Treasury and Trade Solutions | Citi Commercial · PDF file6 Innovation, Efficiency,...

Innovation, Efficiency, Simplicity. | 2015 Commercial Cards Conference | May 18 - 20, 2015

Presented by:

Rodrigo Sanchez, North America Commercial Cards B2B Product Manager

Presentation Title

Treasury and Trade Solutions | Citi Commercial Cards

Citi® Virtual Card: Enabling Successful Payables

Programs - Breaking Down the Barriers

2

Innovation, Efficiency, Simplicity.

Table of Contents

1. Presentation Objectives

2. Market Overview

3. Existing Challenges and Barriers

4.

5.

Virtual Card for Accounts Payables

Best Practices

Key Takeaways

Presentation Objectives

4


Presentation Objectives

To identify existing challenges and barriers facing buying organization and adapt best practices in

order to expand working capital, rebate opportunities and reduce operational cost.

The Main Takeaways from this Presentation

1. Discover market trends and current growth of virtual cards

2. Identify existing challenges and barriers organizations face when considering a virtual card

program

3. Learn about the use of virtual cards as a form of payment within accounts payable

4. Discover the time and resources required to implement a payables program

5. Learn tactics and best practices to optimize spend through supplier incentives and successfully

roll out a virtual card program

Market Trends, Organizational Drivers

Market Overview

6


B2B Check Payments are Falling

Check use for B2B payments is declining rapidly in the US and across the world

* Source: 2013 Association of Financial (AFP) Professional Electronic Payments Survey

Top Reasons For Using Virtual Card*

81% 74%

57% 50%

2004 2007 2010 2013

Use of Checks for B2B Payments*

20%

25%

29%

30%

45%

49%

80%

Reduction in

Fraudulent checks

Reduction in

duplicate payments

Increase ability to

capture early

payment discounts

Increased Vendor

Satisfaction

Increase in on-time

payments

Reduction in P2P

cycle times

Lower Processing

cost

7


14.5%

16.1%

34.9%

43.9%

55.6%

2007 2009 2011 2012 2014

Virtual Accounts emerge as strong alternative to checks and ACH

Cards are quickly replacing checks as a form of payment

7

(1) 2012 RPMG Purchasing Card Benchmark Survey Results

(2) August 2014 RPMG Survey respondents using EAP

Trends in Virtual Account Adoption, 2007-20142

1- Source: PayStream Advisors, 2015 US ePayment Forecast for all us

businesses. Large Enterprises (> $1 Bn Revenue)

B2B Payments by Volume of Payments1

5% 8% 13%

72% 67% 61%

21% 23% 25%

2% 2% 2%

Card Checks ACH Wires

2010 2015 2020

Exploring current challenges and barriers to adoption

Existing Challenges and Barriers

9


Financial Supply Chain: Broad Organizational Pressures

Organizations face ongoing pressure to maximize efficiency from their financial supply chains by

reducing costs, improving productivity and driving compliance to organizational policies

• Complexity of increasingly global supply chains

– Credit constraints, supply chain risk

– Visibility to maximize cash efficiency, liquidity management

– Working capital management across complex supply chain

• Effective day-to-day supplier management

– Push to maximize operational and headcount efficiencies

– Pressure to reduce expense, increase automation

– Balancing pressures with need to minimize supplier impact

• Focus on compliance, regulatory environment

– Reputational risk of lax oversight

– Reduced IT spend available for discretionary items

– Better visibility into internal practices needed

• Dispersed decision making

– Challenges ensuring alignment across key stakeholders

Impacted Stakeholders

Treasury & Finance

Accounts Payable

Strategic Sourcing & Procurement

Audit & Compliance

Technology

Key Challenges

9

10


Overcoming Challenges to Adoption

Despite the large opportunity, a number of challenges still

exist for large corporations to adopt a solution.

Source: Paystream Advisors Report: Electronic Supplier Payments—Innovation Drivers for Corporate ePayments—ePayments Explosion!

40%

35%

33%

26%

26%

Suppliers not willing to adopt

Shortage of IT Resources

Lack of integration between AP systems

Loss of Check Float

Inability to exchange electronic paymentinformation

Solution Overview

Citi VCA for Accounts Payable

12


Citi Virtual Card Accounts - Overview

Clients can gain financial benefits, process improvements, and greater security & control by

leveraging Virtual Card Accounts for payments

12

Virtual Card Numbers (VCNs)

– Unique, non-plastic account numbers used for

secure purchasing

– Local-currency issuance in 40+ countries and

25+ currencies

Increased Transaction-Level Controls

– Number of transactions (single- or multi- use)

– Transaction amount limit (exact, maximum, or

range)

– Validity Period

– Suppliers and Merchant Category Codes

Enhanced Client-Supplied Data

– Client-specified data elements per VCN for

enriched analysis, reconciliation and allocation

Secure VCN delivery via encrypted email to

suppliers

Web

API

Batch

Simple web-based

user interface for

generating VCN’s

A file transfer method

to request VCNs in bulk

Systemically

generate VCN’s

in real time from internal

application or ERP

Flexible VCN Generation….

13


VCA for Accounts Payable: Solution Overview

Citi has combined a wealth of capabilities to develop an integrated virtual card file-based solution

focused on successful execution and program optimization

Working Capital Analytics

Proprietary analytics platform to identify

financial opportunities and optimize payment

strategies in your accounts payable

Supplier segmentation methodology to ramp

up conversion and card spend

File-Based Connectivity

Process card based payment method leveraging

existing file processes

Solution flexibility to adapt to our clients’

existing systems and business processes

Supplier Enablement

Dedicated team to manage supplier outreach

Ability to leverage multiple financial and

operational levers to help increase adoption

Supplier Portal and Support

Supplier support and self-servicing solutions

to provide ongoing operational support

Virtual Card

Accounts

Payable

Supplier

Portal and

Support

File Based-

Connectivity

Working Capital

Analytics

Supplier

Enablement

13

14


Segmentation Analysis and Strategy

Citi’s leading-edge analytical capabilities and working capital solutions help clients optimize

their payment strategies, improve processes and ensure stability across the supply chains.

1. Strategic Suppliers

2. Multi-sourced

suppliers with

significant spend

3. Smaller suppliers

4. Non-system

spend

Traditional Payment Methods

Supplier Credit Rating

Card-based Payments

Supply Chain

Finance

14

15


Building the Business Case

An analysis of your supplier data can help quantify multiple hard-dollar benefits to help build the

business case for implementing virtual card solution.

Example for Illustrative purposes only, Assumes In-Scope Spend of $135 million

Increased

Rebate

Working

Capital

Potential

Investment

Operational

Efficiencies

Driver = Incremental

Spend

Driver = Payment

Terms

Driver = Check

Reduction

Driver = Resource

Prioritization

Savings per Trxn: $2*

No. of checks

converted= 150,000

150,000*$2

Cost of Funds: 4%

Total Volume:

$135 million

DPO = 40 days

$135MM*4%*(40/360)

Total Volume: $135MM

Rebate share: 125bps

125bps

Actual costs and

commitment assessed

on a client by client

basis

$1.6MM $0.6MM $0.3MM $0.1MM

Recurring Recurring Recurring One-Time

Total Client Net Benefit = $2.5 million.

15

* Actual costs varies based on client’s existing processes

16


VCA

Virtual Card File-based Payments

Virtual Cards can help lower administrative costs by reducing operational

complexity around your Payables process.

VCA for

AP

Client Suppliers

Payment Instructions

1

2

3

Reconciliation File

4

Increased Efficiency

Simplified Reconcilation

Flexible Remittance

Comprehensive Service

Send standard file for virtual card payments along with traditional payment

methods

Receive corresponding file for reconciliation

Deliver remittance and payment information to suppliers

End-to-end servicing and support

Reduce administrative overhead and transactional costs

16

17


Virtual Cards as a New Payment Method

Virtual Card presents an opportunity to generate revenue for making payments while having other

similar characteristics to other payment methods

17

Costs/Process Cutoff/Receipt Remittance Detail Final Settlement

Virtual Card

Profit from making

payment due to card

rebate model

Virtual account number

sent to supplier e-mail

Payment received in 2-3

hours

Funds settled within 48hrs

of authorization

Standard option provides

enhanced remittance data

Customization to allow

unlimited remittance

All payments subject to 60

day dispute window

No liability for fraudulent

transactions

Ability to recover misuse

Check

High costs to process/

administer

$1-$5/check

Same day/Next day option

Mailing time subject to

disbursement location

Clearing subject to

supplier deposit

No limitation

Within 48hours of clearing

Potential for late return if

funds still exist in the

account

Fraud/counterfeit

transactions up to 1 year

ACH

Low costs for

electronic payment

~$0.07/transaction

Typically next day

settlement to major

financial institutions

Limited in some formats

with option for unlimited

Settled upon execution

Limited ability to reverse

transaction

Wire High costs

~$10/wire transfer

Late day cutoffs for same

day receipt

Limited Settled upon execution

Limited ability to reverse

transaction

Best efforts basis that

diminishes rapidly with time

18


Citi Supplier Enablement and Support: Overview

Citi’s experienced supplier enablement team designs and executes customized outreach

campaigns to maximize the growth of your card programs while supporting your suppliers.

Cleanse, mine and enrich client data for tailored

supplier targeting via Citi Working® Capital Analytics

Holistic campaign to support significant supplier

adoption with faster card spend ramp

Co-branded marketing materials for customized

communication and message delivery to suppliers

High-touch engagement model for strategic vendors

Utilize robust campaign reporting on an ongoing

basis

Market research and intelligence to drive informed

decision making around supplier adoption leveraging

best practices

Onboard vendors not yet accepting card payments

through specialized B2B merchant-acquiring

partners to maximize adoption of your cards program

Dedicated Supplier Support Team post-enablement

to resolve your suppliers card inquiries

18

19


Supplier Self-Service and Support: Payment Exchange

Suppliers can maintain their own profiles and bank account information, access real-time payment

details, and connect with a dedicated support team.

Self-servicing Portal:

Update and maintain payment

preferences and associated information

(bank account details, email addresses)

View payment status

Reconcile payment information with

remittance advices

Download payment records and

remittance advices for use with

Accounts Receivables or other

purposes

Supplier Support

Dedicated supplier support

team via phone

Access to online chat for

virtual support

Suppliers

Optional Self-Servicing and Help Desk Capabilities to Support Suppliers

Suppliers

19

Successfully Roll-out VCA Programs

Overcoming Challenges: Best Practices

21


Best Practices for a Successful Virtual Card Program

Citi will support your organization along the way to implement best practices for developing

a best-in-class Virtual Card program.

Align the

Organization

Establish Supplier

Outreach Plan

Develop payment strategy

Analyze AP spend to quantify benefits and determine ROI

Measure and report on payment metrics pre- and post-implementation

Identify Strategy &

Build Business Case

Identify senior executive to champion solution

Solidify goals and align Card team with cross organizational resources

Develop plan for supplier segmentation and adoption

Contact suppliers for enrollment in card solution

Develop

Requirements

Create detailed project plan, identify required resources, set target dates

Provide information and training to key resources involved with solution

Continued Monitoring

& Optimization

Monitor and refine program goals

Benchmark against the original business case on a periodic basis

22


Payment Strategy Implications

Depending on your company’s goals and supplier strategy, Citi’s Virtual Card payment can be

leveraged to use in a variety of fashions.

Working Capital Process Efficiencies Rebate Realization

Convert Your Checks to Card

Reduce costs by converting

expensive check process

with card payments

Generate Revenue

Get paid for making card

based payments payments

Implications on Payment Strategy

Payment Strategy: Campaign Approach Buyer DPO Benefits Transaction Cost Benefits

Offer Current

Terms

Card

Benefit

New

DPO

DPO

Effect

Transaction

Savings

Payment

Method

Targets

Rebate

Potential

Payment Digitisation Default VCA 30 30 60 ↑ Medium Check Med

Payment Term Extension Early Payment VCA 60* 0 30 - High Check, EFT High

Expedite Payments Early Payment VCA 30 0 35 - High Check, EFT High

Benefits for the Buyer

Use card float to

gain additional

working capital

Benefits for Suppliers

Maintain DPO while

offering suppliers early

payment

Allow term extension

terms without

damaging relationships

23


Citi Supplier Enablement Services: Proven Success

To date, Citi has enrolled more than 40% of targeted suppliers which has resulted in converting

over 30% of spend across both check and electronic payments to a B2B Cards solution

Check

Annual Volume Spend Adoption Merchant Adoption

<$500K 37% 40%

<$1MM 35% 39%

<$2MM 28% 39%

Total 28% 39%

<$5MM 24% 38%

$5MM+ 14% 13%

ACH

Annual Volume Spend Adoption Merchant Adoption

<$500K 38% 51%

<$1MM 33% 49%

<$2MM 27% 47%

Total 27% 47%

<$5MM 22% 46%

$5MM+ 11% 8%

Incentives offered have a material impact on card

conversion rates

– Spend adoption impacted by proposed cash

flow benefit

– The stronger the incentive the more successful a

campaign will be in enrolling higher spend merchants

Traditional

Target Zone

Traditional

Target Zone

$136K

$82K

$155K $178K

$227K $209K

16% 16%

33%

23% 29%

20%

0 10 20 43 60 65

Cash Flow Benefit to Supplier (No. of Days)

Avg. Annual Spend Enrolled % Suppliers Enrolled

Adoption by Payment Method

Success By Incentive

24


Implementation Support Model

A dedicated and experienced Citi implementation team works closely with our clients’

corresponding team to ensure program requirements are met.

Project Manager

Technical Specialists

Supplier Enablement

Manager

Project Management

Documentation

Technical Expertise

Specialists providing deep expertise on

system integration, file delivery, data and

reporting needs

Manage supplier enablement activities

end-to-end

Report campaign success and

opportunities for expansion

Implementation Manager

Central Point of Contact for coordinating

implementations

“One-stop contact” for best practices and

client questions Experience working with various ERP

systems

Clients represent some of the most complex card implementations in the industry

Citi brings a track record of integrating at every level of requirement for its implementation services based on best practices in project management

Additional Support on ERP integration

Support in development of VCA files

Custom ERP coding and reporting

Expertise in SA, Oracle and Microsoft ERP systems

Consulting service offered on an ad-hoc, as needed basis

Acceleration of Virtual Card implement

Citi’s Experience with Complex Implementations

ERP Integration Support

25


Sample Implementation Timeline

Citi will customize a project plan tailored to each client’s specific needs

Month 1 Month 2 Month 3 Month 4 Month 5

Product kickoff

Complete all documentation

Supplier enrollment campaign

Open accounts

Client setup

Validation, testing

Client training

Production ready/Go Live

Task

IR S C irc u la r 2 3 0 D is c lo s u re : C it ig ro u p In c . a n d its a f f i lia te s d o n o t p ro v id e ta x o r le g a l a d v ic e . A n y d is c u s s io n o f ta x m a tte rs in th e s e m a te r ia ls (i) is n o t in te n d e d o r w r it te n to b e u s e d , a n d c a n n o t b e u s e d o r

re l ie d u p o n , b y y o u fo r th e p u r p o s e o f a v o id in g a n y ta x p e n a lt ie s a n d ( ii) m a y h a v e b e e n w r itte n in c o n n e c t io n w ith th e " p ro m o tio n o r m a rk e tin g " o f a n y tra n s a c tio n c o n te m p la te d h e re b y (" T ra n s a c tio n " ) .

A c c o rd in g ly , y o u s h o u ld s e e k a d v ic e b a s e d o n y o u r p a r tic u la r c irc u m s ta n c e s fro m a n in d e p e n d e n t ta x a d v is o r .

A n y te rm s s e t fo r th h e re in a re in te n d e d fo r d is c u s s io n p u rp o s e s o n ly a n d a re s u b je c t to th e fin a l te rm s a s s e t fo r th in s e p a ra te d e fin it iv e w rit te n a g re e m e n ts . T h is p re s e n ta tio n is n o t a c o m m itm e n t o r firm o f fe r a n d d o e s n o t

o b lig a te u s to e n te r in to s u c h a c o m m itm e n t , n o r a re w e a c tin g a s a fid u c ia r y to yo u . B y a c c e p tin g th is p re s e n ta tio n , s u b je c t to a p p lic a b le la w o r re g u la tio n , yo u a g re e to k e e p c o n fid e n tia l th e in fo rm a tio n c o n ta in e d h e re in a n d

th e e x is te n c e o f a n d p ro p o s e d te rm s fo r a n y T ra n s a c tio n .

W e a re re q u ire d to o b ta in , v e r ify a n d re c o rd c e r ta in in fo rm a tio n th a t id e n tif ie s e a c h e n ti ty th a t e n te rs in to a fo rm a l b u s in e s s re la tio n s h ip w ith u s . W e w ill a s k fo r yo u r c o m p le te n a m e , s t re e t a d d re s s , a n d ta x p a ye r ID n u m b e r .

W e m a y a ls o re q u e s t c o rp o ra te fo rm a tio n d o c u m e n ts , o r o th e r fo rm s o f id e n tif ic a tio n , to v e r ify in fo rm a tio n p ro v id e d .

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Treasury and Trade Solutions | Citi Commercial · PDF file6 Innovation, Efficiency,...

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