Contents. 01 SunGard market study. 02 Challenging bank relationship complexity. 03 Drivers for implementing a payment project

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1 PAYMENTS Putting payments fraud and bank fees under the microscope; SunGard 2015 Payments Study shows a trend toward consolidation of bank accounts and payment flows Pivot.

2 01 SunGard market study Contents. 02 Challenging bank relationship complexity 03 Drivers for implementing a payment project 04 A truly centralized operating model? 05 Managing bank connectivity 06 Future requirements Participant Profile: The survey on which these findings were based was conducted in April May There were 177 respondents. Where relevant, responses are divided at the $1B revenue mark across multiple countries throughout the globe.

3 SunGard market study 02 Challenging bank relationship complexity Companies today are looking for diversity, rather than consolidation, in their global banking relationships. This is particularly the case with large multinational organizations, where 28 percent have 10 or more cash management banks. This trend has slightly increased from SunGard s 2014 study, when 25 percent operated with 10 or more cash management banks. The driver for bank diversification remains the global financial crisis. Not only do companies not want all of their eggs in one basket from a counterparty risk perspective, but the shockwaves of the crisis continues to affect banks to this day. The geographical landscape of where global banks operate continues to shift, meaning that multinational corporates need to be ready to switch on new banking relationships with a short lead-time. There is no end in sight for the trend of multiple banking relationships, which can add considerable complexity and cost for treasurers that do not operate a true payment factory solution. Consolidating bank accounts While banking relationships may be diversified, there has been a significant reduction in terms of the number of bank accounts that companies are using. In SunGard s 2014 study, some 23 percent of companies said that they were using 1000 or more bank accounts globally. Today just 7 percent of companies say this is the case, a fall of 16 percent. 28 percent of companies are operating with 10 or more cash management banks. Despite this, only 7 percent of these companies now operate more than 1000 bank accounts *with revenue $1B+ Organizations that have subsidiaries with some level of autonomy over account management, or those that are engaged with a lot of merger and acquisition (M&A) activities may not have had full visibility over their total number of bank accounts. However, regulations such as the foreign bank account reporting (FBAR) element of the U.S. Bank Secrecy Act has been a driver for corporates to be able to identify all of the bank accounts they are responsible for around the world. At the same time, developments in the treasury technology world such as electronic bank account management (ebam) and an increase in the use of treasury or payments management systems (TMS/PMS) has meant that companies are starting to gain the visibility over where all of their bank accounts are. With this visibility, companies are starting to consolidate and reduce their bank accounts, if not their bank relationships. These consolidated accounts are often legacy accounts from acquisitions or from temporary projects that were not managed properly. There is a benefit whenever companies complete a treasury or payments project in that, if it is properly connected, it can locate all additional bank accounts and allow the treasury team to remove the ones that they don t want. Consolidation of bank accounts % 7% 77% 93% >1,000 <1,000

4 03 SunGard market study Drivers for implementing a payments project The key driver for companies to embark upon a payments and bank connectivity project with 33 percent of companies highlighting this reason, is to gain improved controls. This response shows an increase of 4 percent year-on-year, and remains the key driver for corporates, emphasizing a desire for a greater degree of fraud management. Gaining control to prevent fraud Companies that do not have a proper bank account management structure could have hundreds of bank accounts in use on a daily basis in the organization that are effectively hidden from treasury. Implementing a payments project that has an overarching view of all accounts globally can allow companies to not only reconcile accounts but in some cases discover a significant amount of cash sitting in a country outside of the headquarters that was previously unmanaged centrally. Subsidiaries may also be communicating with their local bank through unsecure methods, such as via fax. These communication methods can be hard to monitor and control and are therefore more susceptible to fraud than a centralized payment platform with SWIFT connectivity. Reducing unnecessary costs A centralized and unified method of bank communication can also help companies reduce costs, which was the key driver for over one-quarter (27 percent) of respondents. Companies that use a variety of different types of methodologies to communicate with banks for payments processing or bank reporting simply multiply the costs every time a different method is used. An argument that is sometimes used against implementing a solution that simplifies this process is that using the variety of connection methods currently in place is cheaper, and that the bank provides e-banking at no cost. The flaw in this argument is that banks rarely provide services for free and managing every bank interface requires time and dedicated expertise. In this situation, companies will be paying for the services they use, even if this is not separated out on the top line of charges. The underlying costs have to be managed. Every different type of connection with every bank is a cost. Achieving true cash visibility A muddled variety of connection methods also impacts the visibility to cash that companies can achieve, so it is no surprise to see that this was the third key driver, selected by 20 percent of respondents. Operating so many different methods to process payment activities and to communicate with banks gives companies no chance of achieving visibility on a realtime basis to cash. While this might be possible on a monthly basis for certain accounting practices, without the real-time visibility that can be achieved from a centralized payments platform it is flawed from a treasury perspective. 33 percent of companies would carry out a payment project to improve controls against fraud, 27 percent to reduce costs, and 20 percent to improve visibility to cash Drivers for change 13% 20% Improved control Visibility to cash Consolidate banks 7% 27% 33% Reduce costs Reduce error Group Treasury has unprecedented visibility and control over company payments, and IT only has to worry about one single exit channel to the banks. ALAIN VANDE REYDE, GROUP TREASURER, CARMEUSE

5 SunGard market study 04 A truly centralized operating model? A large majority of companies (80 percent) are now operating at some kind of a centralized level. However, only 16 percent are using a true payment factory approach when it comes to executing payments. This highlights the difference that exists between a centralized group and a truly centralized technology. On the one hand, everyone in the company reports to the same manager, even though they may be operating in different locations. Some companies may view this as centralization, but essentially all that has changed is the reporting structure. Payments are still being executed in a decentralized way, while merely being processed through a central hub; or in some cases through multiple channels with a single policy. With truly centralized payments technology, from a CFO or group treasurer perspective there is global visibility, while from an IT and compliance point of view you have full control. This is critical to remember. Some companies may push back on a project as staff are afraid about the impacts of centralization (i.e. loss of autonomy, redundancy, etc). That is not what the concept of a fully centralized payments solution is about rather, it is about giving corporates the right tool to gain full control over their payments activities and visibility into their cash, while letting the treasury team structure operate in a centralized or decentralized way. Trend to standardize payments workflow While just 16 percent of companies have adopted a true payment factory approach, there are positive signs to be found in how many are standardizing their payments workflow. Over one-third (37 percent) of companies surveyed report that they are following a standardized global payments management workflow. This is up sharply from the 2014 study where just 20 percent said they operated that way. While the quest for true payments centralization still has room for improvement, the trend to create a standardized workflow is encouraging. 80 percent of companies are operating some sort of centralized model for payments, but only 16 percent are using a true payment factory approach Payment factory adoption 16% Payment factory 84% No payment factory Every morning my team gets a report of all account statements, offering a view on how much money can be paid out that day or not. On average each person is saving about 20 minutes on authorizing company payments and processing bank account statements. ALAIN VANDE REYDE, GROUP TREASURER, CARMEUSE

6 05 SunGard market study Managing bank connectivity The biggest trend in bank connectivity is the sharp fall in use in proprietary e-banking platforms. Some 36 percent of companies connect to their banks using an e-banking platform. Taken in isolation this is still the single most used method of corporate bank connectivity. However, this has fallen from 55 percent in There is a clear trend that corporates are coming off proprietary e-banking platforms and are looking for third-party hosted solutions with SWIFT connectivity. 36 percent of companies use e-banking platforms to connect to their banks. This represents a fall of 19 percent year-on-year Bank connectivity 6% There are clear drivers in the move away from e-banking. It is essentially a web-platform provided by a bank. Companies that deal with 20 banks have 20 different bank platforms to connect to. The overall process is not automated. This is not a significant issue for domestic organizations with two banking relationships, for example, but for multinationals this becomes a serious risk with a high amount of related management costs. On the other hand, connection to SWIFT via a central network provides access to all banks through a single channel. Power of combined payments management and connectivity For companies that are engaged in payments management or want to upload end-of-day reporting from various banks, data processing and bank connectivity can be two halves of a whole. Intuitively these should be part of the same process. Unfortunately the vendor community has traditionally split down the lines of those that only provide the payment platform segment or that only provide the SWIFT connectivity segment. The latter, SWIFT-certified service bureaux, numbered around 150 a year ago, but today this number is closer to 70 and is dropping rapidly. Standalone services offering only a payment platform or only SWIFT connectivity are not enough for corporates today, who are right to demand both. The connectivity in itself is about sending the message. The role of the payment solution is to control, monitor and track the message. The combination of these two elements is essential. Companies also expect providers to manage and monitor the process from end-toend. SunGard provides a fully managed solution to process the whole payment activity, including bank connectivity. 3% 5% 9% 36% SWIFT e-banking platform 3rd party cloud BACS 18% 23% Host-to-host Manually EBICS A payment factory helps to channel payments through a single bank, which enables us to rationalize our cash management structures and banking systems, standardize formats, and achieve greater economies of scale. ALAIN VANDE REYDE, GROUP TREASURER, CARMEUSE

7 SunGard market study 06 Future requirements Once a company has centralized its payments processes, gained control over these processes, implemented standards and achieved clear visibility over cash flow, where do they go, next? When asked what additional needs they have to the current services provided by their payments solution, a large majority of corporates (68 percent) wanted additional reporting and dashboard capabilities. This demonstrates a strong demand for analytics and data insights as a future requirement. This is a logical next step on the journey to payments efficiency. Corporates first need to reach the point where they have a payment factory that provides a view into payment flows, standards and allows effective cash management. With a centralized payments platform in place, companies are able to efficiently retrieve bank account statements, providing full visibility, at a company-wide level, of their cash. Not only does this provide a high-level view of their cash, but it also allows corporates to drill down into this information and perform a variety of analytics. Critical visibility over bank fees Bank fee analysis is one example of the analytics that corporates can benefit from with a payment factory solution in place. With this visibility, companies can see exactly what they are charged for, where they may have been mischarged and compare fees across their different banking partners. They can also track the monthly and annual trends of their bank fees and identify any unexpected changes. This is a powerful tool for corporates operating with a true payment factory solution. Future proofing with predictive analytics Companies can also look to the future by taking advantage of predictive analytics tools. These help corporates to understand what is coming down the pipeline, be it business trends or FX fluctuations. The data that exists around payments can help corporates do so much more to drive efficiencies in their business. For example, companies can achieve better insights into vendor relationships and better insights into business process optimization (BPO). A payment factory solution provides corporates the opportunity and scalability to add true value and efficiency to everyday processes across the entire organization. COULD YOUR CORPORATE PAYMENTS TEAM BE SITTING ON $10 MILLION IN BASIC SAVINGS? One of the clear problems with disparate systems and processes is that this non-integrated approach can result in elevated bank fees being paid in relation to payment services. High levels of invalid payments and continuing usage of expensive settlement channels / payment methods creates unnecessary cost. But given the challenge in correctly attributing bank fees, it can be difficult to get the insight needed on where all that cost is coming from. One of the key returns associated with a payment factory implementation is reduced bank fees. So, let s go through a simple hypothetical exercise to see where that comes from. Through some basic calculations, a very large multinational could save up to $10 million over five years, just on bank fees. And that s before all the other cost savings that can be achieved through rationalization of people, infrastructure and bank connectivity. On bank transaction fees 200 international payments per day at a low-end estimated payment cost of $20, when converted to a local payment cost of 5 cents, would result in a cost reduction of $1 million per year or $5 million over 5 years. By centralizing the payments process and therefore enabling all business units to hand over execution of the payment to the central team, a payment factory can eliminate the cost of international transfers by facilitating local payments. Add in payment repair costs Now, consider the payment repair fees that any banking partner can charge to correct an invalid payment instruction. 200 payment fix fees per day at $20 per fix fee also comes to $1 million a year or $5 million over 5 years. Any payment factory implementation should be able to ensure that no invalid payments reach the bank. Rather they would be corrected or worse case, intercepted by the platform. With these considerations, your corporate payments team might be sitting on $10 million worth of bank fee savings alone. If you ve ever considered the potential savings within your organization, it could be worth a second look.

8 Enabling the Adaptive Enterprise Sitting at the intersection of technology and finance, SunGard is focused on delivering fresh ideas and inventive solutions to help our customers adapt and thrive in an ever changing environment. With a blend of software solutions, cloud infrastructure, global service capabilities and deep domain expertise, SunGard is capable of supporting virtually every type of financial organization, including the largest and most complex institutions in the world. For more information, please visit twitter.com/sungard getinfo@sungard.com linkedin.com/company/sungard 2015 SunGard. Trademark Information: SunGard, and the SunGard logo are trademarks or registered trademarks of SunGard or its subsidiaries in the U.S. and other countries. All other trade names are trademarks or registered trademarks of their respective holders. CPL4634