Executive summary

Scope

• This report looks at the moves which are being taken to in response to falling cash usage
• The report examines the regulatory environment and the implications for both banks and businesses
• Developments in technology seen across the world are examined – the US, UK and Australia are leading players
• SEPA feels as though it has been around for a long time, but the report looks at whether corporates are SEPA compliant

Key highlights

• Technology is changing the way in which corporates make payments and transmit cash
• The commercial card is an alternative form of payment to the cheque that is increasing in popularity amongst businesses and in North America in particular
• There are several initiatives in place aimed at creating a more harmonized payments market worldwide. It was announced in late 2011 that all payments made in the euro economic area must be SEPA-compliant by February 2014
• SWIFT, the cooperative formed in the 1970s with the aim of increasing the efficiency of processing international banking transactions, is bolstering its presence in the Asia Pacific region

Reasons to buy

• Gauge the extent to which technology is changing the corporate payments landscape
• Discover the importance of customer service and the availability of credit
• Understand how the announcement of the SEPA end date will bring further standardisation to payments messaging
• Benchmark against case studies of attempts to harmonise payments markets in other regions

Table of contents

Executive Summary
1: Attempts are being made to streamline cash management activities
1.1 Attempts are being made to streamline banking relationships and internal processes, but they remain fragmented
1.2 Cash management processes are becoming increasingly centralised
1.3 Centralisation helps cashflow forecasting
1.4 Short-term financial deficits are increasingly funded by inter-company loans
1.5 Electronic invoicing could reduce costs by $300bn in Europe alone
1.6 Summary

2: Electronic invoicing is gaining in popularity, although from a low base
2.1 The public sector is key to driving adoption of e-invoicing in Europe
2.2 Major market segments remained underserved
2.3 The market is highly fragmented and the number of service providers is growing
2.4 Further harmonisation of messaging formats is required, particularly for cross-border transactions
2.5 E-invoicing is increasing in popularity in the US, but adoption rates remain below those in Europe
2.6 Benefits of invoicing
2.7 Barriers to the adoption of e-Invoicing
2.8 Large companies are significantly more likely to use technological payment solutions than their smaller counterparts
2.9 Summary

3: What does Basel III mean for corporates?
3.1 The objectives of Basel III
3.2 Corporates that demonstrate transparency and understanding will be favoured by the banks
3.3 Corporates expect Basel III to have a negative impact on their performance in 2012
3.4 Two-thirds of banks do not believe that the regulators understand the impact of Basel III
3.5 Corporates will continue to seek alternative sources of borrowing due to tighter capital controls
3.6 Summary

4: The growth of SWIFT
4.1 Standardisation of messaging is one of SWIFT’s key roles
4.2 SWIFT regulation and oversight
4.3 SWIFT has identified an opportunity to connect with smaller businesses through Alliance Lite
4.4 SWIFT is currently dominant but there are threats from new market entrants
4.5 File traffic has grown by just 15% since 2007
4.6 The number of live users is increasing at a steady rate
4.7 Benefits / drawbacks of using SWIFT
4.8 Future growth is likely to come from fast-growing, emerging regions
4.9 Bank payment obligations – modernizing and simplifying trade transactions
4.10 Is Asia Pacific moving towards a more harmonized payments market?
4.11 Summary

5: Are corporates ready for SEPA?
5.1 What does SEPA mean for corporates?
5.2 Switching to SEPA will not be a quick and easy process
5.3 Considerations when switching to SEPA
5.4 Use of SCTs varies significantly by country
5.5 The popularity of direct debits continues to grow
5.6 Growth of SDDs will accelerate now the end date has been set
5.7 Card compliance is progressing well due to the adoption of EMV specifications
5.8 Room for further adoption of SEPA compliant payments amongst European corporates
5.9 Strong stated intentions to switch to SEPA payments
5.10 National CTs are the main form of payments received
5.11 Corporates predict that payments received using SCTs will increase to 2013
5.12 Corporates have not received sufficient information on SEPA
5.13 Summary

6: The decline of business cheque usage
6.1 Cheques are in decline but still used by businesses
6.2 Larger businesses could benefit from switching to electronic payments
6.3 BACS and Direct Debit are the most convenient alternatives to business cheques
6.4 Cash flow management and tradition are the main reasons for the continued use of cheques
6.5 The cheque will stay in the UK, but its future remains uncertain
6.6 Summary

7: Sources of corporate payments fraud
7.1 Payment fraud has remained constant, despite investment in its prevention
7.2 Large organizations are subject to higher levels of fraud than those with revenues of less than $ 1bn
7.3 Cheques are the main source of payment fraud, yet their use is still prevalent in the US
7.4 Corporate account take-over is a serious issue in the US
7.5 Recommendations for avoiding corporate account take-over
7.6 Employee fraud is increasing in the UK
7.7 Summary

8: Increasing control and efficiency with payment cards
8.1 Commercial cards – different forms for different purposes
8.2 Transaction cost and payment cycle reduction are two of the key benefits of p-cards
8.3 North America is the biggest market for p-cards
8.4 P-cards are popular amongst middle market organizations
8.5 P-cards are used to purchase ‘every day’ goods and services
8.6 Europe and Asia Pacific are less developed than the US, UK and Australia
8.7 Summary

9: Treasury management in 2012
9.1 Treasury departments have varying degrees of control over payment initiation
9.2 A more holistic view of risk
9.3 Increased adoption of payment networks and exchanges
9.4 Improved credit risk analysis
9.5 Streamlining and consolidation of payments
9.6 A continued shift towards outsourced transactional treasury functions
9.7 Bank independence will remain important in 2012
9.8 Greater use of consolidated technology hubs for multi-bank connectivity
9.9 Examples of treasury outsourcing products and services
9.2.1 Summary

10: Conclusion – future trends in corporate payments
10.1 Corporate clients will become more demanding as clearing moves towards real-time
10.2 The path to adoption of ISO 20022
10.3 Late payments are becoming increasingly unacceptable
10.4 Organisations need to protect themselves against bad debt
10.5 E-payables will also continue to grow in EMEA and North America
10.6 The use of business cheques will decline by 60% in the next 10 years in the UK
10.7 Prepaid cards could change the way in which remittances are sent and received
10.8 Commercial cards represent a key growth area, particularly in Europe
10.9 SEPA – banks need to be more proactive
10.2.1 Summary

List of tables

Table 1: Forms of e-invoicing documents
Table 2: Main e-invoice and e-bill operators in Europe in 2012
Table 3: Basel III proposal summary
Table 4: Methods of connecting with SWIFT
Table 5: SWIFT Alliance Lite features
Table 6: Cost of implementing SWIFT in 2008
Table 7: Initiatives aimed at promoting the adoption of ISO 20022 in Asia Pacific
Table 8: Focus of SWIFT’s 2015 Asia Pacific strategy
Table 9: The SEPA project checklist
Table 10: Uses of cheques for business payments
Table 11: Over half of businesses feel that e-payments are convenient alternatives to cheques
Table 12: Fraud prevention measures available to corporates
Table 13: Recommendations for avoiding corporate account take-over
Table 14: Employee fraud in the UK 2011
Table 15: Benefits of card programmes to organizations
Table 16: P-card programmes – key performance measures
Table 17: Number of business units authorised to initiate payments by region (%)
Table 18: Advantages of corporate payment factories
Table 19: Outsourced treasury functions
Table 20: Bank of America Merrill Lynch corporate payments services
Table 21: Features and benefits of SunGard Avantgard
Table 22: 50% of UK SMEs report problems with late payments

List of figures

Figure 1: Corporate payment methods: 2010 - 2013
Figure 2: Almost one-fifth of corporates have 20 or more banking relationships
Figure 3: The majority of companies have retained the same number of banking relationships in 2010
Figure 4: Change in the total number of banking relationships by region, 2009 - 2010
Figure 5: Price of credit is becoming increasingly important to US middle market companies
Figure 6: Availability of credit is becoming increasingly important to large US corporates
Figure 7: Centralised cash management processes growing steadily
Figure 8: Lack of internal systems integration is the main barrier to accurate cash flow forecasting in 2011
Figure 9: Inter-company were used more than bank overdrafts to cover short-term cash deficits in 2011
Figure 10: Europe is the biggest adopter of e-invoicing
Figure 11: Both B2B and B2C e-invoicing are growing
Figure 12: Growth of e-invoicing users in Europe 2006 – 2010 (m)
Figure 13: Number of e-invoicing service providers in Europe by volume of invoices processed 2010
Figure 14: The number of e-invoicing service providers is increasing but is forecast to peak in 2012
Figure 15: Adoption of e-invoicing solutions in the US, 2009 – 2010
Figure 16: Fewer missing invoices are the main benefit of e-invoicing
Figure 17: Discounts for early payment of invoices are important to the majority of US companies
Figure 18: A perception that ‘current processes work’ is a barrier to e-invoicing adoption
Figure 19: Small companies are still highly reliant on paper processes to facilitate payments
Figure 20: Corporate revenue and profits are expected to be positive or flat in 2012
Figure 21: Basel III is viewed negatively by Western European treasury professionals
Figure 22: Regulators are perceived to lack understanding of the impact of Basel III on corporates
Figure 23: Euro area corporates face tighter credit standards than SMEs in Q4 2011
Figure 24: SWIFT’s net profit has fallen during the global downturn
Figure 25: Steady growth in the number of SWIFT countries and participants 2007 – 2010
Figure 26: Change in daily SWIFT file traffic
Figure 27: Steady growth in the number of SWIFT countries and participants 2007 – 2010
Figure 28: Traffic by market has changed very little since from 2007 – 2010
Figure 29: EMEA traffic is declining with growth expected in Asia Pacific in future
Figure 30: Messages received and sent are increasing in Asia Pacific
Figure 31: Growth in SWIFT file traffic is strongest amongst Asian countries
Figure 32: Significant variance of SCT usage by European country
Figure 33: Volume of credit transfers in the Euro area 2005 – 2009
Figure 34: Increase in the value of large value direct debit payments 2005 – 2009
Figure 35: Growth of SDDs is starting to accelerate
Figure 36: SEPA card payment compliance is progressing well in Northern and Western Europe
Figure 37: SEPA Direct Debits are not used by over one-half of corporates
Figure 38: Use of national payment schemes looks set to decline by 2013
Figure 39: National schemes dominate the primary methods of receiving payments
Figure 40: SEPA payments will increase at the expense of national schemes
Figure 41: Scope for further education on what SEPA means for corporates
Figure 42: Scope for all stakeholders to provide more information on SEPA
Figure 43: Almost one-half of corporates do not have plans to make changes to facilitated SEPA payments
Figure 44: Lack of knowledge is preventing corporates from using SEPA services
Figure 45: Impact of SEPA on payment processing costs
Figure 46: Decline in the number of cheque transactions in US and UK, 2006 – 2009
Figure 47: Cheques are an important payment instrument in the US in particular
Figure 48: Average number of cheques written and received by UK businesses 2008 – 2011
Figure 49: Larger businesses write and receive more cheques than others
Figure 50: Cheques are written to pay regular business expenses
Figure 51: Card payment acceptance increases according to the number of employees 2011
Figure 52: Cash flow management is a more important reason than cost for the continued use of cheques
Figure 53: Change in payment fraud attacks on US organizations
Figure 54: The majority of large US organisations have been subject of attempted or actual fraud in 2010
Figure 55: Cheques are the main source of fraud within US businesses
Figure 56: Payment fraud committed using cheques continues to increase
Figure 57: External individuals are the main perpetrators of payment fraud
Figure 58: Basic fraud prevention services are used by US corporations
Figure 59: One-third of companies do not perceive there to be value in using positive pay, debt blocks or UPIC
Figure 60: P-cards reduce transaction costs by 76%
Figure 61: P-cards reduce cycle times by 12.3 days
Figure 62: P-cards are replacing low-value corporate payments by cheque in North America
Figure 63: Cheques are declining in importance for higher value payments
Figure 64: Strong growth of p-card usage within the US public sector
Figure 65: Office equipment is purchased using p-cards by the majority of US organizations
Figure 66: A lower proportion of organisations use p-cards to purchase services
Figure 67: Commercial cards are more prominent in Western Europe than in CEE
Figure 68: Remittances sent from developed to developing countries look set to grow to 2014