The Future of Global Transactions Wilco Dado October 2011

Financial Crisis, Sovereign Debt Crisis, Recession… Implications for Corporates and Banks. Risk From open account to trade finance transactions Counterparty risk: more demand for bank agnostic channels Liquidity Costs Banks Not a negative impact on transaction volumes

Drivers for Change “Key drivers for change in payments infrastructures are regulation, greater standardisation, new competition and new technologies.” (Source: The Changing Face of Payments, June 2011) Innovation

Revolutionary Innovation, Evolutionary Innovation and Disruptive Innovation Cars Transactions Revolutionary Innovation Evolutionary Innovation Disruptive Innovation

Disruptive Innovation Revisited Disruptive products are simpler and cheaper Disruptive technologies are first commercialized in merging or insignificant markets Leading firms’ most profitable customers generally don’t want, and indeed initially can’t use, products based on disruptive technologies

Transactions? What Transactions? Number of Transactions in 2009 (Source: World Payments Report 2011) Cash 715 bn (75%) Banks 21 bn (93%) 1000 bn Non-cash 260 bn (25%) e/m Payments 22.5 bn (2.2%) Non-banks 1.5 bn (7%= 0.2% of the total)

The Future of Global Transactions

The Changing Face of Payments Developments most likely to occur: Automated Clearing Houses (ACHs) will have merged and will offer regional services Payments processing will be a key business for innovators and new entrants New payments processors will be more successful than current incumbents There will be specific payments processing infrastructures for mobile payments Cheques will no longer be used at all (Source: The Changing Face of Payments, June 2011)

The Changing Face of Payments Those least likely to occur: PayPal will be the largest payments processor on the planet SEPA will no longer be relevant Core payment systems, such as SWIFT, will have been replaced Cash usage will have declined to a minimum Payments will no longer be viewed as a core revenue stream by banks (Source: The Changing Face of Payments, June 2011) Ultimately, payments and collections are the lifeblood of all businesses. The transaction banking business clearly gives banks the potential to create strong and enduring bonds with clients.