© 2011 Treasury Strategies, Inc. All rights reserved.
Treasury Services: Innovating For The Next Generation
May 23, 2011
Presented by: Tony Carfang, Partner Cathy Gregg, Partner
Dave Wexler, Principal
w w w . T r e a s u r y S t r a t e g i e s . c o m 2
Meeting Objectives
1. Discuss innovation, its importance in our industry
2. Understand the emerging client needs
3. Identify areas of potential opportunity /challenge
4. Prioritize these areas and agree on a way forward
w w w . T r e a s u r y S t r a t e g i e s . c o m 3
Perspectives
Treasury Strategies’ corporate, financial services, and technology practice area perspectives reveal marketplace inconsistencies significant to this discussion.
• Although our bank clients work hard and invest heavily to differentiate themselves, our corporate clients see similar-size banks as largely undifferentiated.
• Much recent transformative banking innovation originated outside the industry.
• The largest banks are focused on leveraging their processing scale but not truly leveraging their information scale or their network scale.
• Corporate spend on managing the working capital cycle can be 10x to 25x the spend on bank treasury management services.
• Virtually all corporate treasury operations are subscale.
w w w . T r e a s u r y S t r a t e g i e s . c o m 4
Treasury 3.0 - Corporate Perspective
Data Information Intelligence
Treasury Management Timeline
Treasury Operations is an
immature, fragmented or
informal function, characterized by manual processes
Treasury centralizes key roles, improving
transparency and controls
Greater access to data and computing power and consolidation of
competency
Treasury 1.0
LOW
HIGH
Treasury is a strategic advisor, more closely
integrated with business units, supporting
globalization, efficiency, trading partner/supply chain integration and
greater sophistication in risk/return optimization
Data Information Intelligence
Treasury 2.0 Treasury 3.0
Pre 1970 1970 - 2010 Now - Future
Trea
sury
Influ
ence
& V
alue
Add
w w w . T r e a s u r y S t r a t e g i e s . c o m 5
3.0 Treasury
Financial Nerve Center view fulfills unrealized potential of ERP
Regulators
Treasury=
Nerve Center
CapitalMarkets
FundManagers
BanksRating
Agencies
BusinessSegments
Board ofDirectors & C-Suite
w w w . T r e a s u r y S t r a t e g i e s . c o m 6
Corporate Trends
• Credit crisis revealed counterparty risk management gaps • Firms coming to grips with country and political risk • Fraud accelerating and diversifying
Risk
• Firms re-engineering treasury technology & banking structures for liquidity visibility / access
• Companies consolidating & optimizing global liquidity
• Cash & FX exposure forecasting continues to improve
Liquidity
• Payment ops consolidation improves efficiency & speed of financial value chain
• Data & analytics improving cash application speed and accuracy
• Increased adoption of financial supply chain solutions
Payments
Globalization
w w w . T r e a s u r y S t r a t e g i e s . c o m 7
Treasury 3.0 - Bank Perspective
Data Information Intelligence
Treasury Management Timeline
Treasury 1.0
$175B
$1T +
Client Accommodations
Cash Management
Treasury Management
TBD
Treasury 2.0 Treasury 3.0
Pre 1970 1970 - 2010 Now - Future
Rev
enue
Rapid scope and volume growth, but
$0 revenues as industry fails to commercialize
Approaching zero-sum game dominated by
several global and regional players
Comprehensive payment & liquidity solutions
Supply chain solutions Increased segmentation and refined competitive
identities Web solutions innovations
$0
w w w . T r e a s u r y S t r a t e g i e s . c o m 8
Banking Scale
Today, transaction banking is a fragmented $175B+ industry; top 3 players each have roughly 5% market share.
In the next decade, top players will triple in size and control larger shares of a $250B+ global industry
Source: TSI data and proprietary econometric modeling
Consolidation and Growth
0
5
10
15
20
25
30
1980s 1990s 2000s 2010s
Decade
US
D B
0%
2%
4%
6%
8%
10%
12%
Mark
et S
hare
Top Player Share Top Player Revenue
w w w . T r e a s u r y S t r a t e g i e s . c o m 9
Barriers to Innovation
• Financial barriers - inadequate funding • Risk avoidance mentality
• Distraction
• Suffocation • Wrong measures of success
• Constrained thinking • Time commitment too short for success
• Unrealistic payback horizon
• Too few bets
w w w . T r e a s u r y S t r a t e g i e s . c o m 10
Value Proposition Frame
Consider white space that exists within the value propositions you deliver to customers
Proposition Success Factors Commercial Payments Scale and footprint
Financial Settlements Scale / monopoly of sector
Financial Supply Chain Very broad scope of services and solutions (including non-traditional) delivered broadly into customer organization
Liquidity Robust investment product set; understanding of how to optimize deposit balances; deeper client penetration
Trading Partner Well-developed understanding of buyer/seller relationships and regulatory insights; solution approach; willingness to invest and customize
w w w . T r e a s u r y S t r a t e g i e s . c o m 11
Treasury 3.0
Treasury Operations Capital Markets Cash Reconciliation
Cash Positioning
Cash Forecasting
Payments
Debt
Investments
FX
Bank Acct Admin
Interest Rate Hedging
Trade Confirmation
Stra
tegy
W
orkf
low
s A
nalytics & B
usiness Logic
Order to Cash
Procure to Pay
Corporate Treasurer and banks work together to achieve this.
Risk Management
Metrics & Decision Support
Intelligence
Record to Report
w w w . T r e a s u r y S t r a t e g i e s . c o m 12
Questions
w w w . T r e a s u r y S t r a t e g i e s . c o m 13
About Treasury Strategies, Inc.
Who We Are Treasury Strategies, Inc. is the leading treasury consulting firm working with corporations and financial services providers. Our experience and thought leadership in treasury management, working capital management, liquidity and payments, combined with our comprehensive view of the market, rewards you with a unique perspective, unparalleled insights and actionable solutions.
@TreasuryStrat
www.TreasuryStrategies.com/ networking/netCommunity.htm
What We Do Corporations We help you maximise worldwide treasury performance and navigate regulatory and payment system changes through a focus on best practices, technology, liquidity and controls. Treasury Technology We provide guidance through every step of the technology process. Our expert approach will uncover opportunities to optimise the value of your treasury through fully integrated technology solutions. Financial Services Our experience, analytic approach and benchmarks provide unique consulting solutions to help you strengthen and grow your business.