Volatility and the

Voyage of Discovery

MEGATREND 1EXTRAORDINARY MACROECONOMICS/P. 5

MEGATREND 2DEMOGRAPHICSHIFTS AND TRADE /P. 7

MEGATREND 3EXPONENTIALTECHNOLOGY/P. 9

MEGATREND 4COLLABORATIVEBANKING/P. 11

2017 Market Outlook EXECUTIVE

SUMMARY

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nOrdea.cOM

M EG AT R EN D 1

EXTRAORDINARY MACROECONOMICSnegative interest rates and what it means for you

M EG AT R EN D 2

DEMOGRAPHICSHIFTS AND TRADEradical shifts in demographics and geopolitics are shaping global trade

M EG AT R EN D 3

EXPONENTIAL TECHNOLOGYWelcome to the fourthindustrial revolution

M EG AT R EN D 4

COLLABORATIVEBANKINGnew regulations open up collaborative developer platforms

The 4 Megatrends

Report is issued by Business Innovation,Nordea Cash Management Customer Solutions.

3/12IntroductIon / 2017 MARKET OUTLOOK2017/V1

Even before 2016 delivered these unexpected events, there was little doubt that the era of smooth sailing had come to an end and more volatile waters lay ahead.

The Market Outlook report is an annual publication, issued by CMCS Cash Management Customer Solutions at Nordea, which employs various data sources to map out the hottest market trends, what they mean for our customers and how you can make the most of what lies ahead.

We reach out across the Nordea organisation to gather views and opinions from a diverse community of colleagues including business leaders, technologists, subject matter experts and senior management. We combine this input with the topics that are at top of our customers’ agenda plus a range of secondary sources including key reports issued by global consultancy organisations, media coverage and the talk-topics at major industry events.

Volatility and the Voyage of discovery2016 will definitely command some extra pages in the history books. With Brexit, President Trump, negative interest rates and increasing geopolitical instability, it certainly was a year to remember.

INTRODUCTION

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#1MeGaTrendEXTRAORDINARYMacrOecOnOMIcSNegative Interest rates and what it means for you

'The Treasury function is taking on a more strategic role amidst a volatile global economy'.Sophia Wikander Head of Business Innovation Nordea Cash Management Customer Solutions

6/12meGatrend 1: extraordInary macroeconomIcs / 2017 MARKET OUTLOOK2017/V1

Never before in modern economics have we encountered negative interest rates. Many leading economists had proffered that such a scenario was an impossibility, while others labelled it “voodoo economics.” And yet, here we are. Looking ahead, we may begin to see a gradual adjustment where some governments begin to borrow and spend in order to get their economies moving. In so doing, they just might change interest rate expectations and gradually bring to an end the long era of very low rates. The Fed’s small hike in December of 2016 could well have been the start of this process.

Even if we are expecting an upturn in rates, the current reality affects the treasury significantly. Bank deposit fees are now an economic reality. Gone are the times when holding surplus cash in the bank would earn a positive yield. Now, banks

are forced to pass on negative interest rates in the form of bank deposit fees (up to 40 basis points in the Eurozone), turning convention on its head.

Some treasurers are philosophical, taking the approach “we are where we are,” and are simply factoring in deposit fees as a cost of doing business during challenging macroeconomic conditions. Others, however, are searching for alternatives to minimise their bank deposit fee exposure. At Nordea, we think the best course of action is to consider a tailored approach based on the unique profile of each customer. As always, there are multiple options to consider, and we can help customers weigh the pros and cons of risk, yield and, of course, operational liquidity demands. Read the full report to find out more about our new AutoFX sweeping solution and how a hedging strategy can become vital when rates are so low.

extraordinary MacroeconomicsNegative Interest rates and what it means for you

MEGATREND 1

HIGHLIGHTS: Negative interest rates, voodoo economics, centralized treasury, optimized working capital, AutoFX

#2MeGaTrendDEMOGRAPHICSHIFTS and TradeRadical shifts in demographics and geopolitics are shaping global trade

'The Global community continues to open up trade corridors not just for physical goods but also for the exchange of ideas, data and new technologies that have no concept of borders'.Tabitha Cooper Strategic Business Developer, Innovation Lab Nordea Cash Management Customer Solutions

8/12meGatrend 2: demoGraphIc shIfts and trade / 2017 MARKET OUTLOOK2017/V1

Dramatic demographic shifts are transforming the global consumer landscape. Traditionally, a rising population fuelled a significant amount of consumer-led growth. However, in the new world, we will see a more targeted shift towards growth in per capita spending. This will have significant implications for companies. More than ever, companies will need to have actionable data on which consumer groups have disposable income, where they are located, what they want to buy and what drives their spending.

This granular approach to targeting consumer groups has already begun and is set to increase in the years ahead, playing an increasingly important role in future business expansion both at home and abroad. According to a recent report by McKinsey, “nine groups of urban consumers will generate nearly

75% of global urban consumption growth from 2015 to 2030.” In our report, we look at two of the largest emerging demographic groups and their potential impact on business as well as the growing momentum behind the demand for capitalism with a conscience.

The international footprint of corporates is rapidly expanding across both the established mature markets and also across the fast developing emerging markets. Increasingly, treasury is serving new regions via central liquidity and cash overview and centralised key functions. Recently, Nordea introduced a Trade Portal and Trade Club to help our customers explore growth opportunities and risks while trading and expanding into new markets.

demographicshifts and tradeRadical shifts in demographics and geopolitics are shaping global trade

MEGATREND 2

HIGHLIGHTS: Developing economies and urbanization, ageing societies, Treasury international footprint, Trade Portal

#3MeGaTrendEXPONENTIALTecHnOLOGYThe next 10 years will be game changing

Technology will define our future society. Data is at the heart of everything.Your data'.Ewan MacleodChief Digital OfficerNordea Group Digital

Follow me on Twitter: @Ew4n

10/12meGatrend 3: exponentIal technoloGy / 2017 MARKET OUTLOOK2017/V1

The technological rate of change is exponential, not linear. This has led some future analysts to claim that we are at the very beginning of a fourth industrial revolution, which will unleash the immense power and potential of technology and self-learning artificial intelligence. Technological advances certainly have the potential to be a short- and long-term bright spot in the future, and over the next 10 years we are sure to see significant advances as technology, smart data and AI combine.

In particular, mesh architecture networks, spanning the physical and virtual worlds, make it possible to bring together many individual technological components in order to yield even greater holistic benefits. For example, we foresee huge advances in the areas such as smart big data employment via

artificial intelligence, robotics, the Internet of Things (IoT), cloud computing and cybersecurity. Additionally, innovative Blockchain technology will continue to develop as protocols and use cases mature over time.

Technology matters. Why? Because technology will define our future as a society, and within this, it will define the future of banking. Customers expect us at Nordea to be both technology experts as well as banking experts and to provide the best technologies to drive their businesses forward. In Nordea, we are committed to continuing our digital journey so we can provide safe, stable and personalised real-time convenience, premium digital tailored services and centralised services via in-house banking offerings.

exponential TechnologyThe next 10 years will be game changing

MEGATREND 3

HIGHLIGHTS: Digital era, artificial intelligence, robotics, the Internet of Things, mobile convenience

#4MeGaTrendCOLLABORATIVEBanKInGNew regulations will open up collaborative developer platforms

'The customer is King. Top-level customer experience will be the primary grounds for competition'.

Jarkko TurunenHead of Open BankingNordea Cash Management Customer Solutions

12/12meGatrend 4: collaboratIve bankInG / 2017 MARKET OUTLOOK2017/V1

The maxim “The Customer is King” will still ring true in 2017. In fact, this statement will be amplified as the converging benefits of open banking regulation and technological advances shift societal and consumer expectations. In the face of these change factors, most business leaders still recognise that the delivery of top-level customer experience matters the most and that customer satisfaction and engagement will be the primary grounds for competition.

Regulation and Nordea’s Open Banking InitiativePSD2 will see Nordea introduce Open APIs (Application Programming Interfaces), including a special developer portal open to third party developers. This will

allow the third parties and developer communities to create, collaborate and build innovative apps on Nordea’s platform to solve customer pain points and create innovative new services and products.

A likely future scenario is that large banks will leverage new technology by providing platforms that act as “digital banking superstores.” Nordea began making significant investments in its core banking and payment platforms in order to optimise technological advances and prepare for the post-PSD2 landscape. This investment, and the next chapter in Nordea’s outward culture, creates the possibility to experiment with different niche providers, business model innovators and a community of non-bank entrants.

collaborative BankingNew regulations will open up collaborative developer platforms

MEGATREND 4

HIGHLIGHTS: Customer experience, PSD2 Regulation, Collaborative Open Banking, digital banking superstores