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CONFIDENTIAL - This report is solely for the use of client personnel. No part of it may be circulated, quoted, or reproduced outside the client organization without prior written approval from Redbridge Debt & Treasury Advisory.

This material was used by Redbridge Debt & Treasury Advisory during an oral presentation. It is not a complete record of the discussion.

INTERNATIONAL BANK FEES – THE NEXT FRONTIER

Helene Shen – Redbridge Debt & Treasury Advisory (New York)

Stephan Ireland -- Redbridge Debt & Treasury Advisory (Houston)

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SUMMARY

Banks' perspective and corporations' perspective

Cash Management: Local Challenges

Global Bank Fee Monitoring

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[To be modified in master

view]3INTERNATIONAL BANK FEE ANALYSIS

KPI’s in terms of bank fees

What is at stake?

• Worldwide bank wholesale payment revenues?

• Cash management related costs in comparison to company’s revenues?

• Typical annual variation?

< 50MM$ 50MM$ < X <

250MM$

> 250MM$

1bp < X < 2bps 2bps < X < 5bps > 5bps

< 1% 2% < X < 4% > 5%

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SUMMARY




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Whoslesale Transaction Banking Revenues (Source: BCG)

Payment-related businessess are the lifeblood of banks, making up about 25% of total revenues worldwide

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$80m-$100m average “all-in” fees paid to banks

(global fortune 500)

25% average ‘payment-related’ business out of “all-in” fees

paid to banks

KPIs on Banking Relationships & Bank Fees (Redbridge source)

Banking relationship analysis: the importance of transactional banking

Fees Raroc

60%

40%

Split in bank fees

Side Business Credit Business

40 Average number of banking relationships for a Global

Fortune 500 company

60% of fees paid to the top 5 banks

15% RAROC given to banks on average

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SUMMARY




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A Panoramic View of Major Regulatory Compliance Projects*

Key regulatory and industrial initiatives (KRIIs) are forcing banks to rethink their multi-country approach and adapt their pricing policy

*Extract from the 2016 World Payment Report; source: Capgemini

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Cash Management Cost in % of Local Domestic Volumes: Example of a Real Situation

Cash Management costs can vary significantly among countries

North America & Canada

UK

Germany

AustraliaNew-Zealand France

Austria

The Netherlands

Belgium

Asia (China, Thailand, Malaysia)

SpainPortugal

Italy

Czech Republic

Israel

Switzerland

0,00%

0,02%

0,04%

0,06%

0,08%

0,10%

0,12%

0,14%

0,16%

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Asia-Pacific

Pricing and countries specificities are always key challenges

China Hong Kong India Australia

Specific Bank Services

- BAD

- Strong development of eBAD

with paperless process

- Low Value / High Value

- Intra City / Inter City

- Standard Transactions

- Auto Pay

- Low Value / High Value

- Checks, Drafts

- Debit card

- Limited credit cards 1100+

clearing houses

- Strong development of digital

payments (Immediate Payment

Service IMPS 24*7)

- Very few Checks

- Mainly ETF

- Direct Debits

- Debit Crad

Bank Fee Reporting

- Very Paper Based

- Difficult to retrieve

- Not always available in English

- Paper Based & Electronic

- Difficult to retrieve N/A

- Very Paper Based

- Difficult to retrieve

- Not always available in English

Existence of Domestic

proportional feesY Y N N

Float Y N Y N

Cost of Cash ManagementLow Transaction banking cost,

High liquidity management costLow Low Medium

Information Services- Web Banking

- Host to host

- Web Banking

- Host to host

- Web Banking- Web Banking

- Host to host

- SWIFT

Paper Based Services High Medium High Low

Bank Competition High High Low Low

IBAN N N N N

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EMEA & Americas

Pricing and countries specificities are always key challenges

UK France Germany Italy Brazil Canada

Specific Bank Services

- BACS, CHAPS

- Faster Payment

- SEPA Payments (SCT, SDD)

- Checks

- SEPA SCT, SDD

- Checks

- Bill of Exhange (paper &

Electronic)

- TIP

- SEPA SCT,

- SDD

- SEPA SCT, SDD

- RID

- RIBA

- Limited Checks

- Cash mainly

- Checks

- Credit Transfer

- DD bank to bank

- "Bloquetos"

Mostly same as in the US

Bank Fee Reporting Y on card collections

Y (paperbased / electronic file) but

often charged (between €300 and

€ 3k) per year

Y with European banks Y with European banks N/AY equivalent of Account Analysis

Statement

Existence of Domestic

proportional feesN

Y (Commission de Mouvement de

Compte CMC: still charged on

commercial debit volumes)

Y (some banks may charge a fee

per line: "Buchungposten")

Y (fees per lines "Spese di

scrittura": still charged by some

banks).

Y N

Float N N N Y Y N

Cost of Cash Management Low (except on overdraft) One of the highest in Europe Low (except on card collections) One of the highest in Europe High incl. Float High

Information Services- BACSTEL-IP

- SWIFT

- Ebics

- SWIFT

- Ebics

- SWIFT

- Web Banking

- SWIFT

- Web Banking

- RSFN

- Web Banking

- Host to Host

Paper Based Services Low Low Low Medium High Medium

Bank Competition Low, mainly 3 banks High High High Medium Low

IBAN Y Y Y Y Y N

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Local Banks

• Excellent branch network and

coverage;

• Necessary for over-the-counter

services;

• Best at servicing specific domestic

needs;

• Closer to the regulators

• Local banks are not always able to

provide a single pricing schedule

across the country (e.g. China).

• Regional Banks

• Can cover more than one country

• Very good fit with some local banks

• Mostly for electronic payments,

• Some regional banks can have a

very good domestic networks

• Bank fee pro-forma is less detailed

than that in the domestic US (services

are more bundled);

• Electronic transfers are often charged

a transaction fee and a percentage

fee (usually capped);

• Countries' local specificities:

"Commission de Mouvement" (France),

RID/RIBA (Italy), "Bunchungposten"

(Germany), BACS and CHAPS

payments (UK), Boletino (Brazil),

Stipandi (Italy)

• Sometimes difficult to communicate;

• Adapt your communication to

overcome cultural and language

barrier;

• Understand each country's local

specificities and requirements;

• Beware of currency conversion and

restrictions;

• Something as simple as account

opening in some countries (China,

France, …) can turn into a nightmare.

Negotiating Bank Fees: USA vs. Rest of The World

Never underestimate the cultural gap!!!

What else?What are the cultural gapsWho to bank with?

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Countries for which there are no legal /

fiscal constraints that can be easily

integrated to a cross-border and notional

pooling:

• France (all currencies)

• The Netherlands (all currencies)

• Germany (EUR)

• Hungary (EUR & HUF)

• Czech Republic (EUR)

• Italy (EUR)

• Spain (EUR)

Countries not used to be integrated to a

cross-border cash pooling due to local

constraints:

• Poland (EUR & PLN): 2% stamp duties

=> the lending / borrowing relationship can

take place outside Poland so as not to be

considered as a « loan agreement » and

avoid 2% stamp duties

• Turkey (EUR & TRY): allowed but

considered as useless because of taxes and

operational workload

=> for the most part, directly integrated in a

cross-border notional pooling

Countries for which there are legal / fiscal

constraints to analyze so that the

integration to the cross-border cash

pooling remains profitable and relevant:

• Belgium (EUR)

• Portugal (EUR)

• Italy (EUR)

• Czech Republic (CZK): only between

accounts of the same legal entities

• Slovakia (EUR): residual exchange

control and reports to the NB?

Most European countries can be centralized via notional or ZBA cash pooling structure

European Cash Pooling Landscape

Without constraints With constraints to analyze Not practiced

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Regional cash pooling in Asia - myth and reality on domestic cash pooling

APAC Cash Pooling Landscape

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Regional cash pooling in Asia - myth and reality on cross-border cash pooling

APAC Cash Pooling Landscape

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SUMMARY




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• ~2800 different ways of charging a

client

• On average, 250 service lines billed to

a client

• EVERYTHING is passed through to the

client

• Main costs: Information reporting (bank

communication) & Lockboxes

• FDIC fees

• B2B credit cards

• No proportionnal fees

• ECR is unique to US market

• Outsourcing payables and receivables

conversion

• Main sources of revenues derive from

balances and interests, commission on

transactions under development

• Bank fee holiday is a trend to acquire

new businesses

• Information reporting is not always

available (even less in English), very

paper based.

• Pricing models are not standardized

• Bank fee pro-forma is less detailed

than that in the US (services are more

bundled);

• Electronic transfers are often charged

a transactional fee and a percentage

fee (usually capped);

• Local banks are not always able to

provide a single pricing schedule

across the country (e.g. China).

• Billing structure can be confusing

• ~300 different ways of charging a client

• ~ 50/80 service lines billed to a client

• Multi bank portal & communication

tools (EBICs, SWIFT bureau..) are the

most common market practices

(Significantly minimizing bank

communication cost)

• No bank account remuneration

• Existence of proportional fees

• Bank account structure is the most

expensive service

• Recent trend of charging high

deposits/balances on big corporations

• No account statements analysis

• Lack of transparency

Different Bank Fee Structure

A wide variety of billing cash management services

AsiaEuropeUSA

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Bank Fee Reporting Offer

18 global banks are now able to provide bank fee reporting for their clients

40 Countries

18 banks

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80% of an average corporation’s needs could be met using the existing bank monitoring standards

Global Picture of Bank Offerings in Terms of Global Standard

International Banks offer

a Standardized AAS

18

Banks using Global AFP

codes*

65%

Banks ready to accept

other codes

20%

Banks have developed

TWIST BSB standard*

80%

Countries covered40

80%

Banks have developed

Camt.086 (ISO 20022)

standard*

50%Coverage rate of an

average

corporation’s needs

*Source: Redbridge

INTERNATIONAL BANK FEE ANALYSIS

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Corporations Behavior and Habits Around Bank Fees

Corporations don’t take all the benefits of this opportunity

Monthly50%

Quarterly22%

Specific frequency

28%

How often do you analyse bank fees?

22%

17%

50%

11%

How do you analyse the data?

Use predefined dashboards of a TMS market solutionUse your own automated solutionDo manual analysisOther

47%

26%

53%

32%

53%

53%

PDF

Paper

CSV

EDI 822

BSB

.xls

Formats of electronic statements

38%

44%

13%

6%

Preferred methodology to classify bank services

Bank classifications

Other (internal, external supplier, Swift referential, etc.)

AFP Global Codes

AFP Standard Codes

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The Main Reasons to Ask your Bank for a Standardized File

Corporations want to increase their global visibility into cash management fees and bank relationships

7%

7%

14%

71%

7%

7%

29%

14%

36%

7%

7%

21%

14%

14%

21%

21%

7%

43%

21%

29%

7%

29%

64%

79%

21%

Volumes checking

Volume validation

Account management

Electronic invoicing mandated and expected from all vendors

Pricing reconciliation

Global visibility into cash management fees and bank relationships

Primary purpose for wanting a BSB?

Ranking 1 Ranking 2 Ranking 3 Ranking 4 Ranking 5 Ranking 6

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How do Corporations Use Standardized Files?

Most Corporations are happy with the level of details from standardized files

ISO 20022 camt.086

46%TWIST BSB45%

I do not know9%

In which format do you receive BSB?

Bank fee analysis

module of my TMS

46%Excel

conversion27%

Other27%

How are you using BSB files?

Yes67%

No33%

Are you statisfied with BSB level of details?

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Join the CGI-MP Task Force

Ask your bank for Electronic Files

Join LinkedIn Discussion Group (coming very soon)

Participate in industrial surveys

Raise your voice!!

Let’s make the banks more accountable for their billing structure and invoices

INTERNATIONAL BANK FEE ANALYSIS

international bank fees the next frontier · - rsfn - web banking - host to host ... do manual...

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