distribution channel setup in accordance
with changed customer behaviour
eBanking / iPad /
iPhone
24/7
Danske
Direkte
Expanded
advisory
centres
Danske
Net Meeting
Expanded
opening hours
8
162326
41
Branch density per 100,000 adults1
1Source: IMF; 2010 figures for Denmark, Finland and Norway; 2009 figures for Sweden and United Kingdom.
37
The latest launched of new digital products and services
Spending overview
Mobile Pay Business & Online
Online Meetings
Contactless Card
Danske Guide
Advisory
services
easy
banking
Contactless Card
Dedicated Private Banking channels
38
MobilePay at a glance (Core facts January 2015)
MobilePay P2P MobilePay Business
Launched in Denmark in
May 2013
2.000.000 Users
2nd
Registered on every
Smartphone in Denmark
70% of active users are not
customers with Danske Bank
Launched in Denmark in
February 2014
+5.500
1.000.000.000 DKK per month
140.000 trx per day
KMD, Dansk Supermarked
and many others
Long pipeline of Business Banking and C&I clients, incl.
Online, AppSwitch and point of
sale
Solutions to support
670.000 More than
trx since launch
90.000.000 DKK since launch
Double digit growth Monthly
+11.000
More than
companies with access
companies have activated MPB
39
MobilePay has developed from an single consumer app for
P2P payments to a MobilePay family with multiple products
Parking
Transportation
Vending machines
… and many others
In app purchase
- AppSwitch
Large retailers –
Point of Sale
Online retailers
Small
businesses
Consumer
s
40
Intro video
41
Text
Transformational
new, better
customer
experiences
Improve
image
Attract new
customers
A more effective/
efficient bank
operation
Protect
current
business
Generate
new business
Desired
end-
deliverables
A dual track strategy will help us achieve our desired
end-deliverables Our dual track strategy; Transform classical bank and
Transform classical bank Disruptive moves
42 42
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