Focus on Regional Banking: Meeting the Connectivity Needs of Increasingly Sophisticated Commercial Clients

Transcription

1 Focus on Regional Banking: Meeting the Connectivity Needs of Increasingly Sophisticated Commercial Clients Patricia Hines, CTP Director, Financial Services Industry Marketing, GXS

2 Session Agenda About GXS Industry Trends Connectivity Options SWIFT for Corporates Regional Bank Case Studies Q&A August 28, 2013 Slide GXS, Inc.

3 GXS in the Financial Services Sector Enabling Connectivity and STP Across Industry Segments Treasury & Cash Management Card Issuing & Merchant Services Trade & Commercial Finance Securities Group Benefits & Employer Services Integrated Payables Consolidated Receivables SWIFT Connectivity Multi-Bank Payments Merchant Enablement & File Integration PCI Compliance ERP Integration Factoring Supply Chain Finance Inventory Finance Dealer Floor Planning Connectivity for Counterparties Order to Settlement Lifecycle Management Post-Trade Exceptions Client Integration for Group Insurance Payroll File Transmission Claims Payment Remittances August 28, 2013 Slide GXS, Inc.

4 Industry Trends August 28, 2013 Slide GXS, Inc.

5 Treasury Managers Wear Lots of Hats Maintaining Liquidity: Ensuring the company is able to meet current and future financial obligations Optimizing Cash Resources: Minimizing non-earning cash balances while providing adequate liquidity, and maximizing use of excess cash balances Maintaining Access to Financing: Establishing financing alternatives for working capital (short-term borrowing) and capital raising (medium to long term debit or equity) Managing Controls and Risk: Monitoring and controlling exposure to interest rate, foreign exchange and other financial risks Managing Bank Relationships: Selecting financial services providers, monitoring provider performance, managing day-to-day operations August 28, 2013 Slide GXS, Inc.

6 How do Corporates Connect to their Banks? File Formats Connectivity Options Multiple Banking Relationships ERP Systems SAP, Oracle B2B Gateway Treasury Management Work Stations (TWS/TMS) Leased Line Cloud-Based ERP and Accounting Solutions Payments Internet FTP Web Portal Business Accounting Software Corporate-to-Bank Connectivity (C2B) August 28, 2013 Slide GXS, Inc.

7 Corporate Treasury Technology Spectrum Implications for Corporate-to-Bank Integration Basic Cash Management Operations (SMEs) Use of statements/ online banking reports to reconcile with accounting system Initiation of payments online or through service bureau Heavy reliance on spreadsheets Minimal use of bank data files to update accounting package Middle-Market Treasury with Primarily Domestic Operations Growing adoption of technology for cash management and forecasting (SaaS) Use of daily bank feeds for reconciliation (online and/or B2Bank connectivity) Initiate payments (online and/or B2Bank) Reliance on lead bank for multibank reporting Large Corporate Heavy use of specialized treasury technology and ERP solutions Use of intraday bank feeds for cash position, liquidity management Multibank payment initiation files and use of online for exceptions Emerging need for frequent status updates Increasing use of integration for trade finance activity Customers Increasing Sophistication and Needs Complex Global Treasury Multibank integration Many banking relationships across multiple regions Focus on managing global liquidity positions Demand for consistent use of global standards Reliance on treasury system for controls, workflow, and single source of truth Demand for ebam Integration for more complex services (e.g., trade confirmations) Note: SaaS = software as a service, ebam = electronic bank account management. Source: TowerGroup, B2Bank Integration: Ignore One-to-One Connectivity at Your Peril, Susan Feinberg, 01/31/11, Ref # V66:07W August 28, 2013 Slide GXS, Exhibit Inc. #: 66:07W-E1

8 Small Businesses Are More Plentiful, but Larger Businesses Dominate Number of US Firms (Thousands) Number of Employees 3,575 15,869 22, ,554 8,288 54,997 6,359 5,926 Non-Employer Firms 0 to 4 5 to 9 10 to to to or more (large businesses) August 28, 2013 Slide GXS, Inc.

9 Middle-Market and Small Business Clients Drive Revenue for Tier 2 Banks Source: GE Reports Share of fee-equivalent revenue by customer segment Large Corporate Middle Market Small Business Top 5 29% 27% 13% Next 15 26% 32% 18% Source: Ernst & Young 29 th Annual Cash Management Services Survey Peers 2 & 3 13% 40% 35% 2011 Total 26% 30% 17% August 28, 2013 Slide GXS, Inc.

10 Revenue from Electronic Products driving Cash Management Growth Revenue growth rates for cash management products 12.0% 11.0% 9.0% 6.0% 6.0% 3.0% 0.0% -3.0% -3.0% -2.5% 0.5% -0.5% 0.5% 1.5% 3.5% -6.0% -9.0% -6.0% 11.0% Check CDA DDA RLBX C&C WLBX ARP Info Rpt ACH/EDI Wire P Card Source: Ernst & Young 29 th Annual Cash Management Services Survey August 28, 2013 Slide GXS, Inc.

11 Payment Products Used in North America Corporates with less than $1B in revenue Bank wire transfers ACH credits Checks ACH debits SEPA credit transfers Purchasing cards Travel & entertainment cards Same day ACH Bank checks Online payment services providers Bankers drafts Other local or niche products SEPA direct debit Mobile payments 6% 43% 34% 32% 32% 30% 27% 18% 17% 16% 15% 53% 58% 90% 0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100% Source: gtnews 2013 Payments Survey August 28, 2013 Slide GXS, Inc.

12 Corporate-to-Bank Connectivity Options August 28, 2013 Slide GXS, Inc.

13 What are the Challenges? Backlog & Slow Client On-Boarding Multiple File Formats Complex Connectivity Aging In-House Technology New Product Development Connecting and on-boarding new clients takes months, often resulting in backlogs. We can help to accelerate time-to-revenue. Managing clients across industry segments and geographies results in multiple file formats and transaction types with different business rules. Clients with unique file formats, communications protocols, security needs and testing requirements require integration experts to handle complex onboarding. Data integration is challenging, complex and costly to implement and maintain. We shield this complexity and reduce overall costs, while improving business performance An external service provider can easily adapt to changing business conditions such as new clients, technologies, acquisitions, transaction types, etc. August 28, 2013 Slide GXS, Inc.

14 Challenges with Bank Interfaces Treasury Organizations Want Real Time Information & Payment Execution Traditional Bank Interfaces Unique connection and file format for each banking relationships Leased Line Web Portal Internet FTP Connectivity, testing and certification required for each bank Fax Standards Complexity Inflexible file format options and lack of ERP integration (SAP, Oracle) Limited internet protocol support for AS2, MQ, HTTPS, SFTP Rigid security policies (encryption, firewalls, audits) Operational Constraints Performance and capacity constraints Lengthy implementation times Limited knowledge of corporate ERP Varying capabilities and support processes across differing regions (Asia-Pacific, Latin America) Lack of Integrated Interfaces Reconciliation challenges Limited visibility to cash and payment status Distinct interfaces per product line (Cash, FX, Trade Finance, Securities Services ) August 28, 2013 Slide GXS, Inc.

15 Multiple C2B Integration Options Direct Integration (DIY) Concentration Bank Integration Higher TCO, multiple standards SWIFT Integration Constrained by bank s capabilities SWIFT bank data through concentration bank Hybrid: SWIFT & Direct Integration SWIFT Service Bureau Bank neutral, limit is bank SWIFT readiness May use SWIFT Service Bureau C2Bank Integration Service Lower TCO, global reach Bank neutral, maximum flexibility August 28, 2013 Slide GXS, Inc.

16 SWIFT Corporate Access A Single Global Standard Multiple Connections & Formats Company Financial Systems Standard Connections & Formats Company Financial Systems Treasury A/P Treasury A/P Other A/R Other A/R Bank Mandates Signature Cards ACH Payments Wire Payments Prior / Current Day Statements Prior Day Balances FX Confirmations Investment Trade Confirmations Bank Mandates Signature Cards ACH Payments Wire Payments Prior / Current Day Statements Prior Day Balances FX Confirmations Investment Trade Confirmations Post Internet FTP Web Portal Fax August 28, 2013 Slide GXS, Inc.

17 What is SWIFT? Secure Financial Messaging Market Infrastructures Central Banks Settlement Systems Customer Solutions TRCO MA-CUG SCORE Source: SWIFT Standards Overview Global Financial Standards SWIFTNet 10,416 Correspondents 213 Countries SWIFT Solutions FileAct Accord Trade Services Utility and more The global provider of secure financial messaging services Society for Worldwide Interbank Financial Telecommunications Consortium of member financial institutions Started in 1973 to automate the telex Premier financial messaging standards body Powers real-time gross settlement systems globally called market infrastructures >2.5B messages exchanged between 10,000+ financial institutions and corporates in over 210 countries largest financial messaging network and community in the world SWIFT develops and defines messaging and standards for the financial services industry August 28, 2013 Slide GXS, Inc.

18 SWIFT for Corporates Adoption August 28, 2013 Slide GXS, Inc.

19 Trends Driving SWIFT Adoption Improved Cash Management Interest in SWIFT Infrastructure Changes Emerging Standards Better Risk Management August 28, 2013 Slide GXS, Inc.

20 Interest in SWIFT Corporate Drivers Increased SWIFT marketing Growing adoption among corporates Single network to streamline messaging and formats Centralizing treasury operations New products: AllianceLite2, 3SKey, ebam, SWIFTRef, Watch Analytics August 28, 2013 Slide GXS, Inc.

21 Improved Cash Management Corporate Drivers Better visibility and more efficient deployment of cash More frequent reconciliation of balances Grow balances through interest rate, currency hedging, derivatives, etc. management August 28, 2013 Slide GXS, Inc.

22 Emerging ISO XML Standards Corporate Drivers FIN MT to MX message standard evolution ISO to ISO for Corporate Actions European Union s migration to SEPA compliant payments August 28, 2013 Slide GXS, Inc.

23 Better Risk Management Corporate Drivers Simplifying, optimizing, and/or diversifying banking relationships Being more nimble to make changes Sensitivity due to Global Financial Crisis of 2008 August 28, 2013 Slide GXS, Inc.

24 Infrastructure Changes Corporate Drivers Upgrading or consolidating treasury technology infrastructure Replacing Treasury Management System Marketing influences from SWIFT (Alliance Lite2) and other Service Bureaus August 28, 2013 Slide GXS, Inc.

25 Growth Driven by Corporate Adoption of SWIFT Number of Registered Corporate Entities on SWIFT 902 1, Source: SWIFT August 28, 2013 Slide GXS, Inc.

26 SWIFT for Corporates Geographical Split 9% 19% 72% EMEA Americas Asia Pacific Source: SWIFT August 28, 2013 Slide GXS, Inc.

27 Growth in SWIFT Messaging Driving Adoption by Corporates of All Sizes SWIFTNet FIN Annual Traffic Millions of messages + 9.9% % SWIFTNet FileAct Traffic Average daily kilocharacters + 8.7% % % % Est est Source: SWIFT in Figures August 28, 2013 Slide GXS, Inc.

28 SWIFT for Corporates Beyond Payments Business area Description Details Messages Payments Bank Account Reporting Bank Account Management Exceptions & Investigations High-value & bulk payments Intraday and end-of-day statements Account-opening, account-closing and reporting Processing of investigations Local formats and FIN MT formats Account statements available in MT or ISO20022 format Electronic management with ISO20022 STP and efficient processes Trade Finance LCs, Guarantees One message for all needs FIN MT 101 FileAct for all formats FIN MT 9xx File Act for all formats FileAct and ISO FileAct and ISO FIN MT 798 and/or FileAct Foreign exchange deals Deal confirmations Optional matching FIN MT 3xx Securities Orders, corporate actions, etc. All processes covered with FIN messages FIN MT 5xx Source: SWIFT August 28, 2013 Slide GXS, Inc.

29 SWIFT Connectivity Options August 28, 2013 Slide GXS, Inc.

30 Institution Size / Message Volumes SWIFT Alliance Solution Set Alliance Messaging Hub (AMH) Alliance Alliance Access Access Integration Platform Alliance Access Alliance Lite2 Alliance Gateway SWIFTNet Link HSMs Automation, Integration, Customization Source: SWIFT August 28, 2013 Slide GXS, Inc.

31 SWIFT Connectivity Options Source: SWIFT Customer-Owned Specific security requirements Full control over IT environment including data storage Supports high traffic volumes Outsourced Off-the-Shelf Clear ramp-up path "Peace-of-mind" solution Scalable to your needs Outsourced Tailored IT environment managed by third party Using a shared infrastructure is not critical Traffic requires medium to high volume infrastructure August 28, 2013 Slide GXS, Inc.

32 SWIFT Outsourcing Trends 8% 26% 66% Service Bureau AllianceLite / Lite 2 Member-Concentrator Source: SWIFT August 28, 2013 Slide GXS, Inc.

33 Alliance Lite2 How it Works Source: SWIFT August 28, 2013 Slide GXS, Inc.

34 SWIFT Alliance Access Solution Components Client Systems SOAP SWIFT Interface SAA ALLIANCE ACCESS SAG SWIFT ALLIANCE GATEWAY SNL SWIFT Net Link Leased Line VPN Box HSM Box Visibility & Message Management / Monitoring Alliance Web Platform Licensed from SWIFT Primary Dual leg HA DR Infrastructure Both have 2 leased lines to SWIFTNet August 28, 2013 Slide GXS, Inc.

35 Choosing a SWIFT Service Bureau Can be daunting almost 120 organizations worldwide have service bureau offerings SWIFT recently rolled out a new Shared Infrastructure Programme (SIP), to certify service bureaus that offer third-party connectivity to the SWIFT network A list of SWIFT Service Bureau meeting the various operational levels defined by SIP can be found using SWIFT s Partner Locator August 28, 2013 Slide GXS, Inc.

36 Regional Bank Case Studies August 28, 2013 Slide GXS, Inc.

37 Large Regional Bank Extending Capabilities to Small/Medium Enterprises DataPool (Unisys) Bank CIPG (EG) Customer Communication Facility (CCF) Messaging Service Single-Sign On / Multi-Factor Authentication Portlet Online Banking for Business Portal Bank Clients Business Issue The bank wanted to extend the ability to upload payment files and download information reporting files to small to medium enterprises (SMEs) Legacy solution called File Transfer Facility (FTF) no longer supported by vendor Need for low-cost Internet solution for small to medium business customers not able to exchange files using machine-to-machine solutions Multi-factor authentication required to comply with FFIEC standards for online security Requirement for single sign-on to FTF solution through bank s online business banking portal Solution Deployed Deployed Intelligent Web Forms (IWF) and Trading Grid for Excel (TG4E) in the bank s messaging service to provide SME client access for file transfer Implemented multi-factor authentication and single-sign to allow the bank s clients to access the new file transfer client access tools through the bank s online cash management portal August 28, 2013 Slide GXS, Inc.

38 Top Tier Global Bank Overcoming Legacy System Limitations BAI2 SWIFTNet File Act Corporate Clients Managed Services MT940 MT942 SWIFT Service Bureau Business Challenge This global bank s core deposit system can only generate information reporting (current/ prior day) in BAI2 format. Multi-national corporate clients require SWIFT formatted files for integration with their backoffice financial systems GXS Solution Translation from BAI2 to MT940 / MT942 Delivery to clients via SWIFT Service Bureau using SWIFTNet File Act Business Benefits Outsourcing corporate on-boarding = faster time to revenue Translation into global formats improves ability to win multi-national corporate business External SWIFT solution eliminates need for inhouse hardware, software and technical staff August 28, 2013 Slide GXS, Inc.

39 US Regional Bank Winning Large Corporate Clients MT101 Corporate Clients MT940 MT942 Business Challenge Meeting SWIFTNet delivery and SWIFT format requirements of multi-national corporate clients for wire payments and balance reporting Bank applications unable to consume SWIFT formats Imminent go-live deadline SWIFT Service Bureau Managed Services 820 BAI2 GXS Solution File translation MT101 EDI 820 BAI2 MT940 / MT942 Connectivity via SWIFT Service Bureau Corporate on-boarding Enables additional large corporate business August 28, 2013 Slide GXS, Inc.

40 Take-Aways Middle market commercial and small business banking clientele have more sophisticated bank connectivity requirements To meet these requirements, regional banks must be wellversed in the complexity of corporate-to-bank connectivity Ever-evolving financial messaging standards increase the complexity on an ongoing basis August 28, 2013 Slide GXS, Inc.

41 To Learn More General Information: Corporate-to-Bank Connectivity: SWIFT for Corporates: gtnews SWIFT Service Bureau Buyer s Guide: Formats: ISO for Dummies: SEPA Overview: SWIFT Common Global Implementation (CGI): Balance and Transaction Reporting Standard (BTRS): August 28, 2013 Slide GXS, Inc.

42 Thank You and Q&A Patty Hines, CTP Director, Financial Services Industry Marketing Office: August 28, 2013 Slide GXS, Inc.