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Innovation, Efficiency, Simplicity. | 2015 Commercial Cards Conference | May 18 - 20, 2015
Presented by:
Rodrigo Sanchez, North America Commercial Cards B2B Product Manager
Presentation Title
Treasury and Trade Solutions | Citi Commercial Cards
Citi® Virtual Card: Enabling Successful Payables
Programs - Breaking Down the Barriers
2
Innovation, Efficiency, Simplicity.
Table of Contents
1. Presentation Objectives
2. Market Overview
3. Existing Challenges and Barriers
4.
5.
Virtual Card for Accounts Payables
Best Practices
Key Takeaways
Presentation Objectives
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Innovation, Efficiency, Simplicity.
Presentation Objectives
To identify existing challenges and barriers facing buying organization and adapt best practices in
order to expand working capital, rebate opportunities and reduce operational cost.
The Main Takeaways from this Presentation
1. Discover market trends and current growth of virtual cards
2. Identify existing challenges and barriers organizations face when considering a virtual card
program
3. Learn about the use of virtual cards as a form of payment within accounts payable
4. Discover the time and resources required to implement a payables program
5. Learn tactics and best practices to optimize spend through supplier incentives and successfully
roll out a virtual card program
Market Trends, Organizational Drivers
Market Overview
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Innovation, Efficiency, Simplicity.
B2B Check Payments are Falling
Check use for B2B payments is declining rapidly in the US and across the world
* Source: 2013 Association of Financial (AFP) Professional Electronic Payments Survey
Top Reasons For Using Virtual Card*
81% 74%
57% 50%
2004 2007 2010 2013
Use of Checks for B2B Payments*
20%
25%
29%
30%
45%
49%
80%
Reduction in
Fraudulent checks
Reduction in
duplicate payments
Increase ability to
capture early
payment discounts
Increased Vendor
Satisfaction
Increase in on-time
payments
Reduction in P2P
cycle times
Lower Processing
cost
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Innovation, Efficiency, Simplicity.
14.5%
16.1%
34.9%
43.9%
55.6%
2007 2009 2011 2012 2014
Virtual Accounts emerge as strong alternative to checks and ACH
Cards are quickly replacing checks as a form of payment
7
(1) 2012 RPMG Purchasing Card Benchmark Survey Results
(2) August 2014 RPMG Survey respondents using EAP
Trends in Virtual Account Adoption, 2007-20142
1- Source: PayStream Advisors, 2015 US ePayment Forecast for all us
businesses. Large Enterprises (> $1 Bn Revenue)
B2B Payments by Volume of Payments1
5% 8% 13%
72% 67% 61%
21% 23% 25%
2% 2% 2%
Card Checks ACH Wires
2010 2015 2020
Exploring current challenges and barriers to adoption
Existing Challenges and Barriers
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Innovation, Efficiency, Simplicity.
Financial Supply Chain: Broad Organizational Pressures
Organizations face ongoing pressure to maximize efficiency from their financial supply chains by
reducing costs, improving productivity and driving compliance to organizational policies
• Complexity of increasingly global supply chains
– Credit constraints, supply chain risk
– Visibility to maximize cash efficiency, liquidity management
– Working capital management across complex supply chain
• Effective day-to-day supplier management
– Push to maximize operational and headcount efficiencies
– Pressure to reduce expense, increase automation
– Balancing pressures with need to minimize supplier impact
• Focus on compliance, regulatory environment
– Reputational risk of lax oversight
– Reduced IT spend available for discretionary items
– Better visibility into internal practices needed
• Dispersed decision making
– Challenges ensuring alignment across key stakeholders
Impacted Stakeholders
Treasury & Finance
Accounts Payable
Strategic Sourcing & Procurement
Audit & Compliance
Technology
Key Challenges
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Innovation, Efficiency, Simplicity.
Overcoming Challenges to Adoption
Despite the large opportunity, a number of challenges still
exist for large corporations to adopt a solution.
Source: Paystream Advisors Report: Electronic Supplier Payments—Innovation Drivers for Corporate ePayments—ePayments Explosion!
40%
35%
33%
26%
26%
Suppliers not willing to adopt
Shortage of IT Resources
Lack of integration between AP systems
Loss of Check Float
Inability to exchange electronic paymentinformation
Solution Overview
Citi VCA for Accounts Payable
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Innovation, Efficiency, Simplicity.
Citi Virtual Card Accounts - Overview
Clients can gain financial benefits, process improvements, and greater security & control by
leveraging Virtual Card Accounts for payments
12
Virtual Card Numbers (VCNs)
– Unique, non-plastic account numbers used for
secure purchasing
– Local-currency issuance in 40+ countries and
25+ currencies
Increased Transaction-Level Controls
– Number of transactions (single- or multi- use)
– Transaction amount limit (exact, maximum, or
range)
– Validity Period
– Suppliers and Merchant Category Codes
Enhanced Client-Supplied Data
– Client-specified data elements per VCN for
enriched analysis, reconciliation and allocation
Secure VCN delivery via encrypted email to
suppliers
Web
API
Batch
Simple web-based
user interface for
generating VCN’s
A file transfer method
to request VCNs in bulk
Systemically
generate VCN’s
in real time from internal
application or ERP
Flexible VCN Generation….
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Innovation, Efficiency, Simplicity.
VCA for Accounts Payable: Solution Overview
Citi has combined a wealth of capabilities to develop an integrated virtual card file-based solution
focused on successful execution and program optimization
Working Capital Analytics
Proprietary analytics platform to identify
financial opportunities and optimize payment
strategies in your accounts payable
Supplier segmentation methodology to ramp
up conversion and card spend
File-Based Connectivity
Process card based payment method leveraging
existing file processes
Solution flexibility to adapt to our clients’
existing systems and business processes
Supplier Enablement
Dedicated team to manage supplier outreach
Ability to leverage multiple financial and
operational levers to help increase adoption
Supplier Portal and Support
Supplier support and self-servicing solutions
to provide ongoing operational support
Virtual Card
Accounts
Payable
Supplier
Portal and
Support
File Based-
Connectivity
Working Capital
Analytics
Supplier
Enablement
13
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Innovation, Efficiency, Simplicity.
Segmentation Analysis and Strategy
Citi’s leading-edge analytical capabilities and working capital solutions help clients optimize
their payment strategies, improve processes and ensure stability across the supply chains.
1. Strategic Suppliers
2. Multi-sourced
suppliers with
significant spend
3. Smaller suppliers
4. Non-system
spend
Traditional Payment Methods
Supplier Credit Rating
Card-based Payments
Supply Chain
Finance
14
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Innovation, Efficiency, Simplicity.
Building the Business Case
An analysis of your supplier data can help quantify multiple hard-dollar benefits to help build the
business case for implementing virtual card solution.
Example for Illustrative purposes only, Assumes In-Scope Spend of $135 million
Increased
Rebate
Working
Capital
Potential
Investment
Operational
Efficiencies
Driver = Incremental
Spend
Driver = Payment
Terms
Driver = Check
Reduction
Driver = Resource
Prioritization
Savings per Trxn: $2*
No. of checks
converted= 150,000
150,000*$2
Cost of Funds: 4%
Total Volume:
$135 million
DPO = 40 days
$135MM*4%*(40/360)
Total Volume: $135MM
Rebate share: 125bps
125bps
Actual costs and
commitment assessed
on a client by client
basis
$1.6MM $0.6MM $0.3MM $0.1MM
Recurring Recurring Recurring One-Time
Total Client Net Benefit = $2.5 million.
15
* Actual costs varies based on client’s existing processes
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Innovation, Efficiency, Simplicity.
VCA
Virtual Card File-based Payments
Virtual Cards can help lower administrative costs by reducing operational
complexity around your Payables process.
VCA for
AP
Client Suppliers
Payment Instructions
1
2
3
Reconciliation File
4
Increased Efficiency
Simplified Reconcilation
Flexible Remittance
Comprehensive Service
Send standard file for virtual card payments along with traditional payment
methods
Receive corresponding file for reconciliation
Deliver remittance and payment information to suppliers
End-to-end servicing and support
Reduce administrative overhead and transactional costs
16
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Innovation, Efficiency, Simplicity.
Virtual Cards as a New Payment Method
Virtual Card presents an opportunity to generate revenue for making payments while having other
similar characteristics to other payment methods
17
Costs/Process Cutoff/Receipt Remittance Detail Final Settlement
Virtual Card
Profit from making
payment due to card
rebate model
Virtual account number
sent to supplier e-mail
Payment received in 2-3
hours
Funds settled within 48hrs
of authorization
Standard option provides
enhanced remittance data
Customization to allow
unlimited remittance
All payments subject to 60
day dispute window
No liability for fraudulent
transactions
Ability to recover misuse
Check
High costs to process/
administer
$1-$5/check
Same day/Next day option
Mailing time subject to
disbursement location
Clearing subject to
supplier deposit
No limitation
Within 48hours of clearing
Potential for late return if
funds still exist in the
account
Fraud/counterfeit
transactions up to 1 year
ACH
Low costs for
electronic payment
~$0.07/transaction
Typically next day
settlement to major
financial institutions
Limited in some formats
with option for unlimited
Settled upon execution
Limited ability to reverse
transaction
Wire High costs
~$10/wire transfer
Late day cutoffs for same
day receipt
Limited Settled upon execution
Limited ability to reverse
transaction
Best efforts basis that
diminishes rapidly with time
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Innovation, Efficiency, Simplicity.
Citi Supplier Enablement and Support: Overview
Citi’s experienced supplier enablement team designs and executes customized outreach
campaigns to maximize the growth of your card programs while supporting your suppliers.
Cleanse, mine and enrich client data for tailored
supplier targeting via Citi Working® Capital Analytics
Holistic campaign to support significant supplier
adoption with faster card spend ramp
Co-branded marketing materials for customized
communication and message delivery to suppliers
High-touch engagement model for strategic vendors
Utilize robust campaign reporting on an ongoing
basis
Market research and intelligence to drive informed
decision making around supplier adoption leveraging
best practices
Onboard vendors not yet accepting card payments
through specialized B2B merchant-acquiring
partners to maximize adoption of your cards program
Dedicated Supplier Support Team post-enablement
to resolve your suppliers card inquiries
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Innovation, Efficiency, Simplicity.
Supplier Self-Service and Support: Payment Exchange
Suppliers can maintain their own profiles and bank account information, access real-time payment
details, and connect with a dedicated support team.
Self-servicing Portal:
Update and maintain payment
preferences and associated information
(bank account details, email addresses)
View payment status
Reconcile payment information with
remittance advices
Download payment records and
remittance advices for use with
Accounts Receivables or other
purposes
Supplier Support
Dedicated supplier support
team via phone
Access to online chat for
virtual support
Suppliers
Optional Self-Servicing and Help Desk Capabilities to Support Suppliers
Suppliers
19
Successfully Roll-out VCA Programs
Overcoming Challenges: Best Practices
21
Innovation, Efficiency, Simplicity.
Best Practices for a Successful Virtual Card Program
Citi will support your organization along the way to implement best practices for developing
a best-in-class Virtual Card program.
Align the
Organization
Establish Supplier
Outreach Plan
Develop payment strategy
Analyze AP spend to quantify benefits and determine ROI
Measure and report on payment metrics pre- and post-implementation
Identify Strategy &
Build Business Case
Identify senior executive to champion solution
Solidify goals and align Card team with cross organizational resources
Develop plan for supplier segmentation and adoption
Contact suppliers for enrollment in card solution
Develop
Requirements
Create detailed project plan, identify required resources, set target dates
Provide information and training to key resources involved with solution
Continued Monitoring
& Optimization
Monitor and refine program goals
Benchmark against the original business case on a periodic basis
22
Innovation, Efficiency, Simplicity.
Payment Strategy Implications
Depending on your company’s goals and supplier strategy, Citi’s Virtual Card payment can be
leveraged to use in a variety of fashions.
Working Capital Process Efficiencies Rebate Realization
Convert Your Checks to Card
Reduce costs by converting
expensive check process
with card payments
Generate Revenue
Get paid for making card
based payments payments
Implications on Payment Strategy
Payment Strategy: Campaign Approach Buyer DPO Benefits Transaction Cost Benefits
Offer Current
Terms
Card
Benefit
New
DPO
DPO
Effect
Transaction
Savings
Payment
Method
Targets
Rebate
Potential
Payment Digitisation Default VCA 30 30 60 ↑ Medium Check Med
Payment Term Extension Early Payment VCA 60* 0 30 - High Check, EFT High
Expedite Payments Early Payment VCA 30 0 35 - High Check, EFT High
Benefits for the Buyer
Use card float to
gain additional
working capital
Benefits for Suppliers
Maintain DPO while
offering suppliers early
payment
Allow term extension
terms without
damaging relationships
23
Innovation, Efficiency, Simplicity.
Citi Supplier Enablement Services: Proven Success
To date, Citi has enrolled more than 40% of targeted suppliers which has resulted in converting
over 30% of spend across both check and electronic payments to a B2B Cards solution
Check
Annual Volume Spend Adoption Merchant Adoption
<$500K 37% 40%
<$1MM 35% 39%
<$2MM 28% 39%
Total 28% 39%
<$5MM 24% 38%
$5MM+ 14% 13%
ACH
Annual Volume Spend Adoption Merchant Adoption
<$500K 38% 51%
<$1MM 33% 49%
<$2MM 27% 47%
Total 27% 47%
<$5MM 22% 46%
$5MM+ 11% 8%
Incentives offered have a material impact on card
conversion rates
– Spend adoption impacted by proposed cash
flow benefit
– The stronger the incentive the more successful a
campaign will be in enrolling higher spend merchants
Traditional
Target Zone
Traditional
Target Zone
$136K
$82K
$155K $178K
$227K $209K
16% 16%
33%
23% 29%
20%
0 10 20 43 60 65
Cash Flow Benefit to Supplier (No. of Days)
Avg. Annual Spend Enrolled % Suppliers Enrolled
Adoption by Payment Method
Success By Incentive
24
Innovation, Efficiency, Simplicity.
Implementation Support Model
A dedicated and experienced Citi implementation team works closely with our clients’
corresponding team to ensure program requirements are met.
Project Manager
Technical Specialists
Supplier Enablement
Manager
Project Management
Documentation
Technical Expertise
Specialists providing deep expertise on
system integration, file delivery, data and
reporting needs
Manage supplier enablement activities
end-to-end
Report campaign success and
opportunities for expansion
Implementation Manager
Central Point of Contact for coordinating
implementations
“One-stop contact” for best practices and
client questions Experience working with various ERP
systems
Clients represent some of the most complex card implementations in the industry
Citi brings a track record of integrating at every level of requirement for its implementation services based on best practices in project management
Additional Support on ERP integration
Support in development of VCA files
Custom ERP coding and reporting
Expertise in SA, Oracle and Microsoft ERP systems
Consulting service offered on an ad-hoc, as needed basis
Acceleration of Virtual Card implement
Citi’s Experience with Complex Implementations
ERP Integration Support
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Innovation, Efficiency, Simplicity.
Sample Implementation Timeline
Citi will customize a project plan tailored to each client’s specific needs
Month 1 Month 2 Month 3 Month 4 Month 5
Product kickoff
Complete all documentation
Supplier enrollment campaign
Open accounts
Client setup
Validation, testing
Client training
Production ready/Go Live
Task
IR S C irc u la r 2 3 0 D is c lo s u re : C it ig ro u p In c . a n d its a f f i lia te s d o n o t p ro v id e ta x o r le g a l a d v ic e . A n y d is c u s s io n o f ta x m a tte rs in th e s e m a te r ia ls (i) is n o t in te n d e d o r w r it te n to b e u s e d , a n d c a n n o t b e u s e d o r
re l ie d u p o n , b y y o u fo r th e p u r p o s e o f a v o id in g a n y ta x p e n a lt ie s a n d ( ii) m a y h a v e b e e n w r itte n in c o n n e c t io n w ith th e " p ro m o tio n o r m a rk e tin g " o f a n y tra n s a c tio n c o n te m p la te d h e re b y (" T ra n s a c tio n " ) .
A c c o rd in g ly , y o u s h o u ld s e e k a d v ic e b a s e d o n y o u r p a r tic u la r c irc u m s ta n c e s fro m a n in d e p e n d e n t ta x a d v is o r .
A n y te rm s s e t fo r th h e re in a re in te n d e d fo r d is c u s s io n p u rp o s e s o n ly a n d a re s u b je c t to th e fin a l te rm s a s s e t fo r th in s e p a ra te d e fin it iv e w rit te n a g re e m e n ts . T h is p re s e n ta tio n is n o t a c o m m itm e n t o r firm o f fe r a n d d o e s n o t
o b lig a te u s to e n te r in to s u c h a c o m m itm e n t , n o r a re w e a c tin g a s a fid u c ia r y to yo u . B y a c c e p tin g th is p re s e n ta tio n , s u b je c t to a p p lic a b le la w o r re g u la tio n , yo u a g re e to k e e p c o n fid e n tia l th e in fo rm a tio n c o n ta in e d h e re in a n d
th e e x is te n c e o f a n d p ro p o s e d te rm s fo r a n y T ra n s a c tio n .
W e a re re q u ire d to o b ta in , v e r ify a n d re c o rd c e r ta in in fo rm a tio n th a t id e n tif ie s e a c h e n ti ty th a t e n te rs in to a fo rm a l b u s in e s s re la tio n s h ip w ith u s . W e w ill a s k fo r yo u r c o m p le te n a m e , s t re e t a d d re s s , a n d ta x p a ye r ID n u m b e r .
W e m a y a ls o re q u e s t c o rp o ra te fo rm a tio n d o c u m e n ts , o r o th e r fo rm s o f id e n tif ic a tio n , to v e r ify in fo rm a tio n p ro v id e d .
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