International Payments in the New Normal

Transcription

1 International Payments in the New Normal Managing Global Payments in a Dynamic Environment Craig A. Jeffery Managing Partner, Strategic Treasurer David E. Levine Director of Product Marketing, Bottomline Technologies

2 International payments have become increasingly vital and challenging in today s environment the New Normal. This white paper details the major factors impacting payments, describes the major payment components, and offers some directional guidelines for organizations seeking to leverage new technologies to support their organizational needs surrounding payments. Topics covered include risk management, cost, efficiency, and working capital optimization considerations. This paper is primarily intended for an audience comprised of US finance professionals. Finance professionals from other locations can also benefit from the content as long as adjustment is made to account for the originally intended audience. Payments in Context...3 Payment Goals...3 The New Normal Describes a Volatile Environment that Impacts Payments...3 Ongoing Increase in International Business...4 Company Challenges and Changes...4 Disparate and Constantly Changing Payment Systems...4 Pressures Related to Liquidity Management and Working Capital Optimization...4 Overview of the Complexity with International Payments...5 Complexity Structure...5 Complexity Scale Structure from Simplicity to Hyper-Complexity...6 International Payments Primary Categories...7 Cross-Border Payments...10 SEPA Single Euro Payment Area...10 International ACH Transactions (IAT)...11 Society for Worldwide Interbank Financial Telecommunications (SWIFT)...12 Cutting Through Complexity The Solution...13 Payment Hubs...13 SWIFT Connectivity, SWIFT Service Bureaus (SSB)...14 Conclusion...15 Credits...16

3 Payments in Context Payment Goals The transfer of value in order to foster good business relationships and optimally manage capital in an efficient and well-controlled manner, are the primary goals of payments. This is far easier to say or read than it is to accomplish given the variables that change so rapidly and dynamically for most mid to large size organizations. These challenges can be summarized in several categories: The New Normal. Unexpected and unpredictable risks and changes happening at tremendous speed. These have created a new set of expectations and requirements that extend beyond traditional payment concerns. Changing Corporate Environment. These changes include increasing globalization, acquisitions, and multiple and disparate systems managing payments. The changing corporate environment must also be understood in terms of bank relationships which support the balance sheet and both domestic and international operational requirements. These two categories include a range of significant issues and developments that confront treasury and payment professionals. These issues and developments have some overlap. We will focus on five themes that confront the majority of organizations. From Barter to Cross-Border The history of payments has included a significant number of changes over multiple millennia. Moving from barter to transfer of particular high-value, non-spoilable commodities that stored value well to fiat money systems, we see that they all sit within a specific set of themes. These themes include making trade easier, less costly, and more secure. Today, for many organizations, making payments to suppliers or employees in different countries represents a costly and painful process. International ACH, SEPA, the emergence of SWIFT for corporations, and payment hubs, represent exciting new developments that must be understood by all organizations and should be used by many. The New Normal Describes a Volatile Environment that Impacts Payments Since the beginning of the financial crisis there has been a far greater recognition of the magnitude of financial risk that confront organizations. This environment of increased risk that is unpredictable and happens at a far faster rate than expected can be described as the New Normal. The New Normal is a phrase coined by Pimco s CEO, Mohamed El-Erian, who used it when describing the view that We think that the global economy and markets are on a bumpy journey to a new destination, the vehicle is being driven primarily by policymakers, and they have already used the spare tire. i The breadth of changes brought about and recognized in recent times certainly includes policymakers. Federal Reserve chairman Ben Bernanke has stated that we are in an unusually uncertain environment. ii Treasurers and finance professionals also include macro-economic forces, acts of God, and other acts of men in the mix. There is a greater recognition of volatility and risk in everything from counterparty exposure, country-level and sovereign risk, to foreign exchange movements and commodity prices. Expectations have changed for finance generally and treasury in particular. International payments are a key component of many businesses, and the New Normal of volatility impacts not merely the efficiency of the processes surrounding payments but also the financial value of managing international payments in a well-controlled and effective manner. International Payments in the New Normal Page 3

4 Concerns about financial counterparties have risen during the New Normal. Payments are regularly initiated and settled through bank counterparties. The rate of apparent deterioration of major financial institutions has brought needed attention to organizational resilience and flexibility. The ability to move core operating services from one bank to another has historically taken far longer than would be considered appropriate or realistic in this environment. Given all these changes and factors, international payments processes and procedures must be reevaluated in light of the New Normal. Ongoing Increase in International Business Nearly all large organizations have substantial international business activity. This international emphasis also extends to much smaller organizations as well. The Association of Financial Professionals in a recent study found that 40% of companies with revenues in the range of $40M-$500M have global supply chains. Many organizations, in order to support their global businesses, also have significant banking relationships and accounts internationally. In a 2012 Strategic Treasurer and Bottomline Technologies survey, over 60% of organizations reported more than three bank relationships outside of their home country. International payments offer a range of different payment types, rules and settlement processes by country, and often by currency. Each new requirement or option requires a range of functionality or flexibility to be appropriately supportive. International presence and business continues to expand for many companies requiring the payments process to evolve which, in turn, requires greater adaptability. Company Challenges and Changes Many organizations undergo almost continuous significant change in one or more critical ways. Acquisitions, as well as divestitures, tend to require significant resources to manage. From the payment perspective, each new acquisition brings with it new accounting systems, payment platforms, and connections that often must be supported for many months or years, even if consolidation is planned. Businesses may grow or seek to grow through expansion to new markets and new countries. These initiatives also must be supported for employees, suppliers and other trading partners. Each aspect adds complexity. Bank relationships are also in a regular state of flux at some level, with some banks becoming less significant and/ or leaving the relationship entirely while others increase in importance. Each change in a relationship has a myriad of impacts. In many cases, these impacts include payment related requirements to support that change. Disparate and Constantly Changing Payment Systems Most mid-sized to large multi-national organizations find themselves possessing a number of systems that accomplish a range of payment related tasks. These disparate systems all must be upgraded and configured to support each new payment type. This process is typically far more difficult than might be initially expected. A system that has been in use effectively for years to generate checks might not support the additional banking information for in-country electronic payments. As more payment types, new countries and additional currencies are added, new data elements, file formats, and connection protocols are required. Pressures Related to Liquidity Management and Working Capital Optimization Liquidity management has been under great stress since the debt and capital markets froze at the beginning of the global financial crisis. While the debt and capital markets are slowly loosening, access to liquidity remains challenging. The 2012 GT News survey reported that 34% of respondents found access to liquidity much harder or a little harder. iii International Payments in the New Normal Page 4

5 Optimally managing liquidity and working capital requires looking at a range of sources and uses of liquidity. This certainly includes the cash conversion cycle, including the payables process. The use of capital based upon payment methods and payment terms requires great care as it impacts critical suppliers as well as those less key or unique. Paying supply chain partners in an effective and timely manner remains important. This component of the balance sheet is also used by some firms to support liquidity needs, but this must be done without destroying a trading partner or damaging a critical relationship. Pressures on effectively managing liquidity require that the payment process and supporting systems be designed to support those initiatives as well. Without exception, excellent organizations seek to continually improve their liquidity and cash management activities. This requires: Improving cash forecasting and spend management Driving business efficiency and accuracy through the effective use of technology and services Finding alternative sources of capital and financing Enhancing compliance and mitigating risk Creating a resilient organizational structure and flexible technology stack Overview of the Complexity with International Payments Moving from a single payment type in one country to many payment types across a range of countries represents a logarithmic increase in complexity of rules, formats and systems. However, the complexity arises from more than simply these three contributing factors. Complexity Structure Exhibit 1 below shows a simple progression of complexity. The x-axis (back office system to payment type and settlement process) shows the primary factors that add to the complexity an organization faces for payments. The y-axis is labeled one-to-many and ranges from simplicity to hyper-complexity. Not surprisingly, the more factors in each category, the greater the complexity as each additional back-office system and each additional payment type makes managing the processes and changes more challenging. Exhibit 1- Progression of Complexity International Payments in the New Normal Page 5

6 Complexity Scale Structure from Simplicity to Hyper-Complexity Exhibit 2 shows two bands within the complexity scale chart. The green band shows a simple payment operation. This has few variables. In this example, the following are present: One accounting system; one payment type (checks) One connection type (in this case a positive pay file) A single bank; USD for payment type Vendors or payments in one country (the US) Payment information details for the settlement defined by the payer. Additional complexity is shown by moving up in each column in the respective category. The red band shows an environment of hyper-complexity. This is exemplified by: Multiple back-office payment systems Multiple payment types (paper, ACH, FedWire, International Wire, SEPA Credit, etc.) Numerous connections (SFTP, SWIFT, Leased Line) Multiple banks to cover different businesses and regions of the world, multiple currencies, etc. Exhibit 2 - Hyper-Complexity The operational complexity, as indicated in this chart, is an inherent characteristic of international payments in organizations that have expansive reach and have often grown by acquisition. As the white paper progresses, please refer to this complexity chart in both the section on payment types as well as in the synthesis and recommendation section. International Payments in the New Normal Page 6

7 Exhibit 3 Detailing the Complexity The following chart adds in more details surrounding the complexity. International Payments Primary Categories This section examines the four primary global payment types and a number of recent developments related to each type. For comparison purposes, the following chart references the three NAFTA countries and the UK. Exhibit 4 Primary Global Payment Types This matrix lists several in-country payment systems as examples for four payment types. COUNTRY CARD CHECKS/CHEQUES ACH RTGS United States Canada Mexico United Kingdom VISA MasterCard AMEX Discover Debit Interact VISA MasterCard Debit/Credit VISA [Electron] MasterCard [Maestro] VISA MasterCard/Europay SWITCH Federal Reserve Bank of England Fedwire System Federal Reserve Direct between banks SVPCO [Clearing House Payments] USBE (USD) CECOBAN (MXP, USD) CECOBAN (MXP, USD) Bank of England EPN [Clearing House Payments] ACCS (CAD) [Canadian Payments Association] CECOBAN (MXP) CHIPS (USD, Xborder) [Clearing House Payments] LVTS Large Value Transfer System [Canadian Payments Association] SPEI - MXP Legend: Private or Association Central Bank International Payments in the New Normal Page 7

8 Card Payments. These electronically settled payments have high popularity for travel and entertainment activity across all company sizes. To a more limited extent, cards are used for corporate purchasing, generally for non-inventory items. These cards may or may not have a credit feature. The card numbers may exist merely as a number or take up corporeal form with a physical card. These payments settle through various networks including VISA, MasterCard, SWITCH, and so forth. Card payments on the corporate front, after advancing for a number of years, have plateaued. This is due in part to resistance to the interchange cost associated with payments. The total CAGR of credit cards showed actual usage decline between the 2006 and 2009 which was the only electronic instrument to do so in this period. iv The 2010 AFP Electronic Payment Report of Survey Results indicated that B2B card payments only made up 4% of total spending by transaction volume. vi Checks/Cheques. These paper instruments used for value transfers still make up the majority, by volume, of the business-to-business (B2B) activity in the US. In Europe and the majority of advanced nations, checks are used much less frequently. In terms of cheque usage, Canada sits somewhere between the US and Europe. Check usage for B2B has long been in rapid decline in most countries with the notable exception of the US. In the US checks in the consumer-to-business (C2B) and business-to-consumer (B2C) space have declined rapidly and consistently while B2B usage of checks has generally remained flat with some measurements indicating a slight increase and others a slight decrease. In the most recent study from the Federal Reserve, it is reported that B2B (commercial) check volumes have declined in overall volume between 2006 to 2009 moving from 8.3B checks to 7.8B checks annually representing a -2% CAGR. Notably, C2B activity declined at a -11% CAGR.). v The cost of producing, distributing, and clearing checks has continued an upward trend for over a decade. Exhibit 5 Automated Clearing House (ACH). ACH items are electronic payments that are made in a batch mode with settlement typically one or two days later. (The UK version is more message/response than batch and can also settle on the same day it is initiated). The transfer amounts range from low to middle value in many countries. ACH payments are typically the least costly method of making payments. In the US, new ACH types have been released, and volumes have continued to grow on a yearly basis even during difficult economic times when the total value of transfers stagnated and even declined. The growth of ACH has been disproportionately large compared to other payment types. International Payments in the New Normal Page 8

9 Exhibit 6 Historical Growth of US B2B (commercial) ACH Payments 12,000 10,000 8,000 6,000 4,000 2, ACH Volume (000,000) Commercial - US Volume (000,000) Most countries have an ACH system for domestic payments. Examples: US: Federal Reserve (National Automated Clearing House Association NACHA) Canada: Canadian Payments Association UK: Bacs In many countries, payment systems are run by the central bank. In the US, there are more private payment systems or consortiums. For example, ACH payments can pass through the Federal Reserve or through EPN. For wire transfers, the Fedwire system and/or CHIPS can be used. Exhibit 4, shown earlier, lists some of the main payments systems by each of the North American countries and the United Kingdom with private payment systems shaded as a contrast with central bank systems. Wire Transfer/RTGS. Wire transfers, also known as Real-Time Gross Settlement (RTGS) systems, normally have the following features: immediate value transfer, non-repudiation, higher value and lower volume than the other three payment types. Wires have a substantially higher per item cost than either ACH or checks. From a value perspective, wires in the US substantially dwarf all other payment methods. Wires are used by corporates for internal and external transfers. Internal transfer, or movements of funds between accounts controlled by the company, are often managed via banking systems using either a book entry (transfer stays entirely within the bank) or via an external wire transfer. External wire transfers (which would be likely to use the Federal Reserve system for domestic movements or CHIPS for international transfers) are used to send funds to trading partners or in some cases to other related internal entities. For companies that are members of SWIFT, the funds transfer instruction could also be delivered via the SWIFT network for ultimate value settlement elsewhere. At this point, relatively few US corporations use SWIFT for their wire transfer messaging. International Payments in the New Normal Page 9

10 Exhibit 7 Summary Chart of Payment Methods CHECKS CARD ACH WIRE/RTGS Entry/ Processing Method Batch process nightly Batch or individual Settled in batch Batch (generally Sometimes prompt and response (i.e. BACS) Real-time Fees Low High Lowest High Finality Rights of return Varies Relatively Short Window Final (typically) Timing Days (mail, processing, collection) 1 or 2 days 1 or 2 days Real-time Total Volume Varies by Country Varies by Country Highest Volume Low Value Low to Moderate Low Low to Moderate Highest Value International Payments Specific Developments Cross-Border Payments Cross-border payments is a general term which simply refers to payments made between two different countries. Cross-border payments have several common elements: Foreign Exchange. The majority of cross-border payments have some aspect of foreign exchange (FX) inherent in the process. There are some transactions, such as SEPA payments, that do not have an FX component as all transactions are in a single currency, the Euro. Providers. Services for cross-border payments are primarily provided by banks and some servicing companies (such as Western Union). Settlement between countries can be made using the bank s own system or facilitated with a partner bank called a correspondent bank. SWIFT. The messaging cooperative owned by banks, SWIFT, is the dominant communication network to exchange payment instruction messages. SWIFT is not a settlement network; these payment instructions are settled via various payment systems or correspondent systems. SEPA Single Euro Payment Area SEPA is a payment and debit architecture that was created to standardize message structure and lower the cost of cross-border payments in 32 countries (the 27 EU countries, 4 EFTA countries, and Monaco). It treats these payments, in most important manners, like an in-country ACH payment. This includes low cost, rights, and reduced complexity. For a US oriented treasurer, SEPA payments (and debits) in Europe are roughly analogous to the US ACH system. Another major advantage of SEPA is that only one EUR account is needed to support payments in all participating countries. This can reduce bank accounts, costs and payment complexity considerably. Additionally, this would allow a company transacting with many European counterparties to keep their cash in one of the more stable countries in this region. An organization that makes payments to 10 EU countries could now maintain a single EUR account. All of the excess funding transactions and account management expenses would be eliminated. SEPA payments are all electronic and use a standard file format (ISO20022). These non-urgent payments settle within a maximum of three days. The next key deadline for SEPA is February 2014 when all participating countries must use SEPA messages for credit transfers and direct debits. SEPA Pan European ACH (PE-ACH) payments have the general characteristics of in-country ACH types carrying a low-cost and settling on a subsequent day. All countries that are Euro-denominated will be required to use SEPA schemes for domestic and cross border payments by See Exhibit 8 for a graphical view of SEPA deadlines. International Payments in the New Normal Page 10

11 In order to facilitate the use and realize the benefits of SEPA, companies are encouraged to place two key bank address elements on all invoices: international bank account number (IBAN) and bank identification code (BIC). Placing this information on invoices allows payers to use SEPA for the majority of their payments without requiring a separate exception process of asking for the electronic address information. One major advantage of SEPA is that it allows a company to execute transactions in any euro country while maintaining cash balances in a more stable country in the Eurozone. Impact: While SEPA offers a number of benefits, it will require enterprises to make some mandatory changes. As noted, the migration deadline from national credit transfer and direct debits has been set for February SEPA also requires a format change from paper and various in-country formats to the new ISO20022 standard. Exhibit 8 Mandatory SEPA Compliance International ACH Transactions (IAT) The IAT is a particular type of ACH debit or credit transaction that has very specific compliance requirements to fulfill the directives of the OFAC (Office of Foreign Assets Control). In order to comply with these directives concerning dealings with sanctioned countries, entities, and persons, organizations must check transactions to foreign entities against the sanction list(s) to ensure payments are not made to proscribed parties. These regulations are generally aimed at making sure that terrorists, drug traffickers, organized crime and sanctioned countries are not enabled by the various banking and payment systems. This ACH format must be sent to a US bank which provides the required OFAC validation. The bank then can reformat the payment into the standard required by the foreign country or accept the inbound transaction on behalf of their client. An important element of this payment format in these transaction flows is the requirement and responsibility of the bank to provide assurance of OFAC compliance. It is also possible for corporations to create ACH transactions in the file format of the foreign ACH network and have this file put into a SWIFT FileAct wrapper for delivery and execution. In this situation the sender is responsible for ensuring OFAC compliance. Possible methods for organizations to ensure compliance include: 1) installing and managing software at their site or 2) using an outside solution offering from a SWIFT Service Bureau or other third party. International Payments in the New Normal Page 11

12 Society for Worldwide Interbank Financial Telecommunications (SWIFT) SWIFT is a cooperative owned by bank members in 210 countries. In addition to banks, publicly traded corporations and sponsored private organizations are now able to leverage the SWIFT network as members. There are currently more than 9,300 members of SWIFT. A standardized corporate membership model has been created for corporates called SCORE (SWIFT Corporate Environment). This environment allows corporations to access a range of needed services through the network including global bank balance and transaction information, domestic and international payments, securities transactions, and messages associated with a wide variety of other financial supply chain processes. This cooperative provides two major services. First, it is a messaging network. These messages may convey information about the transaction in a bank account, a message detailing a wire transfer payment that will be made, or even information about a foreign currency trade. Second, it is an organization that drives and supports messaging standards. This refers to ensuring that the business and banking messages that are required between its members are clear, consistent, and effective. Examples of newer messaging standards include those related to electronic bank account management (ebam) and a range of other new messages that employ richer and more complete format types using XML versus the delimited and position sensitive messages that have proliferated over the past 40 years. SWIFT, while providing the message network over which enormous volumes of payment instructions are sent, is not a settlement system. Messages move between banks or between banks and corporations on SWIFT. The network has several features that are very attractive to banks and corporations. Its security and reliability are unmatched in the financial messaging category. As an independent party to the messages flowing through its network, it also provides non-repudiation. This is the validation that messages sent are receive and picked up by the other party. This eliminates the We sent it and well, we didn t get it statements from becoming a real issue. SWIFT continues to grow rapidly as it adds other target industries and builds out existing services. The chart that follows shows the steady and significant growth of corporates joining SWIFT using the SCORE membership model. Exhibit 9 SWIFT Corporate Members Q4 2012Q1 2012Q3 SWIFT Corporate Members By Periods SWIFT use for corporations requires several key decisions based upon the organization s transaction volume and their ability to manage the SWIFT infrastructure and SWIFT expertise. There are three connection methods: 1. Connecting via the internet 2. Connecting via a specialized technology company (a SWIFT Service Bureau), or; 3. Using in-house infrastructure The majority of corporations joining SWIFT are using the service bureau method for connectivity. International Payments in the New Normal Page 12

13 Cutting Through Complexity The Solution In Exhibit 2 we showed the increasing complexity as additional systems, payment options, services, countries, and formats are added. There are both structural methods of simplifying payments in varying degrees (pooling, netting, multi-currency account) and service offerings. In this section we will limit the discussion to several of the major service offerings that can assist an organization in managing this complexity. These services allow an organization to scale their international payments gracefully. We will describe three of these services briefly: payment hubs, SWIFT connectivity, and settlement services, as shown in Exhibit 10. Exhibit 10 Solutions to Simplify Global Payments Payment Hubs In a recent paper, McKinsey & Company stated that Payment hubs are still a new technology but over time they will become the dominant architecture in the payment industry. vii When seen in context, this prognostication seems rather obvious. A payment hub can be defined as a centrally managed payment service that supports back-end systems and payment formats/types on a global basis. Payment hubs help simplify and manage the range of variables in the payment stream. In the graphic above, we illustrate three components of a payment factory in the process including the payment hub, connectivity and intermediate banking services. Emphasizing the payment hub portion for a moment, we typically see these hubs offering the following features: Connectivity to underlying payment systems. The hub will connect to multiple payment generating system (example: two accounts payable systems, payroll and claims payments). Formats and Payment Data. The payment hub often has an extensive array of the various payment formats that are required (ACH, Fedwire, Bacs, SWIFT MT101, etc.). Additional data and logic is included. The additional data can be used to supplement an internal legacy system that may not have the ability to add the fields or logic to process changes to payment formats or new formats. Changes can be made in the hub one time instead of within every single payment system in a company. Compliance and Control. Payment hubs provide a range of process and file control utilities between internal payments systems and with the external systems that deliver payment messages and execute the payments. All domestic and international payments passing through the payment hub are matched against sanction lists which are updated or maintained in a single location. International Payments in the New Normal Page 13

14 SWIFT Connectivity, SWIFT Service Bureaus (SSB) When payment files are created by a payment system or payment hub this information must either be delivered to a printer or to a settlement servicer such as a bank. Connectivity on a direct basis is relatively easy when you are dealing with a single bank. For many organizations there are numerous reasons why multiple banks are required. For many corporations connecting to their banks via SWIFT provides the range of advantages listed earlier in this paper. The two primary connection choices to SWIFT are via a service bureau (SSB) or directly. Companies will decide their connection type preference based upon volumes and their own ability and desire to maintain the hardware/software and internal expertise and associated costs (direct) or leverage a specialized firm s capability. By becoming a member of SWIFT and connecting to the SWIFT network, payments can be sent through a single connectivity pipe to 9,300+ financial institutions connected to SWIFT for settlement. All format types can travel over the SWIFT network reducing several key contributors to complexity (connections and formats). The chart that follows describes the three primary format types that are sent via the SWIFT Network. Exhibit 11 SWIFT Messaging Options SWIFT Format MT Messages Description These messages are well-established but use an older type of formatting (delimited, position can define the field). XML or MX Messages (ISO XML 20022) This refers to the newer, enriched, file formats that leverage new technology. FileACT. Other file formats (ACH, Proprietary, etc.) FileACT is a packaging service for files. An existing standard, non-swift, format can be packed up in a FileACT wrapper and sent along to the bank partner. FileACT can also be used to transport other proprietary or standard formats. Bank Settlement Services, Payment Settlement Services The range of bank settlement services is quite varied. Rather than attempt to capture this entire field, we will offer a brief and conceptual description of this important service category. Settlement services can range from FX transactions offered on a spot basis through a bank portal or by a payment provider such as Western Union. A particular transfer is requested, data is entered, and the bank or servicing company completes the remainder of the transaction leveraging their infrastructure or relationships. Some major international banks support file formats (such as Paymul) and can generate the proper payments from information contained in the batch file. International Payments in the New Normal Page 14

15 Conclusion Numerous external and internal forces have increased the international payment scope and requirements. The complexity that these additional demands have created is often significant. In addition to the various factors driving usage, the payment environment is undergoing significant changes to formats, rules and compliance requirements. Each of these changes adds resource requirements and/or complexity to the payment environment. Four major services or payment types are being used with increased frequency to help organizations scale their payments business by managing the complexity gracefully. These four items include: SEPA: Simplifying payments, reducing costs as well as bank account complexity, and managing country level risks within the Eurozone more prudently Payment Hub: Leveraging a single, enterprise-wide, solution to reduce complexity, cost, risk, and ensure flexibility SWIFT: Corporations are leveraging this network to reach more banks in a highly flexible and secure manner Settlement Services: Many major banks and private organizations, such as Western Union, have a range of offerings that greatly ease the pain and complexity of delivering actual payments to their final counterparty. The demands on organizations to provide affordable and well-controlled international payments continue to expand. This challenge is matched by opportunities in new services and more flexible options. Corporations will realize significant advantages by implementing the combination of payment hub, connectivity and banking services that best meet the needs of their organization. Exhibit 12 Detailing the Complexity International Payments in the New Normal Page 15

16 Credits i Goldberg, Steven. Investing in the New Normal. Kiplinger Personal Finance. Kiplinger Publications, 19 Oct Web. 26 Oct < ii Tanzer, Andrew. Where to Invest in Kiplinger Personal Finance. Kiplinger Publications, Jan Web. 26 Oct < iii Treasury Risk Survey Results GTNews [London] 2012: Print. iv Federal Reserve System. The 2010 Federal Reserve Payments Study. December 8, Print. v Federal Reserve System. The 2010 Federal Reserve Payments Study. December 8, Print. vi AFP AFP Electronic Payments Report of Survey Results. pgs 7-8. November 2010 vii McKinsey & Company, Payment Hubs: Redefining the Industry s Infrastructure, June About Bottomline Technologies Bottomline Technologies (NASDAQ: EPAY) provides collaborative payment, invoice and document automation solutions to corporations, financial institutions and banks around the world. The company s solutions are used to streamline, automate and manage processes involving payments, global cash management, transactional documents and invoice approval. Organizations trust these solutions to meet their needs for cost reduction, competitive differentiation and optimization of working capital. Headquartered in the United States, Bottomline also maintains offices in Europe and Asia-Pacific. For more information, visit