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  • BEST OF CASH

    GO DIGITAL AND DISCOVER MORE ABOUT OUR CASH MANAGEMENT EXPERTISE AND SOLUTIONS AT WWW.CASHMANAGEMENT.BNPPARIBAS.COM

    OUR EXPERTS STANCE ON WHAT COUNTS THE MOST IN CASH MANAGEMENTSEPTEMBER 2015

    MANAGING COLLECTIONS Why Collections are the talk of the town

    PLAYING HERE AND ABROAD Asia, a far from harmonious payments market

    TRENDS AND VISION Never waste a good recovery

    DIGITAL BANK & REPORTING The quiet revolution of reconciliation

    OPTIMISING LIQUIDITY International cash pooling in China: To join the pool, follow the rules

  • 126 20Trends & Vision Optimising LiquidityDigital bank & Reporting

    International cash pooling in China: To join the pool, follow the rules 20

    Yield under strain in a low interest environment: Striking the right note 22

    The quiet revolution of reconciliation 12

    Smart systems, smart fraud 15

    Integration: complexity made safe and simple 16

    XML: the discrete genie in a bottle 18

    In a fast changing world, agility is key 6

    Never waste a good recovery 8

    Is china leading the e-payment momentum? 10

    India: a quantum jump into the mobile age 11

  • 24 33 42Managing Collections Paying here & abroad About us

    Asia, a far from harmonious payments market 33

    Finding your way in the payment factory maze 36

    Obstacles and incentives to mobile payments in the US 38

    Cross-currency payments: international payments with an FX flavour 40

    Global footprint, local player 42

    Our transaction bankers share their views 42

    BNP Paribas business model: robust and effective 43

    How Virtual Accounts respond to your new collection challenges 24

    Improving the collection process to better manage treasury 26

    Why collections are the talk of the town 28

    Questioning the dogma of centralisation 30

  • A few years back from now, I was struck by the forward thinking claim of a leading world electricity supplier. They argued that they owed their clients more than electricity to switch on the light. I saw it as the expression of an enlarged role, one that any major company should play in todays world.

    Looking back, I find it more relevant than ever. Indeed, it is precisely how I see our mission as BNP Paribas cash management experts.

    I personally believe that we owe all of the businesses that entrust us with the management of their treasury more than the most relevant, efficient and innovative cash management responses. These are prerequisites. They support our core mission, but the truth is, there is more to it.

    In todays world, any company that aims for a sustainable leadership cannot solely rely on the quality of its offers and services, however proven and innovative these might be. Rightly so, the markets -and society at large- expect more.

    EDITORIALWE OWE YOU MORE THAN THE BEST CASH MANAGEMENT PRACTICES

  • I also personally believe that in addition to offering smart and state-of-the-art treasury management solutions, we owe you a continuous and fruitful dialogue on the multiple aspects, challenges and impacts of transaction banking as a pillar of corporate strategy and success. Evidently, such dialogue is, first and foremost based on your relationship with our advisory and sales teams. This is critical to us, but yet again, we owe you more.

    Because the scope of corporate treasury management is constantly broadening, so are the related issues that we as a community must address, whether closely related to our core mission -like managing payments or optimising collections- or apparently more remote from it -like the digitisation of our economies or the emergence of communication technologies and standards that make it possible to do more with less.

    As treasury management has become a driver for progressive corporate strategies, and as the roles of CFOs and treasurers broaden and are increasingly more strategic, we have more conversations to engage in, and more to share. Catering for the needs of 40,000 corporates in 60 countries, we have relationships with no less than 2,500 transaction banking professionals. Our vision of how markets evolve, which trends most impact companies, how corporate treasury is transforming and how you can take advantage of change draws from this extensive field experience.

    By launching www.cashmanagement.bnpparibas.com a year ago, we triggered the conversation. Today, we want to continue it and Eurofinance Copenhagen appears as a formidable opportunity to launch a new initiative that is consistent with our philosophy. So we have gathered some of the best content from our website and created a magazine to share our vision and thoughts with you.

    Welcome to Best of Cash, a BNP Paribas Cash Management publication that has been designed for all corporate treasury professionals. It contains a selection of our most advanced reflections in the field of working capital management, all collected from www.cashmanagement.bnpparibas.com.

    We hope that you will find this information helpful and that you will enjoy reading through it. Please share your comments and suggestions to help to make it even better.

    Best,

    Pierre Fersztand, BNP Paribas Global Head of Cash Management

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  • can be a key part of their taking-advantage-of-a-changing-world kit.

    A well-designed liquidity management strategy brings many benefits, in addition to traditionally improving control and visibility. Yet, both remain primary challenges for corporates of all sizes, and its easy to understand why. In a global environment, keeping control over cash is much more difficult and as much essential.

    A MORE SOPHISTICATED APPROACHBut that is not all there is to it. As companies go global, new cash related challenges arise: from making successful international

    No wonder liquidity has become a critical issue for corporates: an efficient liquidity management strategy translates into more financial power and agility to project into the future. Simply put: liquidity management means agility; and in a fast changing world, agility is the word.

    TAKING ADVANTAGE OF CHANGETo take advantage of change, corporate treasurers must first understand it. In which area of the world will growth be the strongest tomorrow? Is producing in a restricted market the right strategy? Which megatrends will impact my business and how? It is one thing to know that a middle-class is emerging in Asia, but understanding how it will transform the marketplace is another matter. And its even more of a challenge to know how to manage my cash to grasp the opportunities that it will bring. Clearly, corporates must adapt, and improving the management of their liquidity

    As external liquidity has turned scarce, treasury departments have become the focus of attention. Yesterday perceived as an operational player, the treasurer is now seen as a strategic internal stakeholder. In organisations where cash is king, central treasuries have become fully-fledged in-house banks. If corporates tend to manage their liquidity like a strategic asset, it is because cash gives them the freedom to act, to invest, to develop and to transform. Yes, the treasurers role is undergoing major transformations. But then it seems that everything around us is changing.

    Trends & Vision

  • AGILITYIS KEY

    payments to releasing trapped cash. As a result, the treasurers toolkit must have solutions to mobilise cash in a volatile market environment where risks -liquidity, currency and counterparty- must be anticipated upon and carefully managed.

    Asia offers amongst the highest potential and the biggest challenges. From a cash point of view, it is made of restricted and regulated markets, plus others that apply pretty much the same rules as in the west. Operating in Asia means dealing with more currencies, languages and regulatory frameworks than ever before, which adds to the overall complexity of being far from home.

    The good news is: things are moving fast in China and change is expected in other parts of the region. With the RMB on the verge of deregulation, corporates can see their prospects broadening, and many are adjusting their cash approach accordingly.

    I DO, BECAUSE I CANIf change can be driven by technology, technology can also be driven by change. Whatever comes first is not that important after all. At the end of the line, there is always increased competitiveness, market share and leadership. Liquidity management is no exception to the rule, with technology leading to innovative corporate strategies.

    BNP Paribas is constantly investing in technology. The Connexis Cash and Liquidity platform is one good example of the Banks commitment. Extended to deliver improved visibility of cash positions, Connexis offers real-time views of all cash balances and significantly improves flexibility and productivity. Mobile services are another area of progress for liquidity management. Right now, mobile services are mostly focused on providing access to information and making remote signing possible, but over time, increased functionality will be added. Ultimately, it is expected that the full functionality of a desktop platform will be available for mobiles.

    IN A FAST CHANGING WORLD,

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  • NEVER WASTE A GOOD RECOVERYIndeed, there is a real chance that countries will use the improved economic situation as an incentive to tone down planned reforms and debt reduction. It is tempting after a protracted period of weak growth and crisis to sit back and relax during an economic upswing. Tensions between Germany and countries from the periphery have at times put European cohesion to the test. Weak growth, cutbacks and structural reforms have come at a considerable cost to the political capital of different governments and political parties. One only has to look at the electoral victory of Syriza in Greece or the rise of Podemos in Spain.

    Although it would be understandable from a political perspective, it would be a big mistake if we were to use the cyclical upswing to again shelve reforms and debt reduction. Institutions such as the International Monetary Fund are warning that Western growth potential has been structurally weakened. In that light, this years stronger growth is but a temporary phenomenon and certainly not a return to the good old boom years. Potential growth in developed industrialised countries has been on the decline for some time. Two main causes are the structurally lower growth of both productivity and population, but the aftermath of the financial crisis also plays a role. In the years preceding the financial crisis we fuelled economic growth by debt. Today, we have to repay that debt with reduced repayment capacity.

    One of BNP Paribas most influential chief economists, Peter De Keyzer, argues that as Europe has entered its post-crisis recovery phase, its economic growth must build on sturdy foundations. The strong economic recovery should be used to open up the bonnet of the European economic engine and increase its capacity in a structural way.

    Now we must be sure not to waste the recovery. Economic growth in Europe is expected to be stronger than anticipated this year. The combination of low oil prices, a weak exchange rate and ultra-low interest rates will give the economy a strong boost. Is this good news? Yes, for now...

    Trends & Vision

  • Structurally weaker growth has a number of disadvantages. First, it threatens to erode financial stability: the zero-interest policy of central banks is aimed at boosting growth, but at the same time it increases the likelihood of bubbles and thus financial instability. Structurally weaker growth also makes it more difficult to build financial buffers against the next crisis, i.e. reduce debts. Yet we must continue to reduce debts. Not because we enjoy it, but because we need to create budgetary margin to absorb future economic

    shocks. Creating budgetary safety margins is not so easy when growth has been structurally weakened. It is like having to build a dam with a spade when we had counted on a bulldozer.

    This is why we need now, more than ever, to swap our spade for a bulldozer again. In other words, to boost our potential growth. Just to be clear: we will not do this by creating more debt. In Europe, we can do that by getting more people into employment, allowing the retirement age to evolve in parallel with life expectancy and by focusing more on innovation and education, for example. Reducing our debt and increasing the economys staying power that is what we need more than ever. The sunny economic weather is no excuse to cruise along at low speed. On the contrary, it is an ideal time to shift to a higher gear. Never waste a good recovery.

    Peter De Keyzer has a dedicated blog: https://blogs.bnpparibasfortis.com/peterdekeyzer/fr

    Never waste a good crisis. It was advice we kept on hearing during the euro crisis. Periods of major financial and political stress created the necessary support to drive continued integration of the euro zone. Joint emergency funds, tighter supervision of budgetary and structural policy and unified European supervision on the banking sector were not a matter of course. The intense financial-economic turbulence facilitated political measures which would have been impossible in normal times. We certainly did not waste the crisis.

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  • CHINA LEADING THE E-PAYMENT MOMENTUM?

    IS

    Before moving on to the B2B scene, mobile payments are usually first adopted by consumers. From looking at the boom of e-consumption in China so far, it should only be a matter of time before e-banking makes its way to many of the countrys corporate treasuries.

    Chinas progression in e-commerce is both outstanding and fast. At the beginning of the new millennium, it had no infrastructure to support e-commerce; whereas by the end of 2013, the country boasted nearly 600 million Internet users and was already a blooming market. According to Chinas market leader Alibaba, the total value of merchandise bought online in 2012 was greater than that of Ebay and Amazon combined. By 2016, the e-commerce giant expects to pass Wal-Mart as the #1 retail network in the world.

    Alibabas ambition is fully supported by the Chinese government. According to KPMGs E-commerce in China: driving a new consumer culture study dated January 2014, the Chinese Ministry of Industry and Information Technology has engaged in an ambitious 5-year plan from 2011-2015 to turn the Middle Kingdom into a global e-commerce leader.

    DRIVEN BY TECHNOLOGY BUT NOT ONLYBack in 2012, China was already the worlds largest smartphone market, with a record share of computer and smartphone owners. The Chinese middle-class purchasing habits were already, and still are, strongly technology oriented. Luxury goods are another area of high interest for the Chinese middle-class. Many purchase them abroad either on business trips or on vacation, with Australia, Europe and the US as the 3 preferred destinations.

    A POSITIVE ENVIRONMENT FOR E-COMMERCEThe countrys incredible boom of e-commerce also benefits from the fight against counterfeiting, which multiplies the potential for mobile consumption and online payments. With over 80% of Chinese using them, especially through local platforms like Sina Weibo or Tecent Weibo, social media is another key driver to an increased online consumption. It does not come as a surprise that Gen Yers are over represented among online consumers.

    There are still barriers, however, to an even stronger emergence of e-commerce, for example a low credit card penetration rate. But yet again, credit cards are becoming increasingly popular among the Chinese middle-class and their use is on the uptrend.

    E-COMMERCE GOING MOBILEAccompanying the rise of e-commerce in China is a clear trend toward mobile devices. In just a few years, China has emerged as the country with the largest number of mobile-based e-commerce transactions. In 2012, mobile transactions totalled USD7.8 billion, representing 3.7% of all e-commerce transactions. But by 2015, the mobile commerce business is expected to more than quintuple to USD41.4 billion, representing 8% of all e-commerce transactions.

    KPMGs E-commerce in China: driving a new consumer culture study (January 2014)

    LAtelier BNP Paribas - for the full article:http://www.atelier.net/en/trends/files/chinese-consumption-becoming-increasingly-web-and-mobile-focusedhttp://www.atelier.net/en/trends/articles/e-commerce-opens-chinese-market

    SOURCES

    Trends & Vision

  • A QUANTUM JUMP INTO THE MOBILE AGE

    INDIADriven by sustainable domestic growth, Indias economic performance makes it a rare bright spot among emerging markets, according to The Economist. On the cash management side, the sub-continent is undergoing a mini revolution, powered by a mobile communication boom.

    To say that India is a huge consumer market is an understatement. The current population of the Republic is over 1.25 billion, and the sub-continent boasts the second largest population in the world behind China amounting to approximately 18% of the worlds population.

    For the first time in 2015, Indias pace of growth is set to overtake that of Chinas. The official figures quoted by the MOSPI (Ministry of Statistics and Programme Implementation) already show a GDP in excess of 7.5% in the 4th quarter of 2014 compared to Q4 2013. A firm Rupee, booming foreign investment and current foreign exchange reserves at a record $330billion are other key indicators of Indias economic momentum. At the beginning of 2015, the additional fall in commodity prices created a positive impact on the inflation rate, down at +/- 5 points in January vs. +8.5 in April 2014. On top all of this, Indias interest rates are down, and more cuts are expected throughout the year.

    A NEW LANDSCAPE IN THE MAKINGBoasting about 200 million subscribers, the Indian mobile market is growing by 5 million per month. Although clearly

    on the rise, the figures do not fully reflect the outstanding potential of the market, with great perspectives of growth as the mobile and smartphone equipment rate of the population continues to grow. As in other countries of the world like China, changes in consumers behaviour -and particularly regarding the use of mobile technology to make purchases and payments- are progressively transforming the way individuals manage their cash.

    With the process of transformation being in the making, the Indian landscape remains contrasted for the time being. Cheques are still Indians preferred means of payment, and cash payments are also very popular. In addition, mid-sized caps that are traditionally more conservative are less proactive than larger corporates in pushing for electronic cash management solutions. Most of them are not yet ready to move in to a 100% paperless environment. Meanwhile, they tend to hold on to cheques. This is due to historical reasons like the costs related to upgrading systems and reviewing internal processes, but also last but not least, to take advantage of the float on the debit side.

    At the other end of the spectrum, major corporations are at the forefront of change. Large corporates have the structure and the size to better grasp the opportunities brought by domestic initiatives like Immediate Payment Service (IMPS), NACH (National Automation Clearing House) and BBPS (Bharat Bill Payment System). These new services contribute to boosting electronic transfers and straight-through processing as part of a broader ambition to automate payments and collections. Major corporations have high expectations as to saving time and costs as well as gaining more reliability across the payment and collection chain.

    For their part, utilities have their own challenges. In the top 20 cities of India, more than 30 million bill payments are generated each year. Due to a complex and heterogeneous environment, they face specific challenges. By supporting a standardised environment and shared practises, Indias BBPS (Bharat Bill Payment System) -due to be operational in 2015- will provide adapted responses to utilities own challenges.

    Laura Milani - BNP Paribas Liquidity product manager Nimesh Karwanyun - BNP Paribas Head of Transaction Banking India 11

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  • THE QUIET REVOLUTION OF RECONCILIATION

    Digital Bank & Reporting

  • The vast majority of cash management specialists would agree that however standardised a treasury environment is, there is no standardised approach to improving reconciliation. But then what would it take for standardisation to truly enhance reconciliation?

    Although indispensible, reconciliation is time-consuming and risky. More importantly, solutions vary depending on how a company is structured, its degree of centralisation and the systems it uses. In fact, a companys entire ecosystem should be taken into account when addressing reconciliation issues, for example: the positioning of its offer; its customers expectations, behaviour and payment habits; the regions and local markets in which it operates and/or sells; its marketing strategy; all its stakeholders; and much more. Above all, whether a company operates in a B2C or a B2B environment will strongly impact how it addresses reconciliation.

    Yet, whatever the nature of a companys business, it appears that reconciliation demands a customised approach, and there is no book of law on how to improve the process. In addition, although IT departments have been gaining ground as key players to enhance reconciliation, treasurers are still the ones who hold the key to success. The reason for this is simple: where cash is king, data (and this encompasses quality, reliability and timeliness) is queen.

    BIG CHALLENGES, HIGH STAKESTo understand why reconciliation is so critical, lets quickly go back to some basics. Reconciliation is

    a key process for tracking and checking that the amounts on the bank statement are aligned with the amounts from the companys general ledger. A robust reconciliation process improves the accuracy of the financial reporting and allows the financial department to publish accurate reports. It also impacts a companys internal control over cash, and therefore its ability to make critical decisions, seize opportunities and ultimately grow. Finally, faster and better reconciliation enables corporates to improve their working capital, for example by optimising their DSO (Day Sales Outstanding). Its no wonder that reconciliation ranks so high in CFOs and treasurers agendas.

    SEPA, A PIONEERING ROLETo improve reconciliation, standardisation generally comes as a core requirement. Prior to SEPA, many banks and clearing systems would overwrite or truncate payment remittance information, which made it necessary to align the reconciliation rules with each bank and each country individually, which resulted in a more complex process.

    But SEPA has improved this by setting up a framework for a standardised payment and collection environment. In particular, the new European regulation introduced the obligation to communicate critical information alongside the payment chain, i.e. end-to-end from the ultimate payer to the ultimate beneficiary. By enabling the automated reconciliation of payments, this SEPA-related feature has enabled a key move towards standardisation.

    Is the XML format richer and therefore capable of contributing to a more efficient reconciliation? We believe so, but it will take time to settle in.

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  • feeding the various fields -however structured they are- may increase the complexity of the integration and the reconciliation processes. Lets take the example of a business code that would identify an operation (SCT, SDD, cross-border credit transfer, cheques). If for the same typology of operation it varies from one country to another, then it will bring extra complexity and the rules of corporate ERPs will have to adapt accordingly.

    Another aspect of this is that the heterogeneity of corporate systems or the discrepancies in the versions used are often the reason why non-standard formats are chosen in the first place. The ability of a bank to customise, enrich and eventually adjust to a companys specific environment and challenges can be a tremendous time saver during the implementation phase.

    INNOVATION VS. CONSERVATISMThere is no need to oppose innovation and conservatism when it comes to reconciliation. Whatever the challenges, the future holds an abundance of promises as new added-value services and innovative initiatives based on a new generation of standards will bring an unparalleled level of automatic reconciliation in the near future. In the meantime, lets be pragmatic and adapt solutions to corporates specific needs and constraints, but also to what the market can concretely offer here and now.

    David Chatelet - BNP Paribas Head of e-banking Client Integration

    MEANWHILE, ON THE FORMAT FRONTThe implementation of SEPA has created a new deal for exchanges based on the XML standard. Yet, it takes time for any revolution to sink in, and the same goes for formats: the use of XML is mandatory for SEPA Credit Transfers in corporate to bank space and is strongly recommended in bank-to-corporate exchanges, with the objective to correctly interpret and account for flows like SDDs R-transactions. Yet, there has been no big bang. It would be unrealistic to believe that either domestic formats of reporting like French CFONB 120, Italian CBI RH or Belgian CODA, or international formats like MT940 can be overtaken by the XML format overnight.

    Remember that such legacy formats are linked to how corporates are organised, their needs and the potential of their market. Today, a corporate operating mainly in a domestic market can still leverage the potential of a legacy format, as it is often much richer for reconciliation purposes. And a corporate that relies on a centralised treasury organisation is better off using one single format which could be XML.

    But then, what does this mean from a market standpoint? Financial players are beginning to broaden their offering of the XML-based reporting format, yet it is still not mature enough and it is bound to significantly evolve as time goes on. Experts tend to think that any version under 3 is not mature and sustainable enough to be worth the trouble.

    Is the XML format richer and therefore capable of contributing to a more efficient reconciliation? We believe so, but here again, it will take time to settle in. The majority of banking players are well aware of the added-value brought by the XML format, but it still requires major changes to their accountancy systems and this cannot be done overnight. Considering this, the Global SWIFT MT940 is likely to be around for quite a while.

    STANDARDISATION IS NO PANACEAIt is right in front of us: standardisation will not fit all configurations. Heterogeneity in system maturity, historical implementation and choices will continue to create out of the box cases. So what should corporates be particularly aware of? Firstly, a standard format does not mean that the whole process is standardised. The reason for this is that the inconsistency of data

    Digital Bank & Reporting

  • Just like data, risk does seem to be everywhere these days. In the world of cash management, it is multifaceted, encompassing counterparty, fraud, and reputation.

    As security systems get smarter and more efficient, so does the fraud. Social engineering, one of the latest developments in the field of fraud, uses psychological manipulation to gather information and/or access data systems, and so far, it has been quite successful.

    Yet, despite the omnipresence of risk, cash flows are more secure than ever. In the wake of globalisation that translates into multiple entities, production sites, invoices, orders and wages, corporates are betting on a centralised treasury organisation to improve visibility, efficiency and security.

    By bringing more control and visibility, a centralised process is in essence, considerably safer. From that perspective, SWIFTNet provides a safe, harmonised and centralised environment (see box) that meets corporates needs for safer cash management processes.

    WITH SWIFTNET, MULTIPLE BECOMES ONEIn a globalised and demanding environment, corporate treasurers look at harmonisation and centralisation as key drivers for more efficiency across the board. Yet, they must handle a wide scope of banking formats, interfaces, e-banking platforms and communication standards, with higher costs and risks as a result. In the Eurozone, SEPA is bringing consistency, but outside, corporate treasurers are faced with the challenge of heterogeneity. There is no doubt that a lack of standardisation means complexity, higher costs and increased risks.

    By allowing a single standard channel for reliable and secure exchanges between corporates and their banks worldwide, SWIFTNet provides answers. Addressing large global organisations or mid-caps, it is particularly suited to those equipped with a central platform or for building a payment factory. The cornerstone of a centralisation project in the context of multiple banking relationships, SWIFTNet streamlines the communication process between corporates and their banks, wherever they are based.

    SWIFTNet provides a broad scope of answers within and outside the working capital field, as it can be used to dematerialise all types of bank-related operations, like FX deals confirmations, trade services (import/export letter for credit, guarantees) and EBAMs to come.

    Being the #1 SWIFTNet bank (400 corporates out of the 1,200 that are connected to SWIFTNet are clients of BNP Paribas) puts our Bank in a pole position to respond to corporates needs for seamless integration of their ERPs.

    SMART FRAUDSYSTEMS SMART

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  • Data is massive. Data is critical. Data is everywhere and it travels fast. Data is risky. Welcome to the 21st century, an era where multiple is the standard and complexity its corollary.

    INTEGRATION COMPLEXITY MADE SAFE AND SIMPLE

    How big is data? According to the IDC iView, Big Data, Bigger Digital Shadows, and Biggest Growth in the Far East, (December 2012) from 2005 to 2020 (sponsored by EMC), the digital universe will grow by a factor of 300; from 130 exabytes to 40,000 exabytes, or 40 trillion gigabytes (more than 5,200 gigabytes for every man, woman, and child in 2020). From now until 2020, the digital universe will just about double every two years.

    Working capital management is right at the heart of these challenges. The good news is; some banks have innovative, safe and efficient integration solutions.

    E-BANKING ACROSS THE WORLDAmazing technology... It has transformed our lives and become indispensable in nearly all areas of the economy. In the financial world, digital is the new name of the game; yet e-banking comes with a number of challenges, as systems transport critical data like wages and payments sometimes to the remotest areas of the globe.

    THE HOW AND THE WHATBeing a global organisation means having large amounts of data travelling worldwide through many separate feeds. But how we do communicate (channels, protocols,

    standards) and what we actually communicate (what we need; what we want; and what we must provide) is a twofold question that addresses most organisations- and more particularly those that are expanding internationally.

    KEY FIGURE

    Digital Bank & Reporting

  • A BROADER OUTLOOK AT RISKA massive amount of data travelling across the globe demands a broader, more optimised risk prevention policy. The objective is to ensure that cash flows are safe and that data is delivered when, where and as needed (i.e. in the right format).

    Visibility, being treasurers core concern, can only be achieved through a digital mechanism linking existing ERPs to the banks systems. Integration solutions do exist, and in this field BNP Paribas provides the most innovative, adaptable and efficient responses to the needs of global corporates (see box green).

    PLUG & PLAY SOLUTIONSCentralisation calls for integration, and there again corporates expect innovation. They demand plug & play systems just like the ones we use

    every day at work and at home. They want return on their IT investments, which are generally quite significant. They expect their bank(s) to provide a smart solution that can easily plug into their existing setup. They need integration to make everything consistent, but they want it to be straight, simple and cost-effective. Now, does that sound like a walk in the park? The good news is: BNP Paribas is up to the challenge.

    Connexis Cash provides complete visibility and control over accounts worldwide and a full range of domestic and international cash services. It also gives access to BNP Paribas accounts and third-party banks information. Download our Connexis brochure An ergonomic, real-time and secure e-banking system.

    At BNP Paribas, we have our clients at heart: we understand their treasury processes; but we also understand their business. To allow them to take advantage of the best e-banking functionalities, we have developed an SAP-compatible ISO 20022 XML adaptor. In addition to state-of-the-art digital technology, we rely on chosen partnerships to design tailor-made solutions. By providing the most adapted solutions to integrate our banking system to our clients existing treasury system, we help corporates make the best out of their existing equipment and investment.

    BNP PARIBAS RESPONSE: INNOVATION AND ADAPTABILITY

    CONNEXIS: AN ACCELERATOR FOR LIQUIDITY MANAGEMENT STRATEGIES

    Marie-Laurence Faure - BNP Paribas Head of e-banking product and marketing 17

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  • XMLTHE DISCRETE GENIE IN A BOTTLE

    This article goes deep into the roots of XML and unveils its potential as a universal -yet not hegemonic- standard.

    While technologies have been a powerful focus of attention for years, the tide is slightly turning as recent studies show a shift of focus away from the world favourite back-office genie. The shift is not about technology itself: what users want is not only to understand what technology is made of, but mainly what it promises.

    This also goes for XML, a (r)evolutionary standard now behind many cash management systems, with its full power still to be unleashed. The thing about XML is that although it is pretty much everywhere, transforming treasurers and accountants lives, we simply cannot see it. It is time to shed some light

    XML IN THE TREASURY WORLDIn the world of cash management, the Extensible Markup Language (XML) is a universal standard (ISO 20022) that makes it possible to exchange payments/collections/EBAM/billing/reporting files from bank to bank or from bank to corporate (and reversely). In Europe,

    it is now mandatory under the SEPA scheme to initiate SEPA credit transfers or direct debits.

    The XML format sets rules (known as XSD) regarding what can and cannot be entered in the different fields (for example, no word should be entered in a date field). Used for different payment methods or reporting services, XML translates messages like pain001 for credit transfers, pain008 for direct debits, camt053 for the end-of-day account statement, etc.

    SEARCHING FOR THE GRAILIn addition to being reliable, easy to implement and cost-effective, XML responds to a widespread quest among corporates: they are all searching for the grail, in other words STR (Straight Through Reconciliation). From that perspective, there is no doubt that XML will bring tremendous value to accountants as it is a richer and more flexible format, progressively adopted by ERP vendors. However, from the treasurers standpoint it is less relevant, as their grail is not STR but rather RTV (Real Time Visibility) on their cash position, and in that field, XML may not bring much additional value compared to the existing formats.

    Everything you always wanted to know about XML and how it supports more treasury and accounting efficiency...

    Digital Bank & Reporting

  • Counting BNP Paribas as one of its most active members, the CGI (Common Global Implementation) initiative acts as XMLs implementation guidelines governing body. Its core objective is to promote and simplify the implementation of ISO 20022 as the XML standard used between corporates and banks. Key topics are addressed as part of several dedicated CGI workgroups, among which electronic Bank Account Management (eBAM) or Bank Service Billing (BSB). Means of payment or reporting are one of the fields for which CGI has already provided extensive specifications. All in all, it looks like everything is in place to allow for a wider acceptance of XML.

    DIVERSITY WILL REMAIN THE RULEAn ISO standard (ISO 20022), XML was originally designed to replace other legacy or proprietary formats like EDIFACT, Idoc, CFONB, BACS, CODA, etc. Driven by SEPA and the boom of payment factories in Europe, and in the wake of the advances that XML should be bringing to accounting reconciliation, the format is admitted-ly set to have a bright future not only in Europe but also across the world.

    However promising, the chronicle of this announced success should not hide the fact that XML will not replace all other formats. Indeed, some of them do and will continue to respond to the needs of corporates like for example MT101 for unitary / high value payments or domestic formats used in non-EURO countries, or else local end-of-day accounts statement formats that are more adapted to local solutions. In addition, not all corporates have streamlined and/or standardised their processes yet, and unless it is mandatory to use XML for SCT and SDD, they will hold on to existing formats for other means of payment. Last but not least, standards like MT940 will continue to be used as they are already perfectly integrated to all TMS and provide all the necessary data.

    The good point is that XML is probably the standard of the future, at the same time driven by accounting departments aiming to improve their reconciliation process and capable of coexisting with other legacy formats. So in this field, like in many others we know, diversity is once again the name of the game. Concretely, this means that corporate treasurers will remain in control of setting the right pace for change, taking into account the big picture that they are in pole position to embrace.

    CGI: XMLS GOVERNING BUDDY

    Stphanie Niemi - BNP Paribas Product Manager Global Channels 19

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  • 1 Within the Shanghai free trade zoneCorporates assigning an entity incorporated in the Shanghai Free Trade Zone (SFTZ) as their RMB pool header will get support from the Peoples Bank of China (PBOC). Concretely, the PBOC facilitates the implementation of an international liquidity structure by:

    Not requiring pre-approval. Not applying any quota to overseas

    lending and borrowing funding, as long as the liquidity in the pool comes from daily operations and

    capital investment. On the other hand, funding from external financing, shareholder loans and bilateral entrusted loans are not allowed in the pool.

    To achieve the optimal interest rate setting in the China mainland side of the pool, corporates have two options:

    They can apply their internal fixed rates, benchmarked to the PBOCs official rates for both their domestic and offshore intercompany lending. BNP Paribas provides an alternative

    that is only available in China:

    the Optimal Internal Rate Scheme (OIRS) solution, a fully tax-compliant solution and an automatic calculation of arms length inter-company interest rates. The OIRS guarantees the most appropriate entrusted loan arrangement and fair-treatment of the benefit/cost allocation amongst all pool participants.

    For the SFTZ as well as for the overseas part of the pool, corporates can apply their internal fixed rates as long as they respect the arms length principle for internal transfer pricing purposes.

    INTERNATIONAL CASH POOLING IN CHINA:TO JOIN THE POOL, FOLLOW THE RULES

    RMB rules change fast and it requires hands-on expertise and thorough knowledge to tailor end-to-end RMB cash pooling solutions. Practically speaking, this is what corporates should be aware of today.

    Optimising Liquidity

  • 2 Outside the Shanghai free trade zoneOn the 4th of November 2014, the PBOC officially released a set of rules applicable to nationwide RMB cross-border pooling. In a nutshell, this is what corporates that seek to set up RMB cash pooling in mainland China should be aware of.

    The PBOC Circular N 324 states that only operational and capital investment funds are allowed in the cash pool, and determines how the inbound net flows should be capped (no quotas on outbound flows).

    To join the pool, the participating entities need to abide by the following requirements:

    The previous years aggregated operating revenue of all the onshore member entities should be RMB 5bn. The previous years aggregated

    operating revenue of all the offshore member entities should be RMB 1bn. All member entities should be in

    operation for more than 3 years.

    Entities operating as local government financial vehicles or those in the real estate industry cannot join the cash pool. The

    same applies to entities included in the PBOCs key supervision list of exporting enterprises settling in RMB. Corporates in the SFTZ (Shanghai Free Trade Zone) can either opt for the new nationwide regulations or for the SFTZs. However, they should choose carefully as their decision is unalterable.

    On the 12th of December 2014, the Chinese State Council finally approved the establishment of free trade zones in Tianjin, Fujian and Guangdong as well as the extension of the SFTZ about a year after its opening. 21

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  • What are your options when youre looking to maximise yield in

    this nuanced and delicate ecosystem?

    YIELD UNDER STRAIN IN ALOW INTEREST

    ENVIRONMENT:STRIKING THE RIGHT NOTE

    Optimising Liquidity

  • PULLING OUT ALL THE STOPS TO MANAGE YIELDAs businesses emerge, eyes blinking and bleary, into the hazy sunlight of the new normal of low interest rates, it can be tempting for CFOs and treasurers to pull out all the stops to manage liquidity. But, like an organist playing a Bach Toccata, how can we tell which stops will set the right tone? What can be achieved? Its unknown territory for many, scary for some, but wiser heads will grasp whatever opportunities are available.

    RE-FINANCE BUT WHAT ELSE?These are indeed challenging times, with interest rates going south, and seemingly set to stay there for the foreseeable future. Its time to re-finance those hefty loans, yes, but what else? You could just hold on to your cash when returns can be so limited. After all, received wisdom is that the bottom line is holding on to the principal. But putting all your money in a shoe-box under the bed and sitting on your hands is probably not a recipe for success.

    ECONOMIC TEMPERATUREEurozone interest rates are being held at the record low of 0.05%, where they have been since September 2014. Its economy slipped deeper into deflation in early 2015 as the economic temperature fell below zero, having reached an annual figure of -0.2% by the end of 2014 according to the European statistics office Eurostat.

    The negative numbers are skewed by lower oil prices, it has to be said, but indicators elsewhere follow a similar theme: factory production in China, as in Europe, is flat-lining, while there are signs that US recovery is faltering, making for jittery markets worldwide.

    FRAGILE CONFIDENCEThe European Central Banks injection of more than a trillion Euros into financial markets will provide a welcome boost but, if confidence remains stubbornly fragile, the danger is that growth

    will stall as businesses and consumers shut their wallets and wait for prices to drop.

    So, youre the treasurer. What are your options when youre looking to maximise yield in this nuanced and delicate ecosystem?

    THE 7-ITEM SHOPPING LIST Take stock. Its time for a review of

    working capital, cash flow forecasting and risk policies. Understand your cash needs, then determine the right level of liquidity for your company. Its just good housekeeping, before you can think about strategy.

    Do some planning. Figuring out appropriate investment guidelines to meet the new challenges is a top priority, focusing on whats available, how safe it is and yes, yield! Look around for diversified sources of contingency funding too. Sharpening the tools in your financial toolbox is not a metaphor for thumb-twiddling.

    Stay at home! Now could be a good time to invest nearer to home, in your own company infrastructure. With low yield out there in the rest of the world, there must be jobs around the house that could repay a little attention. Go to the pool! If yield is elusive,

    its time to pool your resources, and even out the lumps and bumps in your global business. If your company coffers are awash with cash looking for a home, make sure it gets to where it should be in your organisation.

    Talk to the bankers. Banks and asset managers are adapting too. Theres a product out there that will get you a few extra basis points, and new forms of MMFs are emerging to meet the new conditions. And ask about a fidelity card!

    Keep an eye on the regulators. As a result of Basel III, the landscape of yields for different types of deposits is changing. By casting their cash into the right liquidity bucket, treasurers can manage their yields more effectively.

    Play the Cheap Loan card. Its not something that will bring additional yield of course, but theres always the option of taking advantage of cheaper loans in this low interest environment.

    A NEW KIND OF AGILITYManaging liquidity and making the most of opportunities to maximise yield in this Brave New World of single-figure basis points can be as tricky as playing a Bach Fantasia & Fugue. Pulling out all the stops can work but, in the low yield post-noughties, finance departments have to master a new kind of economic agility.

    Nick Haste - BNP Paribas

    Head of Corporate Deposit Line

    In the low yield postnoughties, finance departments have to master a new kind of economic agility.

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  • ONE DEDICATED BANK ACCOUNT PER CLIENTWith as many bank accounts in IBAN format as they have clients, corporates can now implement a true and unique end-to-end reference for each of their clients. This new capability brought by Virtual Accounts is fully transparent for the clients (debtors), the banks and the clearing houses, and it also allows a 100% success rate of automated payer identification.

    As an example, a company with a global turnover of 1 billion EUR has an outstanding position in its accounts receivable of 220 million EUR, leading to a DSO of 79 days.

    SEPA has contributed towards the harmonisation and the standardisation of formats. Corporates are now in a position to improve their collections through automation and accelerate the centralisation of their cash. However, some challenges are still keeping them from taking full advantage of SEPA, and improving their order-to-cash cycle as a result.

    To positively impact upon the Days Sales Outstanding (DSO), and consequently on the whole working capital

    To lower processing costs due to the reduction of manually intensive tasks associated To create better credit risk

    management

    Even though SEPA has led to the simplification of the collection process for electronic instruments and opened new doors for data exchange, some issues still keep corporates from achieving a high rate of Straight Through Reconciliation (STR), particularly for incoming credit transfers.

    If it is a general practice for managers to be responsible for the profitability of their company, then they are rarely incentivised on the level of working capital. The impact of bills reconciliation on the whole order-to-cash cycle is often under-estimated, and cash is not seen as a strategic resource for success.

    Yet, in a financial environment where access to cash and liquidity has been drastically reduced in the last few years, and probably will be in the next coming years, such consideration must be reviewed in order to re-position reconciliation at the heart of the financial processes with the following objectives:

    Managing Collections

  • HOW VIRTUAL ACCOUNTS RESPOND TO YOUR NEW COLLECTION CHALLENGES

    The positive impact of improving the reconciliation by 2 days can free up almost 10 million EUR in cash.

    CENTRALISATION: THE NEW LEITMOTIVAs corporates are now SEPA compliant, they are in position to benefit from the new European format to centralise their payment and collection organisations. One area where centralisation has been facilitated by SEPA relates to bank account reduction; fewer bank accounts means lower account administration costs - multinationals can use over one hundred full time equivalents just to open, close and update account signatories.

    More importantly, having fewer accounts also facilitates internal control and oversight.

    The ultimate centralisation model for collection accounts strives to limit the number of accounts to one per currency, an account that would be used for collections for multiple entities. This model, sometimes known as the Collections on Behalf of model currently raises a number of regulatory, tax and operational challenges, one of these being the identification of the final beneficiary of funds received on the central account.

    In summary, the Virtual Account provides a reliable technical

    response to two main challenges: automatic identification of the payer and identification of the final beneficiary for direct allocation of funds, and a solution that brings corporates one step closer to a more efficient reconciliation process through customisation of the number of virtual accounts.

    Guillaume Flies - BNP Paribas Head of Collections 25

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  • IMPROVING THECOLLECTIONPROCESS TO BETTER MANAGE TREASURY

    From carefully choosing your collection instrument to integrating reconciliation (and increasing your collection rate as a result), there is only one step to SEPA 2.0, our favourite master key to continuous improvement in treasury management. Our step-by-step guide provides the information you need to make the very best of SEPA and enables you to use it as a springboard for a more efficient future.

    STEP 1: CHOOSE THE RIGHT COLLECTION INSTRUMENTChoosing the right collection instrument is the first step to optimising your treasury management process. If you have implemented SEPA, you are one step ahead as you have already addressed local specifications and format related issues. If you are a global player, it did not come easily. The banking partner you chose had to offer a whole range of variants to match the requirements of your local customers. Even if your headquarters are outside the SEPA zone, you had to be SEPA compliant to carry out your transactions in Euro.

    Maybe you chose a conversion solution and did not migrate yet? Clearly, migrating to SEPA will bring multiple benefits.

    What we offerBNP Paribas built up a broad expertise as the #1 cash management bank in Europe, and as a global player, we offer the whole scope of SEPA standards and variants. Our Bank boasts a track record of 57 countries with direct cash management coverage and over 200 live payment factories.

    A three steps, holistic approach to achieving more efficiency

    Managing Collections

  • STEP 2: MAKE SURE YOU INTEGRATE RECONCILIATIONReconciliation comes with a cost: if you can monitor and rapidly detect which clients or transactions are at risk (the 3 Rs: rejects, returns, refunds), you can significantly increase your collection rate. Thanks to our enriched SEPA reporting tool, your remittance information is readily available. With SEPA we provide relevant information that goes further than legacy reporting tools (longer End2End reference, remittance information). So you dont get a flat file (MT9XX), but a tagged CAMTXX report, which gives you fast access to the data you really need. And in the end, a relevant payment status report (PSR) means an easier reconciliation process.

    What we offerWhen we say local footprint, we mean a deep knowledge and understanding of local cultures, regulation and practices. And because we also are a true global player, we offer a broad set of local and global reporting tools. Above all, we provide the best experts to help devise solutions that are adapted to your real needs.

    STEP 3: OPTIMISE YOUR PROCESSES WITH SEPA 2.0Step 1 was mandatory; step 2 triggered some change and led you

    to question or even reconsider your reconciliation process; but step 3 actually offers real benefits. Its code name is SEPA 2.0. Of course, you will always want to rationalise your bank accounts; but maybe youre considering optimising and harmonising your processes and organisation by centralising your treasury activities or reviewing your mandate management systems; or else you want to set up a collection factory with identical processes everywhere you operate.

    What we offerBNP Paribas offers expert advice to harmonise your processes. We know that treasurers are under pressure to deliver more for less. We know that your performance impacts your organisation. And these days, it is more than ever a priority.

    OPTIMISE OUTSTANDING DAYS SALES (OSP) AND CIRCULATING CAPITALAfter step 3, you might need to review your existing collection instruments again, a challenging and demanding task. But it will help you to optimise your Outstanding Days Sales (OSP) and circulating capital.

    Francis de Roeck - BNP Paribas Head of SEPA Payments and Collections

    Higher client satisfaction Reduced operational and

    processing costs Better credit risk management Lower Day Sales Outstanding A positive impact on Working

    Capital

    THE IMPACT OF WELL-PERFORMED RECONCILIATION

    27

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  • WH

    Y CO

    LLEC

    TION

    S AR

    E TH

    E TA

    LK O

    F TH

    E TO

    WN

    Managing Collections

  • Boosting collections efficiency has nothing to do with reaching the finish line and everything to do with continuous improvement. The reason for this is that it is a fast-paced journey in a complex, globalised world. The stakes are high. And the old adage a sale is a sale when it is paid for has never sounded so true, as organisations now operate in a complex, uncertain and risky post-crisis environment.

    Meanwhile, the options brought by technology have increased tenfold, so those who do not get sufficient expert advice might find that making choices is a challenging puzzle. Taking a closer look at collections, its easy to see why many players in the treasury field -and more largely so in the corporate world- might share such a view.

    UNDERSTANDING TREASURERS PRIORITIESUnderstanding why collections are critical demands that we understand the challenges of treasurers, which are threefold: collect & account; report & reconcile; and if relevant, recover.

    In a nutshell, todays corporates must be able to collect everywhere they do business i.e. have the capacity to get paid on time, at the right place and with optimal means of collection. In a globalised world, however, this is very complex, partly because of the broadened geographical scope of corporates of all sizes. Along with this comes the rising importance of local knowledgeregulation, practise, culture, formats All in all, doing business abroad brings formidable opportunities, but handling complexity is the price to pay.

    Another objective that corporates aim to achieve is to collect their ARs using the scope of existing local channels and formats so that their clients can pay with their preferred instruments. Last but not least, todays corporates also need collection solutions in the countries where they do business, without being physically present.

    IMPROVING COLLECTION IS MANAGING RISKOnce their collection process is set-up, corporates will look at improving their reporting and reconciliation processes in order to have more visibility on their liquidity. Effective reconciliation is critical, as it can potentially undermine credit management and jeopardise cash flow forecasting with a direct impact on the DSO (days sales outstanding). Ultimately, poor reconciliation will impact on client relationships, and it can severely and rapidly- damage a brands reputation, as communication is eased by the widespread use of social networks.

    Reversely, a streamlined collection process will translate into a shortened DSO and make cash available faster as a result. Going one step further, centralising collections considerably accelerates the whole collection process, including the reconciliation phase, in addition to improving operational efficiency and reducing costs. Among the other benefits of centralised collections are higher transparency and an improved reporting of transactions. However, to achieve all this requires expert advice based on a thorough knowledge of local payment practises.

    REVISITING THE COLLECTIONS APPROACHUnder the increased pressure to free working capital, and due to initiatives like SEPA (Single Euro Payment Area) and the Payment Services Directive (PSD) framework, corporates operating outside their domestic market tend to take a fresh look at their collections and receivables processes. The key words of their approach are simplification, centralisation and standardisation.

    Their aim is to better manage their costs and risks, but this can only be achieved with experts help to design and implement optimal processes and a renewed collection set-up that is adapted to their strategy and profile. Whatever the circumstances, tangible and proven solutions to better, safer and faster collections are now available.

    There is no mystery as to why collections are such a highly sensitive area. When they are not optimally managed, they can translate into significant value being trapped. And while boosting collections efficiency is every treasurers dream, going from dream to reality might be like opening Pandoras Box. The stakes might be high, but fortunately there are proven solutions to collect better, safer and faster.

    29

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  • QUESTIONING THE DOGMA OF CENTRALISATION

    Managing Collections

  • How quickly corporates should jump on the bandwagon of centralisation is an open debate. After years of unquestioned dogma, it turns out that full centralisation is no panacea after all. Moving the cursor to the right place depends on where corporates come from, how they operate and where theyre heading.

    There have always been trendsetters and trend followers. But while the former are generally envied, the latter are the winners in the end because learning from the others mistakes allows them to design more efficient strategies. And this is precisely what corporates aiming to centralise their treasury processes should do.

    IS CENTRALISATION A ROYAL PATH TO SUCCESS?For some years now, standardisation has been put forward as the royal path for corporates expanding abroad. No wonder so many of them have followed suit: by channelling cash to a header account, centralisation provides an overview of cash flows, enhances visibility and control and allows for economies of scale. As the backbone of centralisation, standardisation provides consistent transaction, communication and connectivity standards. Both are intertwined as a result.

    WHY CORPORATES CENTRALISECentralisation and standardisation respond to endogenous and exogenous factors. Both come at a time when corporates are challenged to cut down on costs, make the best of their liquidity and sharpen their financial assets. In addition, regulations like SEPA and EMIR come as powerful facilitators. Technology plays a significant part too, with innovation broadening the scope of whats possible -for example, setting up payment or even collection factories.

    LOCAL CHALLENGES REMAINWhereas SEPA gave a strong boost to standardisation and centralisation in Europe, many local discrepancies remain. Outside the old continent, homogeneity is far from being a reality. Companies operating in high potential areas like South-Eastern Asia must cope with different regulations, tax regimes and cultural approaches. Yet, they are precisely the organisations with the strongest need for centralisation, due to a more complex environment that creates specific challenges for international payments and collections.

    In a nutshell, the overall pressure of the environment, evolving regulations and the increased pressure on treasurers to take extra care of their working capital demand an enhanced cash management approach, and standardisation and centralisation come as core solutions. However, corporates must design a customised approach and set their own scope and pace. In other words, it is in their best interest to apply the old know yourself principle.

    Filipe Simao - BNP Paribas Head of Advisory & Strategic Marketing

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  • IN A CHANGING WORLD,GLOBAL KNOWLEDGE AND LOCAL EXPERTISE ARE WITHIN YOUR REACH.

    ATLAS : YOUR TRANSACTION BANKING ADVISORBank across the globe and flnd your way through the maze of international treasury management, trade flnance practices and local regulations. Our Atlas guide covers 60 countries and provides a host of value-added content from economic summaries to international trade requirements and regulatory data.

    www.cashmanagement.bnpparibas.com/atlas

  • ASIAA FAR FROM HARMONIOUS PAYMENTS MARKET

    Looking east, an international sales director might picture the land of milk and honey, while a treasury executive will see a promising, yet complex patchwork. While the two will marvel at growth drawing near, the cash expert will soon endure the strains of a heterogeneous market. This article explores the multiple challenges of payments in Asia.

    Because of Asias outstanding growth and potential, corporates are eager to adapt to local requirements. To do this, they must know what is expected of them. Yet this is far from simple, as there is no such thing as a homogeneous payment market in Asia.

    Instead, what we find is a mix of regulated and restricted countries, in addition to a select few countries operating much like in the west. As a result, a French treasurer setting out to conquer Asia faces a serious challenge. While the sales or operations managers can foresee a consistent development of their

    activity across the continent, he or she is confronted with a veritable patchwork, with almost as many currencies and rules as languages.

    To make things more complex, regulations may change rapidly in Asia, with some countries facing political instability. Remaining alert is essential take China, for instance, where key developments to come will change the local clearing system (CNAPS2).

    NON-CONVERTIBLE CURRENCIES: GO LOCAL! Let us first focus on countries with non-convertible currencies, such as Vietnam or South Korea. Sending funds and changing them into local currency is feasible if the local requirements are respected. In practice, most businesses will rely on a well-established bank to transfer their funds to closed markets. But then again, if the customer experience is relatively simple, processing the transfers is more complex. It is likely that the

    bank will use a strong currency like the Euro of the US dollar to make a payment from Germany to a local Vietnamese or South Korean bank.

    As a next step, the local bank sends the payment in a local currency to the beneficiarys bank. Solid expertise is required to manage the foreign exchange risk, but it also requires a holistic operational approach to comply with the local rules and monitor the entire payment chain. This can be time-consuming, as it takes up to five to seven days for the funds to reach the beneficiary. In the case of recurring operations, however, corporates can plan ahead and optimise the time spent.

    SEMI-REGULATED COUNTRIES: SIMPLER, BUT NOT SIMPLE The second challenge treasurers face is transferring funds in a local currency to semi-regulated countries, such as India, China, or Thailand (typically, the larger countries). 33

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  • In highly regulated markets, it takes up to seven days for funds to reach their beneficiary.

    In semi-regulated countries, corporates tend to settle commercial transactions in local currency or structurally finance their activities in situ (locally).

    There is only one way to translate a Chinese character into Latin, but many ways to translate a Latin character into Chinese.

    GOOD TO KNOW

    Although strict conditions apply, these markets offer a more liquid access to currency. Although the Indian rupee is partially convertible, (it can be exchanged under strict conditions), making a payment in India remains complex. Transfers to India are subject to challenging procedures, and failure to comply can lead to payments being stopped or returned.

    In India, a payment order must specify if the settlement is made as a down payment or for the total amount of a given transaction. Some banks require the telephone numbers of the beneficiary for any transfer, so European businesses have no choice but adapt their procedures to meet Indian requirements.

    LIMITED OPTIONS TO REPATRIATE FUNDS The third challenge corporates face is repatriating funds. Businesses operating locally may find their options are a bit limited. For example, in Vietnam, it is difficult to repatriate funds to Italy in Euros or dollars, and it is impossible to do it in local currency since its non-convertible. Solutions do exist, but while some only bring a few restrictions, others lead to many.

    In moderately regulated markets, such as Thailand, domestic pooling is allowed, while cross-border activities are restricted due to the convertibility of the currency. In more heavily regulated markets, however, local solutions are the only available option and corporates must comply with very strict requirements.

    CONNECTING THE DOTS It might seem obvious, but it is best to rely on a well-established local

    bank. It is a challenge to balance the local regulatory and administrative requirements while ensuring the correct payment formats in the back office.

    BNP Paribas recently helped a corporate close an acquisition deal in China. The company needed special authorisations to conduct the operation, as it is under the responsibility of the Foreign Direct Investment (documentation from the Ministry of Commerce of the Peoples Republic of China, or MOFCOM). Additionally, the payment was very sensitive because it required three transfers in Renmimbi (RMB) to three different business owners. Such transactions are usually not authorised by the Peoples Bank of China and the SAFE (State Administration of Foreign Exchange). BNP Paribas had to set

    up very specific procedures to align the entire transaction process, from validation to clearing. The pressure was incredibly high, since the funds had to be available precisely when the agreement was to be signed.

    LOOKING LIKE EUROPEDeregulated countries, such as Japan, Australia, New Zealand, Singapore, and Hong Kong are much less of a challenge. Their payment systems are very similar to what we have in Europe, with free currencies and simple rules. In theses countries, corporates usually manage their foreign exchange risk directly and centrally, as it can be quite substantial.

    But even if the whole payment process is skilfully managed, Asia is not Europe. Transfers in Yen or Singaporean dollars to Europe are not subject to European rules, nor are they protected by Europes Payment Services Directive (PSD), as the regulation only covers operations carried out in European currencies within the European Economic Area. Additionally, the time required to complete an operation is not regulated, which means corporates might have to support extra costs as a result of extended value dates. Relying on a banking partner that closely monitors its correspondent banks is an asset.

    To be frank, we are still a long way from the single Asian payment market that international treasurers dream of. Despite the Hong Kong-based US dollar clearing system, the dollar is not king in Asia. Many would rather have the RMB as Asias reference currency, but the RMB is not quite there yet.

    Paying here & abroad

  • Wim Grosemans - BNP Paribas Head of International Payments product management

    Far from simple and homogeneous, Asia is a mix of regulated and restricted countries that make western treasurers face serious challenges.

    PLAYING BY THE RULESIf managing currencies in semi-regulated markets is easier than in restricted countries, businesses must ensure that they apply the highest operational standards to handle documentation and payment instructions. All the necessary data must have been provided and treasurers must follow the procedures throughout the whole payment process. For those who fail to comply, not only will their payment be blocked, but they will probably find that it is even more complicated to make another payment in the future.

    ONLY IN ASIA: THREE FAMOUS FRUSTRATIONS

    The time difference. As a German treasurer starts his day, most Asian offices are about to close up. It is too late to complete a payment on the same day, so unless there is some specific arrangement, most payments in Asia will be processed on the following day.

    The alphabet. Processing Kanji and other Asian scripts is tricky. Even the Cyrillic alphabet is a piece of cake compared to Chinese ideograms. Also, if a Chinese character can only be written in one phonetic way in Latin letters, one given Latin syllable

    can be written using a range of Chinese characters.

    Homonyms. Ensuring that a payment is made to the correct beneficiary can be especially challenging in Asia, simply because homonyms are very common.

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  • FINDING YOUR WAYIN THE PAYMENT FACTORY MAZE

    Payment factories are too often presented as a run-of-the-mill solution that all corporates wanting to steal the show should have long adopted. But more and more voices are raised to alert about the importance of combining cultural relevancy and progressive thinking in order to achieve maximum benefit and get tangible return on investment. When creating a payment factory, many aspects must be considered. By taking a close look, we can understand why the phenomenon is widespread amongst the larger global corporates but yet fails to convince some mid-caps and smaller organisations.

    NO UNIQUE PAYMENT FACTORY MODELExperts agree that there is no unique, standard payment factory model that would bring the same benefits to all organisations. On the contrary, adapting to the reality of each corporation - its culture, scope, organisation and business approach - is of essence when it comes to payment factories.

    The truth is that implementing a payment factory has more to do with managing corporate transformation than simply implementing a new set of operational treasury processes. To put it short, what resembles the centralisation of international cash flows is in reality a strategic business move that can potentially translate into a sharper competitive edge whose key word is lean. That is, provided it is managed to the highest standards in the first place.

    THREE KEY ASPECTS TO CENTRALISATIONBut how do we ensure that we do that? Lets look at the key aspects of setting up a payment factory that corporates should carefully look into before committing themselves, namely technology, people and bank accounts.

    Information systems are the very first expression of centralisation and corporates have been going that way ever since the trend emerged in the 90s. Since then, the pace of innovation has accelerated in an unprecedented

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  • level of expertise and in the level of service are amongst the corollaries of delocalising human resources, with a make-or-break moment as a result.

    Centralisin g bank accounts is the third key aspect to be considered, and as we write, it is a burning topic for corporates. Many organisations are looking to cut down on their bank accounts. To achieve this, they can either centralise their entities bank accounts in a single country or create a single bank account to make payments on behalf of all their subsidiaries (PoBo). The benefits are tangible as a smaller number of bank accounts translates into reduced administrative costs, bank fees and risks of fraud. From a technical standpoint, PoBo is made more accessible thanks to the ISO 20022 standard that supports the end-to-end processing of the final debtors identification. However, the current regulatory framework leaves room for interpretation and may require special attention locally. In addition, not all means of payment can be centralised which requires an

    in-depth reflection prior to making any decisions that will commit the organisation.

    ALL ABOUT CHANGE MANAGEMENTImplementing a payment factory demands a carefully considered change management strategy conducted by an expert -and multidisciplinary- task force. Communicating to all the internal stakeholders on why change is necessary, how the organisation wants to go about it and which overall benefits can be expected from it is a major key to success, as change is more likely to be embraced if it is understood. In the end, the organisations that have already centralised their payments agree that it is worth the effort: payment factories do contribute to a leaner modus operandi, with enhanced business performance, increased competitiveness and more agility as a result.

    manner, and what was impossible to contemplate yesterday is now feasible based on the use of standards like XML and platforms like SWIFTNet. Adding to these are other promising trends like cloud computing which has the potential to make a major difference. The world is moving faster than ever and it is hard to keep up. Yet in this wild swirl of change, some will make the right decisions based on expert advice and the sharing of the best practises.

    The human face of centralisation, people are -and rightly so- what the highest level of attention from corporates that aim to centralise their payments. Shared Service Centres (SSC) bring together operational teams at a domestic, regional or international level with the objective to control and streamline the payment process, with major economies of scale as one of their main benefits. But creating a support team that is geographically remote from a groups subsidiaries comes with a price: language barrier, time difference, discrepancies in the

    The world of payment factories is all but static. Quite the opposite, it shows a constant momentum that makes it difficult to keep up with change and innovation. And its variable-geometry semantics brings more complexity. Time to set the record straight and make sense of it all.

    Jan Dirk Van Beusekom - BNP Paribas Advisory & Strategic Marketing 37

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  • REMOTE & PROXIMITYMobile payments can be split into 2 categories: remote payments, which in the US account for 90% of the mobile payment business, and proximity payments that encompass near field communications and other technologies like mobile bar code transactions. While the former type of payment is supported by an increasing number of smartphones, the latter is a favourite ground for new business ideas. Indeed, in the field of proximity payments, major credit companies compete with younger brands, all striving to channel the huge revenue streams from bank accounts to cell phones, smart phones and tablets. As a result, innovation is bustling. A report from IDC Financial Insights predicts that the global value of

    So much innovation comes from America, that sometimes its hard to keep track. In recent history, brands like Apple or Google have paved the way to some life-transforming innovation. In 2015, Facebook will become nothing short of the most populated country in the world, and this is only the tip of a giant iceberg. So when it comes to the payments market -a major driver for economic growth and probably the biggest recent breakthrough in the mobile industry- we would expect America to be at the forefront.

    FACTS & FIGURESIn North America, over 40% of smartphone owners are aware that their phone can be used as a payment device at the point of sale,

    While mobile payments are booming in the B2C environment, why are American consumers so reluctant to engage?

    but, only 16% use it as such. In a healthy competitive environment where mobile payments are bound to expand, retailers are still yet to find the best way to convince their customers to join in.

    The prospects are promising. Between 2012 and 2017, the US mobile payments market is expected to rise from $12.8 billion to $90 billion. The Pew Research Centre estimates that 90% of North American adults have a cell phone and that 58% are smartphone owners. In addition, faster network speeds are making mobile broadband more available, thus supporting the growth of ownership and the multiple business developments that it engenders.

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  • proximity payments will reach $296 billion in 2017.

    REASSURANCE & REWARDSAccording to an Accenture study among North American consumers, persuading consumers to become regular users of mobile payments is the next critical step in order for the market to bloom. The study recommends that both users and non-users be addressed as part of incentive programmes that bring rewards and other value-added tools.

    Nevertheless, there are obstacles to an increased usage. Consumers are worried about security and data confidentiality. Nearly half of the non-users who responded to the Accenture study are concerned about security while 37% express worries

    about privacy. And 60% of mobile payments users said that being incentivised with instant coupons would lead them to make more mobile payments. In addition, one in five non-users polled said that they would expect special coupons or reward points stored on their phones, a dedicated line at retailers or priority customer service.

    In a nutshell, retailers have a great opportunity to increase their performance, provided that they incentivise their customers and

    OBSTACLES AND INCENTIVESTO MOBILE PAYMENTS IN THE US

    reassure non-users of the security measures in place for mobile payments and data protection. As for technology, it is already there to support a market breakthrough, and it is in constant evolution to provide both reassurance through enhanced security and data protection, as well as value-added services. So once all the components of the ecosystem are there, there will be no more reasons why US mobile payments should not thrive, as they do in other parts of the world.

    Further reading on LAtelier BNP Paribas website http://www.atelier.net/ 39

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  • It is all about understanding how treasurers think, where

    they come from and how they want to manage their FX exposure.

    Wim Grosemans - BNP Paribas Head of International Payments product management

    Our approach to cross-currency payments is to offer a convenient, flexible and transparent service. Adrian Brown - BNP Paribas Head of Commercialisation -

    FX + Fixed Income, Electronic Markets

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  • WHAT STRIKES YOU MOST WHEN IMPLEMENTING A CROSS-CURRENCY PAYMENT SOLUTION?WG: Flexibility is essential to designing a successful cross currency approach. Not all corporates benchmark in the same way provided they do at all. Some focus on automation and efficiency to ease the workload, so it is on us to integrate how we work to how they want to work. Others want more control over their cross currency transactions, so they expect more added-value services on the front end. As a leading bank, our powerful technological infrastructure means that we can meet these requirements, including the real-time monitoring of transactions and flows. AB: Also, whatever their profile, corporates are seeking more transparency on how we create and apply FX rates. Its not enough to simply disclose or negotiate a margin. Its equally important to be willing to discuss what rate that margin is applied to and how that can be benchmarked or verified. By discussing and demonstrating these openly, we ensure that our CCP offering meets these requirements. Technology is a powerful tool to make this possible.

    SO IT LOOKS LIKE CONVENIENCE, FLEXIBILITY AND TRANSPARENCY ARE THE WORDSAB: Absolutely, and both our own clients and the market research we have conducted confirm the importance of all three. Our approach to CCP is to offer a convenient, flexible and transparent service. This includes how corporates wish to submit payments, how we create and apply an FX rate, whether they wish to combine the payment and FX into one simple transaction or deal with them separately, and what level of transparency and auditability they require. WG: In the end, it is all about understanding how treasurers think, where they come from and how they want to manage their FX exposure. Based on that understanding and on our expertise, we provide fair and effective cross currency solutions to cater for a whole spectrum of corporate realities and strategies. And because continuous improvement is one of our drivers, we are already looking at further broadening our offer with more innovative, value-added services.

    As globalisation continues to drive the need for international payments, corporates are focusing on the underlying FX as well as the payment itself. Increasingly, they require their banks to offer fully integrated payment and FX platforms. BNP Paribas new cross-currency solution is designed to meet this requirement. A joint interview with Adrian Brown and Wim Grosemans.

    WHY AN INTEGRATED CROSS-CURRENCY PAYMENT OFFERING NOW?AB: This is a client-driven change. Weve responded to what our clients have told us. Corporates are becoming increasingly sophisticated and knowledgeable about the FX underlying cross-currency payments (CCP) and they now look at CCPs as both payments and FX transactions. They want the best of both worlds a platform and a service that offers both a high quality payment and FX experience. WG: In the Eurozone, SEPA is up-and-running, so corporates are ready to address new aspects of treasury optimisation. Cross-currency payments are non-SEPA, international payments that integrate an exchange of currency. And they are undeniably a focal point for c

    WHAT IS YOUR PROMISE TO THE MARKET?WG: Many corporates find that strictly separating the handling of their international payments and the embedded foreign exchange is not a winning strategy. Our commitment is to help them streamline their whole cross-currency payment process once and at fair prices, even if their FX exposure is not actively managed as part of a dedicated foreign exchange policy. AB: There are 3 key words to describe our CCP offering - convenient, flexible, and transparent. Our clients are under pressure to streamline and reduce their costs while remaining fully accountable, and we want to help them meet this challenge. The ability to reach the entire world through one single point that combines both payments and FX is fundamental.

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  • SHARED VIEWS

    Andrej AnkerstHead of Cash Management, BNP Paribas Germany & AustriaInternational clients look to leverage efficient processes and set ups. The German economy is very well inte-grated in international trade flows. With more than 1,200 hidden champions global leaders in their

    specific sectors German corporates are highly export oriented. For their corporate treasuries this means that they have to adapt to the different cultures around the world, and tackle the different local challenges country by country. At the same time they seek guidance locally on how to imple-ment efficient structures. So there is more to advising such corporates, who in Germany are spread very evenly across the entire country, than just being located nearby. The bank partner needs to know the German set ups and be knowledgeable internationally. In tandem with close cooperation, this can deliver very valuable ideas about how the clients local infrastructure can be efficiently leveraged to meet global challenges. Therefore, we have deve-loped solutions like Global EBICS that allow corporates to extend a German connectivity standard to various countries around the globe, and thus enable German corporates to roll out well-known solutions internationally.

    Ron OudshoornHead of Cash Management, BNP Paribas the NetherlandsWe can rely on a robust SEPA offering and exten-sive Liquidity Management solutions. Fuelled by an economic and tax environment that creates great opportunities for them to better manage their

    working capital, a number of Dutch based multinationals have already initiated treasury centralisation processes. To support companies that operate at home and abroad, we have a robust SEPA and International Payments offering and extensive liquidity management solutions. To cater for the expanding needs of growing corporates, BNP Paribas has set up one of its larger European cash management hubs in the Netherlands. For us in the Netherlands, being close to our clients is a prerequisite. Relying on our back-, middle- and front offices located in several Dutch cities, and drawing on the expertise of our Amsterdam based product and implementation teams, we use a customer centric approach to develop and maintain a close relationship with our clients. We implement specially designed solutions for cash management and international trade finance, whatever their needs or growth model.

    At BNP Paribas, transaction banking is about vision and commitment and, above all, relationships. Weve been supporting corporates for a long time, and our ambition is to continue to be your preferred transaction banking partner into the future.To us, proximity means being where you choose to operate, with the right solutions to best manage your liquidity, your working capital and your risks.

    A GLOBAL FOOTPRINT

    BNP Paribas has one of the biggest transaction banking footprints worldwide, covering 60 countries across the world. In addition to Europe, our home market, we have extensive reach in Asia, the Middle East and the Americas. In cash management, we have a community of 2,500 professionals serving 40,000 corporates worldwide.

    ACTING AS ONE BANK FOR CORPORATESTransaction banking is one of the cornerstones of BNP Paribas strategy. We act as one bank not only in Europe - our home market - but also in Asia, the Americas, Africa and the Middle East.

    About us

  • Suresh SubramanianHead of Trade & Treasury Solutions Americas, BNP ParibasWe are at your service to provide world class solutions both in the Americas and also seamlessly throughout our global footprint. The transaction banking business is a key

    area of investment for BNP Paribas in the Americas. We have full capabilities across the trade & supply chain, and in finance, cash management and liquidity, with experts on the ground across all these product areas. We not only take care of your regional needs, but also provide solutions that enable you to manage your global requirements efficiently. Our key investments in global reach and expertise are at your disposal to provide innovative solutions tai-lored to your specific circumstances. Our vision is to build upon our global position as a leading provider of trade and treasury solutions by supporting US-headquartered clients for their international needs, and also providing comprehensive US domestic services to international clients.

    Chye Kin WEEHead of Transaction Banking, BNP Paribas APACIn a changing environment, you can count on us to help you connect across borders. Asia Pacific markets are largely autonomous with diverse country regu-lations, banking landscapes and multiple emerging currencies, unlike Europe and the Americas with

    their standardised clearing platforms such as SEPA and CHIPs. Coupled with the changing environment after the financial crisis, the role of corporate treasurers has now evolved into a position of significant stature, with treasury mandates focused on achieving balance sheet objectives, and consequently more is demanded of transaction bankers like us. We have invested significantly in technologies and resources for our transaction banking business, to be able to offer flexibility, efficiency and visibility to the corporate treasurers of today. Our set up allows us to focus on product capabilities and quality of service, helping corporate treasurers to reduce the complexity of their processes and their intensive administrative efforts, thereby contributing to cost savings and value creation.

    BNP PARIBAS BUSINESS MODEL: ROBUST AND EFFECTIVEOur diversified business model has proved its effectiveness and demonstrated the robustness of our operating divisions in an unprecedented time of crisis. Our strategic plan for 2014 2016 builds on this momentum. It reconfirms our universal bank business model with three key pillars: retail, corporate and institutional banking, and investment solutions.

    Jean-Laurent Bonnaf, Chief Executive Officer

    KEY FIGURES ON BNP PARIBAS GROUP FOR 2014

    39.2 BILLION in revenues excluding exceptional items

    185,000 EMPLOYEES

    75 COUNTRIES

    157 MILLIONin net income, Group share

    A GOOD OPERATING PERFORMANCE FOR 2014

    7 BILLION Net income attributable to equity holders excluding one off items

    1.50 DIVIDEND PER SHARE

    A ROCK SOLID BALANCE SHEET FOR 2014

    FULLY LOADED BASEL 3 CET RATIO OF 10.3% (stable v. 2013)

    LIQUIDITY COVERAGE RATIO 114%

    291 BILLION a very large liquidity reserve

    10.3%

    BASEL 3SOLVENCY RATIO

    10.3%

    2013 2014

    STRONG EXTERNAL CREDIT RATINGS FOR 2014

    A+ (NEGATIVE)

    A1 (STABLE)

    A+ (STABLE)

    About us

    43

  • IN A CHANGING WORLD,CASH MANAGEMENT IS DIGITAL.

    OUR EXPERTISE AT YOUR FINGERTIPS Join us and share our thoughts on corporate treasurys hottest topics. Discover the whys and hows of cash management innovation, the new standards and the most e cient techniques to boost your treasury.

    All on www.cashmanagement.bnpparibas.com