National Oil Companies

Skills Transfer Workshop 2017

Transactional Products and Services
Cash Management
10 October 2017
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Transactional Products and Services – Cash Management

Agenda

Cash Management Products

─ Transactional and Investment Products
─ Lending Products
─ Payments Products
─ Collections Products
─ Liquidity Management Products

Evolution of Clients' Payments and Collections Needs

─ Evolution of Clients’ Payment Needs
─ Evolution of Clients’ Collections Needs

Evolution of Clients’ Treasury Needs

─ Treasury Evolution
─ Treasury Stages

TPS Working Capital, Supply Chain and Trade Solutions

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Transactional & Investment Products

Payments &
Account Types Core Purpose Interest Tenure Overdraft
Collections

Current Account Transactional None Unlimited Immediate Available

Hybrid transactional
Saving Account Low Limited Immediate Available
and investment

Call Deposit Account Investment Higher None Immediate No

Term deposit, less

Notice Deposit Account Investment Higher None No
liquid

Term deposit,
Fixed Deposit Account Investment Highest None No
least liquid

Client Administered
Trust Accounts Third Party Funds Low Restricted Restricted No
Management

Bank Administered
Escrow Accounts Third Party Funds Low None Restricted No
Management
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Lending Products

  Commitment Accessibility Tenor Repayment Interest Rates

No structured
Borrow up to limit at
Overdraft Committed Intraday up to 1 year repayment, no set Highest
any time
maturity date
No structured
Borrow up to limit at
Call Loan Committed Overnight up to 1 year repayment, set Lower
any time
maturity date
No structured
Money Market Borrow up to limit at
Uncommitted Overnight up to 1 year repayment, set Lower
Advance any time
maturity date

Structured
Fixed amounts at
Term Loan Committed 1 month up to 1 year repayment, set Lowest
set times
maturity date

Payments Products
 Telegraphic Transfer
• Instrument utilised to send funds
cross border, utilising SWIFT and
correspondent banking networks
• May take several days to clear,
depending on the source and
destination countries
 Regional Real Time Gross Settlement
(RTGS)
• High value cross border payment
instrument set up within a specific
region i.e. SADC
• Generally same day value
 Domestic RTGS
• Domestic high value urgent
payment
• Funds settled and cleared within
half an hour
 Domestic Instant Payments
• Domestic low value real time
payment usually settled via a local
clearing house (ACH)
• Funds available immediately
 Domestic Electronic Funds
Transfer (EFT)
• Domestic low value bulk payment
instrument settled via an ACH
• Funds available on the same day,
or the following day
5
 Mobile Money Payments
• Low value payments to a mobile
money wallet offered via a mobile
network operator
• Currency converted to digital
currency
• Payment is real time in nature
 Cheques
• Physical bill of exchange drawn on
a bank in favour of a third party
• May take several days to clear
• Decline in usage due to cost, risk
and regulation

Collections Products*
 Physical Cash
• Physical tender issued by a
central bank
• Various banking products
associated with cash such as
ATM’s, bulk deposits and autosafe
devices
• High cost and risk associated with
cash handling
 Card Acquiring
• Payment for goods and services
utilising a bank issued card (debit
cards, cheque cards, credit cards,
petrol cards)
• Physical acceptance devices
known as point of sale (POS)
• Online acquiring for ecommerce
purchases
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 Direct Debits  Electronic Bill Presentment and
Payment (EBPP)
• Also known as debit orders
• Instrument to pull funds from a
• Ability to electronically present a
bank account via an automated
bill or invoice to the payer
clearing house
• Payment is made against the
• Low value transactions
• Requires signed agreement actual bill
• Ensures that the receiver can
between seller and buyer known
identify both who has made the
as a mandate
• May clear same day or the payment, and what the payment
was for
following day
• Dispute period allowed for
 Receipt Referencing
• Automated check of payment
reference to ensure the receiver
can identify who has paid them.
* In addition to the payments instruments on the previous slide
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Liquidity Management Products – Sweeping

• Automated transfer of funds between a customer’s own accounts

• Achieve treasury objective of having the right amount in the right account at the right time to meet payment obligations
• Achieve physical pooling of funds to optimise interest
• Uses ledger balance – intraday, end of day or retro
• Surplus sweeping only, funding sweeping only, target balancing
• Single entity vs multiple entity sweeping (intercompany loans, limitations on financial assistance, interest transfer pricing)
• Interbank sweeping

Before ZBA Sweep After ZBA Sweep

Acc 7 Acc 7
150 100

Acc 5 Acc 6 Acc 5 Acc 6

0 10 0 0

Acc 1 Acc 2 Acc 3 Acc 4 Acc 1 Acc 2 Acc 3 Acc 4

100 -200 20 20 0 0 0 0

Liquidity Management Products – Pooling
Full Set Off Pooling
Netting of client debit balances
(overdraft) and credit (deposit)
balances
Results in single net debit or credit No change to the underlying
balance between the bank and
client
Governed by Banks Act
Regulations
Net balance used for regulatory
reporting for capital adequacy,
liquidity and reserving
Single legal entity and multiple
legal entity basis
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Interest Enhancement Pooling
Only a basis for calculating
interest on a group of accounts
taken together
balance position of the
participating accounts (overdraft
and deposit balances) between
bank and client
Pooling Option Gross Balances Balances Used for Annual Interest
interest Calculation
Not governed by Banks Act
Regulations
Full Set-Off 150 DR 150 DR – 150 = 0 DR 50 CR x 5% = 2.5 CR
Pooling 200 CR 200 CR – 150 = 50 CR
Gross balances used for
Set-Off Amount = 150
regulatory reporting for capital
adequacy, liquidity and reserving
Partial Set-Off 150 DR 150 DR – 75 = 75 DR 75 DR x 10% = 7.5 DR
Pooling 200 CR 200 CR – 75 = 125 CR 125 CR x 5% = 6.25 CR
Assume a 50% Set-Off Amount 150 x 50% = 75
set-off percentage
Partial Set Off Pooling, Credit
Balance Only Pooling, and Gross Gross Balance 150 DR 150 DR 150 DR X 10% = 15 DR
Balance Pooling options Pooling 200 CR 200 CR 200 CR X 5% = 10 CR

Evolution of Clients’ Payments Needs
Basic mechanisms to pay
Pay Staff staff how they would like to
be paid
Make statutory payments in
Make Statutory
accordance with the
Payments
beneficiary requirement
Reduce cash payments;
Payment Options
ensure staff receive salaries
and Scheduling
at the same time
Beneficiaries need to know
Beneficiary Support when they are paid, and by
whom
Predictable real time
Predictability and
payments to minimize
Speed
funding requirements
Support shared service
Centralisation
centres
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Basic Payment Needs
Pay suppliers how and
Pay Suppliers for Cash; Cheque EFT; RTGS;
Cash; Cheque EFT’s where they would like to be
goods and services TT’s
paid
Cash; Cheque; EFT; RTGS
Advanced Payment Needs
What is the status of the
Mobile payments; Sync Transaction status feedback;
Transparency payment, how much will it
credits Swift GPI
cost
Referencing; Notifications; Improve efficiency Reduce cost through Direct Integration; Swift;
Reconciliation and risk automation and improve Reconciliation; Access
management risk management Controls
Improve Working Capital
Payment processing within Guarantee currency
Guaranteed Payments;
SLA’s; Instant Payments; Foreign Currency availability; adhere to
Regulatory support
RTGS; Swift GPI regulation
Further Cost Efficiency and Control
Centralised Payments; Manage payroll and Payroll and Supplier
Outsourcing
Payments on behalf of supplier payments Payment Services

Evolution of Clients’ Collections Needs
Stage 1: Basic Deposit cash and cheques
Sales into bank account
Stage 3: Costs to
Reduce sales & distribution
sell in own outlet
costs & risk
escalate
Aggregation; Receive funds
Stage 4: Use of
and information from third
third party channels
parties
Integrate into client’s
Stage 6: Bank used systems for sales and
as a sales channel payment processing
Receive payment on
Stage 7: Use of
digital channels
digital channels
(Online/App/USSD)
Stage 8: Collect from multiple
Centralisation geographies and reconcile
Maximise use of
Working Capital collections for working
capital funding
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Client owned retail outlets
Pull funds, receive card Direct Debits
Stage 2: Advancing
Cash and Cheque Deposits payments, accept mobile POS devices
payment methods
money Mobile devices
Cash in Transit
Cash Devices
Sales Reconciliation
Third party channels
Third Party Channels Stage 5: 3rd party Need to identify receipts &
Aggregators pays funds directly receive immediate
Information mechanisms to bank notification thereof
Referencing / Real time Electronic Bill Presentment and Payment / Sales reconciliation
Client sells through digital channels
Online Card Acquiring
Embedded Payments
Push bill
Client seeks to reduce cost to sell further
Shared service centre Stage 9 : Billing (invoicing) and Invoicing; debtors &
solution: Payment flow & Outsourcing collections services collection services
Information flow
Real time value for all
collections
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Evolution of Clients’ Treasury Needs Treasury Evolution

Stage 1:
Visibility Cash Exposure/ Bank Working Client Regulation
Review
Visibility Credit lines relationship Capital Credit
Emerging

Subsidiaries will continue to manage the bank

Stage 2: relationship, working capital and client credit terms
Local Cash during each stage.
Cash Exposure/ Bank Local borrow Local cash Foreign
Management Visibility Credit lines management Exchange
Account and invest

Stage 3:
Regional Cash Foreign
Cash Exposure/ Bank Local Local cash Global Global borrow Global cash Trade
Maturing

Management Visibility Credit lines Account Investment management Exchange Account and Investment management

Stage 4: Shared
Services Cash Exposure/ Bank Local Local cash Foreign Global Global borrow Global cash Trade Receivables
Visibility Credit lines Exchange Procurement Payments
Account Investment management Account and Investment management
Proficient

Stage 5:
Fully
Cash Exposure/ Bank Local Local cash Foreign Global Global Global cash FinanceTrade
Centralized Visibility Credit lines Exchange
Procurement Payments Receivables
Account Investment management Account Investment management

Review Bank Client Treasury Working

relationship Credit Policy Capital

Further improvements
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Evolution of Client’s Treasury Needs Emerging Treasury

Stage 1: Liquidity, exposure and regulatory visibility

Visibility Cash Exposure/ Accuracy of cash forecasting
Visibility Credit lines

Objective Client options Standard Bank response

Gain visibility of overall cash Receive daily balance information – Host and online transactional platform
position Standard Bank accounts

Receive daily balance information – Non Host and online transactional platform
Standard Bank accounts

Consolidated balance information Interoperability of host and online

platforms with TMS or ERP systems

Improved ability to ensure Cash flow forecasting Host and online transactional platform
adequate liquidity
Future capability** - TMS Services
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Evolution of Client’s Treasury Needs Emerging Treasury

Stage 2: Earning rate on invested funds

Local Cash Interest expense on borrowing
Cash Exposure/ Bank Local borrow Local cash Foreign
Management Visibility Credit lines management Exchange Borrowing base usage percentage
Account and Invest

Objective Client options Standard Bank response

Increase return on balances Credit balance interest strategy Interest bearing transactional account

Matching, laddering or tranched Short term investment products

interest

Local concentration or Pooling Liquidity management Sweeping/Pooling

Offshore investments Offshore investment products
Reduce earnings volatility Cash flow hedging - options GM options trading
due to interest volatility

Elimination of balance Working capital financing Overdraft and Short term loans
shortfall
Trade finance and supply chain Trade finance and open account trade
finance finance

Bonds and Commercial paper Structured and specialized financing

Long term loans IB long term financing

In house bank Liquidity management Sweeping/Pooling

Cost effective accounts Account review and rationalization Dedicated global client services and
advisory team
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Evolution of Client’s Treasury Needs Emerging Treasury

Stage 2:
Local Cash
Management
Cash Exposure/ Bank Local borrow Local cash Foreign FX gains and losses
Visibility Credit lines Account and Invest management Exchange

Objective Client options Standard Bank response

Reduce earning volatility due Establish FX exposure – data collection Global markets FX advisory team
to FX volatility
Home currency payments only Payments and receivables products
(LCY)

Shorter payment terms Open account trade products

Foreign currency accounts or loans Foreign currency deposit and loan
products

Forward exchange contracts Global markets foreign exchange

dealers

Currency futures, options and swaps Global markets trading desk

Sourcing changes Structured and specialized financing

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Evolution of Client’s Treasury Needs Maturing Treasury

Transaction error rate

Stage 3: Cost of services
Regional Cash Earning rate on invested funds
Cash Exposure/ Bank Local Local cash Foreign
Management Exchange
Global Global borrow Global cash Trade Interest expense on borrowing
Visibility Credit lines Account Investment management Account and Investment management
Borrowing base usage percentage

Objective Client options Standard Bank response

Increase return on balances Central or regional concentration Cross border sweeping

Bank overlay structure Cross border sweeping

Inter company loan management Future capability** - TMS Services

Reduce earning volatility due Cash flow hedging – options GM options trading
to Interest fluctuations

Elimination of balance Working capital financing Overdraft and Short term loans
shortfall
Trade finance and supply chain finance Trade finance and open account trade
finance. Letter of credit and discounting
facilities

Bonds and Commercial paper Structured and specialized financing

Long term loans Long term financing

In house bank Liquidity management

Sweeping/Pooling

Cost effective accounts Account review and rationalization Dedicated global client services and
advisory team

Establish treasury location Treasury advisory services Global relationship manager

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Evolution of Client’s Treasury Needs Maturing Treasury

Stage 4: Shared Cost of goods

Services Cash Exposure/ Local cash Foreign and services
Bank Local Global Global borrow Global cash Trade Receivables
Visibility Credit lines Exchange Procurement Payments Error rate
Account Investment management Account and Investment management

Objective Client options Standard Bank response

Cost savings and improved Procurement hub Host and online transactional platform
level of control

Trade instruments and risk management Letter of credit and discounting facilities

Establish Procurement Treasury advisory services Global relationship manager

location

Cost savings and improved Payment factories Host and online transactional platform
level of control
Collection factories Host and online transactional platform

Shared service center Host and online transactional platform

Payment netting Intercompany netting Host and online transactional platform

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Evolution of Client’s Treasury Needs Proficient Treasury

Stage 5:
Fully
Cash Exposure/ Bank Local Local cash Foreign Global Global Global cash FinanceTrade
Centralized Visibility Credit lines Exchange
Procurement Payments Receivables
Account Investment management Account Investment management

Review Bank Client Treasury Working

relationship Credit Policy Capital

Further improvements

Objective Client options Standard Bank response

Treasury effectiveness Review treasury management and Global relationship manager or

identify areas of further improvement. transactional banker

Global working capital review Working capital advisory services Global relationship manager or
transactional banker

Global bank relationship Banking services Global relationship manager or

management transactional banker

Cost of outside service Cost and fee review Global relationship manager or
review transactional banker
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TPS Working Capital, Supply Chain and Trade Solutions…

Working Capital , Trade and

Retail Services Access
Transact, borrow, invest and Access and connect to your
enhance your return. Accessibility working capital through a
through single banking platform. single online or host platform
Connect your supplier and your Host Online Branch Mobile from procurement to sale.
clients. Solutions solutions network

Receive Reconcile Accelerate

Accounts EFT Direct Debits POS Flow of money into your Simplified view and Receivables Speed up accounts
Receivable Statements reconciliation of receivables time
accounts through various discounting
payment mechanisms. monies received. through supply chain
Improved accounts discounting.
Card Cash e-Commerce receivable
performance. Pre and post
Reconciliation
shipment financing

View and Protect Grow

Borrow
FX Cash Risk management and Bank Short term interest
hedging Cash flow Visibility Investment earning investments, Short term Short term
Cash advisory solution assist to Account borrowings through
hedging sweeping and pooling Credit
protect your funds from overdrafts and term
market, counterparty or solutions.
loans.
LC and foreign currency volatility. Monetize inventory.
Foreign Monetize
Gaurantees Advisory Exchange inventory

Pay
Accounts
Local and cross border Extend
payable
salary, supplier and tax Extend the use of
Local and Tax payments. Focus on
Cross border payments Supplier Invoice and available cash but still
timing, speed and meet your payment
predictability. financing Import LC
financing obligations.