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Program The future of Payments: Setting the scene Payments playing field Impact of regulation What s next in payments 2
Setting the scene
Setting the scene Global reach Multiple Channel Big Data Regulation Innovation Risk Liquidity E-commerce 4
The payment playing field: new players determine the direction
Innovation in payments is fuelled by E-commerce 6
E-Commerce has its own rules Conversion rates Clients demand free choice of preferred payment method. Business might be lost when preferred payment method is not offered Ease of use Clients demand ease of use, especially with payment products. E-dentifiers, tokens or other slow identification methods are no longer accepted by clients. Geographical Reach E-Commerce is not limited by borders, hence clients from all over the world may purchase via your website. A wide variety of local payment methods may make the difference for the client between your services and those of your competitor. Finality of payment Chargebacks, returns or bounces are costly and time consuming. The risks imbedded in some typical payment methods need to be monitored. A thorough understanding of these payment products is required to oversee their risks and effectiveness Costs Corporates are faced with relatively costly payment methods which are charging by percentages, rather than a fixed fee per payment. Business cases are required to determine the profitability of offering expensive payment methods. Innovation Fintech is a growing industry which uses new regulation to establish a solid position in the payments market. These parties offer innovative solutions, are quick to adapt and integrate in the value chain of the corporate Big Data New generation payment methods may offer a world of enhanced information which can be used to increase marketing effectiveness. Big data may also be used to prevent fraud and bad creditors Regulation Regulation is forcing a change in the world of banking. New players get easier access whilst banks are suffering under the weight of regulation. Is the bank still your preferred Payment Service Provider? 7
Payments are hot And no longer just something my bank does Bank Wallet POS Payments Online Payments Credit Card Acquiring Loyalty program Mobile payments Integration with your processes & systems Geographic presence 8
Success in the Payments market is determined not only by excelling in one part of the payment chain Successful new entrants do not excel in just one part of the chain, but shed their competitive advantage (in partnership) to provide a complete seamless working ecosystem, examples are Adyen and Apple Pay * Transactions Business models Means (Technological) enablers Channel What transfers from owner? How to earn money with it? Which agent is used? What technologies are used? Which channel is used for the transaction? Competitive advantage Competitive advantage Competitive advantage Competitive advantage Money Transaction fee 250+ payment possibilities & Geographic presence Great number of technologies Pin terminal, smartphone and PC but turns to a large extent be determined by a seamless working ecosystem 9
Who is best positioned to service you? Global Cash Management Banks ERP software giants Silicon Valley champions Fintech 10
Innovations tap into various processes in your value chain Order 2 Cash (Sales) Marketing Inventory check Order processing Confirmation/ payment initiation Selection payment product Select logistical partner Transaction IIAA Transaction Confirmation Send invoice Debtor management R2R Procurement Sales Process Consumer Record 2 Report ( processing) Merchant Producer O2C/ P2P Delivery Transaction information Procure to Pay (Procurement) Merchant Reconciliation Bank statement Reconciliation Account Balances Cash Flow Goods/ Services Goods/ Services Cash Flow End-of-day Reconciliation Analysis Reporting Accounting Merchant Management information Producer Annual statement Producer Inventory system Purchase Order Goods in Transport Goods receipt Receipt invoice 3-way matching Process payment Payment authorisation Send payment to bank R2R 11
In which banks only support marginally Order 2 Cash (Sales) Marketing Inventory check Order processing Confirmation/ payment initiation Selection payment product Select logistical partner Transaction IIAA Transaction Confirmation Send invoice Debtor management R2R Procurement Sales Process Consumer Record 2 Report ( processing) Merchant Producer O2C/ P2P Delivery Transaction information Procure to Pay (Procurement) Merchant Reconciliation Bank statement Reconciliation Account Balances Cash Flow Goods/ Services Goods/ Services Cash Flow End-of-day Reconciliation Analysis Reporting Accounting Merchant Management information Producer Annual statement Producer Inventory system Purchase Order Goods in Transport Goods receipt Receipt invoice 3- Way matching Process payment Payment authorisation Send payment to bank R2R 12
And ERP vendors have a solid position Order 2 Cash (Sales) Marketing Inventory check Order processing Confirmation/ payment initiation Selection payment product Select logistical partner Transaction IIAA Transaction Confirmation Send invoice Debtor management R2R Procurement Sales Process Consumer Record 2 Report ( processing) Merchant Producer O2C/ P2P Delivery Transaction information Procure to Pay (Procurement) Merchant Reconciliation Bank statement Reconciliation Account Balances Cash Flow Goods/ Services Goods/ Services Cash Flow End-of-day Reconciliation Analysis Reporting Accounting Merchant Management information Producer Annual statement Producer Inventory system Purchase Order Goods in Transport Goods receipt Receipt invoice 3- Way matching Process payment Payment authorisation Send payment to bank R2R 13
Meanwhile the tech companies expand their role Order 2 Cash (Sales) Marketing Inventory check Order processing Confirmation/ payment initiation Selection payment product Select logistical partner Transaction IIAA Transaction Confirmation Send invoice Debtor management R2R Procurement Sales Process Consumer Record 2 Report ( processing) Merchant Producer O2C/ P2P Delivery Transaction information Procure to Pay (Procurement) Merrchant Reconciliation Bank statement Reconciliation Account Balances Cash Flow Goods/ Services Goods/ Services Cash Flow End-of-day Reconciliation Analysis Reporting Accounting Merchant Management information Producer Annual statement Producer Inventory system Purchase Order Goods in Transport Goods receipt Receipt invoice 3- Way matching Process payment Payment authorisation Send payment to bank R2R 14
Fintech is everywhere Order 2 Cash (Sales) Marketing Inventory check Order processing Confirmation/ payment initiation Selection payment product Select logistical partner Transaction IIAA Transaction Confirmation Send invoice Debtor management R2R Procurement Sales Process Consumer Record 2 Report ( processing) Merchant Producer O2C/ P2P Delivery Transaction information Procure to Pay (Procurement) Merchant Reconciliation Bank statement Reconciliation Account Balances Cash Flow Goods/ Services Goods/ Services Cash Flow End-of-day Reconciliation Analysis Reporting Accounting Merchant Management information Producer Annual statement Producer Inventory system Purchase Order Goods in Transport Goods receipt Receipt invoice 3- Way matching Process payment Payment authorisation Send payment to bank R2R 15
Regulation is speeding up the shift
Regulatory topics that influence payments Possible Impact / Opportunity xxxxxx 2014 SEPA SEPA introduced standardisation of Euro denominated payments with the goal to increase competition in the European market. SEPA 2.0 : Possible reduction of local bank accounts Cheaper cross border transactions Easier roll out to new countries Standardised payment methods increase efficiency Soon Basel III / CRD 4 impact on Notional Cash Pooling New Bank regulation changes the qualification of bank assets. Banks will be required to hold more liquidity against specific positions, for example against Debits/ Credits included in Cash Pool positions. Furthermore the bank may revalue their relation with you based on operational/ non-operational relationships. Review Current Cash Pooling Possible reduced access to Notional Cash Pool products Treasury products may be discontinued BEPS 2017 (expected) PSD II The most important element of the Payment Services Directive revision is the introduction of Access to the Account (XS2A). It obliges banks to share bank details with third parties as well as process payments initiated via these third parties Acquiring model may be redundant leading to cheaper transactions Better integration possibilities with client and Payment Service Provider Potential to simplify Cash Pooling Selecting PSP 17
PSD II- revolutionary legislation? Account Services AIS Account Services Requires a bank Payment to share account Initiation information Services (i.e. Account balance and account details) with third parties upon request of the account holder Currently the directive does not specify how the Third Party should proof the request came from the account holder PIS Payment Initiation Services A third party may send payment instructions to the bank in the name of the account holder. The bank should treat this payment equal to the payment instructions send directly by the client 18
Although the directive is not yet live, we already think of some applications such as Cash Pooling Target (zero)-balancing Cash Pooling Account Services (AIS) Payment Initiation Services (PIS) 1 2 Balance? Third Party Payment Service Provider Balance? Balance? Payment Third Party Payment Service Provider Payment Payment Bank Bank Account Account Account Account Account Account Cross Border Zero Balancing at very low costs No messaging costs, no pool maintenance costs, all banks are accessible 19
And a cheap alternative to card payments Alternative to Credit Card payments Current setup Payment Initiation Services (PIS) 1 2 Authorization Authorization Card scheme: CC: 2,5% Debit card: 0,25c TPP: Initiates Credit Transfer SCT: 0,07 Instead off using an expensive Card network, one may simply approve a Credit Transfer using the same terminal Lower costs for merchant, direct finality of payment Same process for online and offline payments Similar benefit case for Direct Debits 20
What's next in payments?
Innovations in payments on all fronts E- Mandate NFC Social Media Mobile E-ID BLE IIAA QR E- Invoice SaaS Biometrics OBEP E-Commerce Crypto Currencies Alternative Payments Who provides you access to these innovations? E-Wallets Online Escrow How will you respond to all these developments? Big Data API Cloud 22
What's next? 23
Payments move to the background as they become integrated with other processes 24
several Token-packs, containing up to 50 Tokens. After your selection of a Token-pack, you can proceed to payment using Credit card or ideal. After authorization, the Tokens are l Payments move to the background as they become integrated with other processes 25
Social Media are using their client relation to introduce payment services Wij zijn geen bedreiging voor de grootbanken 1) Facebook biedt op dit moment al betalingsdiensten in de V.S. aan (USD 2,1 mld 2013) Om ook in Europa betaaldiensten te kunnen aanbieden loopt er op dit moment een vergunningsaanvraag voor een EMI in Ierland. Vanuit hier kunnen zij hun services paspoorten Facebook is ook in onderhandeling met drie Londense start-ups op het gebied van mobiele betalingen Is het in de toekomst mogelijk voor gebruikers van Twitter om te betalen met een tweet? Twitter is momenteel in onderhandeling met online betalingsdienstverlener Stripe om winkeliers in de toekomst creditcard betalingen via tweets te kunnen laten accepteren Twitter is onlangs een samenwerking aangegaan met American Express, om het mogelijk te maken voor klanten van AMEX om te betalen via een tweet 1) Neil Hiltz, the global head of Facebook's financial services 26
Even bitcoins are becoming more and more professionalized 27
PSP s are moving towards cash disbursements Accounts Payable Management The PSP positions themselves as service provider for outgoing payments by using the liquidity from the incoming stream to cover the outgoing payments. Accounts Receivable Banks are cut off of the stream and will be left with the surplus liquidity. Cash is used most optimal by reducing the time in process between receiving from the PSP, and disbursing from bank account. Advantages: Incoming cash flow Bank Acquirer Payment Service Provider Payment Router Service Providers Creditors FX risk can be isolated Working capital can be reduced Bank agnostic (but dependant on PSP) Easy access to worldwide payments without local disbursement accounts Integrated reporting as common with PSP Outgoing cash flow Merchant Reconciliation in ERP Accounts Payable Suppliers 28
Questions 29
More information Trainer: Emiel Kuiken Phone number: 088 792 3978 E-mail: emiel.kuiken@nl.pwc.com 30
Payment hub Cash Pooling Cash flow forecasting Are you geared up for the future? Next Gen. Payments Swift Payment Factory Bank selection In-House banks Our team has a global network of corporate treasury specialists with deep expertise in assessing and managing cash management transformations, managing risks and control experience learnt from various projects in both the banking and corporate sector. has over 500 Treasury professionals with various geographical experience and expertise's. Our Treasury team has been voted number 1 Treasury Consultant Team by the over 18,000 worldwide readers of Treasury Management International (TMI) in each of the years 2001 to 2014 as undisputed leaders in the field. For more information visit: http://www.pwc.nl/treasury Bas Rebel Senior Director Corporate Treasury Solutions T: +31 (0)88 792 3824 E: bas.rebel@nl.pwc.com Gabriel Aslan Senior Manager Banking & Cash Management T: +31 (0)88 792 6721 E: gabriel.aslan@nl.pwc.com Emiel Kuiken Manager Cash & Liquidity Management & Payments T: +31 (0)88 792 3978 E: emiel.kuiken@nl.pwc.com V0.3 April 2015