© 2011 Treasury Strategies, Inc. All rights reserved.

April 2011

Treasury 3.0 “The Time Is Now To Make It A Reality”

Presented by: Dave Robertson

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Contents

Growth Limits Of A “Payments Only” Strategy Where Are The Opportunities Treasury 3.0 Success Stories

Growth Limits Of A “Payments Only” Strategy

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Stability of Transaction Banking Revenues

*The Transaction Banking Index (TBI) is designed to track the size and stability of the Transaction Banking market, driven by Treasury Management, Global Trade Services, and Securities Processing Revenues. Information is collected from the world’s leading banks that identify TM revenue in their annual, and quarterly financial releases.

50

60

70

80

90

100

110

Q1 2008

Q2 2008

Q3 2008

Q4 2008

Q1 2009

Q2 2009

Q3 2009

Q4 2009

Q1 2010

Q2 2010

Q3 2010

The TSI Transaction Banking Index Transaction Banking Index

Global Market Cap

Global GDP (Const.)

Global Trade

Global GDP (Current)

Global Production

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Modest Expectations for Revenue Growth

0%

10%

20%

30%

40%

50%

60%

70%

0-5% 5%-10% 10%-15%

Estimated Growth in Revenues

Per

cent

of R

espo

nden

ts

Projected Growth

Expectations Among Banks For Growth In TM Revenues in 2011

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Forecasted Growth in Payment Volumes

Volume of Payments

Region/Payment Type 2010

(Billions) 2020

(Billions) CAGR (%)

North America (Total) 117 207 6%

Latin America 29 207 14%

EMEA 94 158 5%

Asia-Pacific 65 213 13%

Rest of World 1 29 37%

World (Total) 306 750 9%

* Source: BCG’s Winning After The Storm 2010 Report

95

2

20

1

8%

4%

7%

6%

0

10

20

30

40

50

60

70

80

90

100

Retail Domestic Retail-Cross Border WholesaleDomestic

Wholesale Cross-Border

0%

1%

2%

3%

4%

5%

6%

7%

8%

9%

2010 Volume (BB) CAGR (%)

Predicted Annual Growth In North America

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Continuous Transition to Electronic Payments

2006 2009 CAGR

Total Transactions (Billions) 95 109 5%

Checks (Paid) 31 24 - 7%

ACH 15 19 9%

Credit Card 22 22 0%

Debit Card 25 38 15%

Prepaid Card 3 6 22%

* 2010 Federal Reserve Payments Study

30.5 24.4

-10% -5% 0% 5% 10% 15% 20% 25%

Total Transactions (Billions)

Checks (Paid)

ACH

Credit Card

Debit Card

Prepaid Card

Annual Change In Payment Types 2006 to 2009

Where Are The Opportunities?

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Treasury 3.0 - Corporate Perspective

Time Pre 1970 1970 - 2009 Now - Future

Treasury Operations is an

immature, fragmented or

informal function, characterized by manual processes

Treasury centralizes key roles, improving

transparency and controls

Greater access to

data and computing power and

consolidation of competency

Treasury 1.0

Trea

sury

Influ

ence

& V

alue

Add

LOW

HIGH

Treasury is a strategic advisor, more closely

integrated with business units, supporting

globalization, efficiency, trading partner/supply chain integration and

greater sophistication in risk/return optimization

Data Information Intelligence

Treasury 2.0 Treasury 3.0

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Treasury 3.0 - Bank Perspective

Pre-1970 1970 - 2007 2007 - Future

Commercial banks provided business services to their

corporate clients at no cost.

Treasury management business began to take shape, growing to $100

billion in 2005.

Treasury 1.0

Trea

sury

Influ

ence

& V

alue

Add

LOW

HIGH

Innovators are introducing more comprehensive payment and liquidity

solutions expanding across the financial supply chain.

Data Information Intelligence

Treasury 2.0 Treasury 3.0

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Cornerstones of Treasury 3.0

Billing Receivables Management Collections Cash

Concentration DDA Account A/P Disbursements Reconciliation

Short Term Investing

Sweep

Capital Structure

Short Term Borrowing

Managed Accounts

Cash Outflows Cash Inflows

Corporate Liquidity

Financial Supply Chain

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Opportunities Available to Those Banks Willing to Cross Established Boundaries

Current Banking Activities

$175 Billion

Accounting Procurement A/P A/R Investments & Funds

Other Financial Services ($1 Trillion Market)

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“Working Capital” Focus of Corporate Financial Managers

Top concerns of CFOs in 2010 •  Ability to forecast results •  Working capital management •  Maintaining morale/productivity

during economic downturn •  Balance sheet weakness •  Cost of health care •  Attracting and retaining qualified

employees •  Supply chain risk •  Managing IT systems •  Pension obligations •  Protection of intellectual property

Source: The Hackett Group –

Working capital opportunity – Fortune 500

55

29

453530

50

Leaders Median Laggards

DPO DSO

-33% +43%

Source: APQC, A.T. Kearney; Fortune Global 500

Treasury 3.0 Success Stories

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Learning From Liquidity and Supply Chain Solutions

Billing

Receivables Management

Collections

Cash Concentration

A/P DDA Account

Disbursements

Reconciliation Positive Pay SWIFT & Payment

Outsourcing

Sweep Accounts

RDC LBX Data

Transmission Purchasing Card

Banks reduced fraud risk if business clients shared their payables files

Inexpensive and easy multi-bank reporting and payment initiation

Automated transfers from non-interest bearing accounts

Economical alternative to physical deposits

Deposit data repackaged for corporate A/R

Replacement of purchase orders for low-value transactions

Working Capital Component Solution Value Proposition

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Distribution of B2B Checks

0

1

2

3

4

5

6

7

8

9

20092006

Remittances POS Remittance/POS

B2B Payments -- A Process in Limbo

B2B remittances paid via checks have increased 7% since 2006! Key Reasons

•  Ability to tie invoice information to payments is often easier with checks.

•  Need assistance to obtain bank account information for all payees if paying electronically.

Continuing Challenges with Checks •  Many checks are applied manually to

A/R. •  Unwarranted discounts & deductions

are difficult to detect. * Fed Payments Study 2010

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Banks Are Offering B2B Answers that Bridge Paper and Electronic Payments Partnering With Vendors Citi recently announced a new partnership with Syncada that allows Citi’s customers to execute the payables cycle automatically •  Process invoices •  Make payments •  Finance payables

End Result: Through partnering with vendors, Citi has created a comprehensive solution that spans across the financial supply chain.

In House Solution Chase acquired Xign and introduced its own “Order To Pay” product with new working capital solutions to •  Place orders •  Issue and receive invoices •  Initiate payments •  Automate discount decisions

End Result: In-house solutions differentiate the bank from competition.

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Multiple Entry Points for New Financial Services

* This high level comparison does not take into account other factors that are important such as the client experience, unique functionality, or special services offered in conjunction to the basic functions of each category.

Citi & Syncada

Cash 360

JP Morgan

Deposits Recon Cash App Cash Discount Payments Invoices Payment

Financing

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Banks Have a “Lock” on Financial Data

Banks Supply Chain Vendors

Payor

Amount

Date

Originating Account

Payment Finality

Account Balances

Authorized Payee

Receiving Account

Invoicing System

Credit Terms

Ban

k

?

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Unfulfilled Needs That Bankers Might Satisfy

Client Activity Issue Bank-Provided Service

Third Party Exposures

•  Managing risks with non-financial trading partners

•  Search all payment and investment transactions to measure counterparty risk.

OFAC •  Identifying payments to illegal payees before issuance

•  Perform OFAC filtering before payments are issued by clients.

Expense Management

•  Managing expenses incurred with banks such as interest paid, non-interest fees, uncompensated balances

•  Provide each client with summary of its total banking expenses (fees, interest paid and uncompensated balances).

Benchmarking

•  Measuring payments performance against peers (checks vs. ACH, size)

•  Investments (term, return, and risk) •  Derivatives exposures and transactions for

currencies, commodities, and interest

•  Provide each client with summary of its activity relative to other clients.

Cash Forecasting •  Developing reliable trends in cash flows. •  Capture cash flow patterns by bank account and payer.

Credit Management •  Verifying a payment from a customer in final. •  Tag each payment when settlement finality is achieved.

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Opportunities For Healthcare Related Services

Provide card (merchant) services to hospital admission offices

Estimate consumer’s expense (the hospital exposure) prior to a surgical procedure

Issue and distribute billing statements

Provide financing to patients

Collect past-due accounts

Process lockbox receipts and 835 remittance advices

1

2

3

4

5

6

Apply payments to receivables 7

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Delivering Treasury 3.0 Services

Sales •  Job requirements include technology and supply chain experience •  Credibility with corporate controllers, A/R and A/P managers •  Sales incentives to support dedicated sales reps during early, low-yielding

periods of product introduction

Implementation •  Project management skills for lengthy complex installations •  Standards for set up cycle times •  Positioning the implementation unit with matrix structure reporting to TM and

technology

Customer Service •  Process that insulates users from the bank’s third-party vendors •  Vendor management programs that track performance of vendors •  Staff knowledgeable of relevant regulations beyond payments only

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Strategic Decisions in a Treasury 3.0 World

Life Cycle

Business Drivers

Customer Value

Reinvest Harvest

Scale Scope

Commercial Payments

Liquidity

Financial Settlements

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Our strategic advice and pragmatic solutions improve bottom line performance. Clients benefit from our 360o view of the treasury market, deep relationships, and proprietary analytic frameworks that transform data into strategic insights.

Clients •  Global Banks •  Regional Banks •  Solution Providers •  Associations •  Regulators

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•  Operational Efficiency •  Risk Management & Compliance •  Competitive Assessment & Positioning •  Vendor Selection & RFP Management •  Market Analysis

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