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The Convergence of Payments Drivers and Solutions John M. Curtis, AAP Vice President and The Convergence of Payments Drivers and Solutions John M. Curtis, AAP Vice President and Senior Product Manager Bank of the West © 2007 Bank of the West. Member FDIC

The Convergence of Payments Agenda Industry Overview Drivers Solutions Considerations Emerging Technologies 2 The Convergence of Payments Agenda Industry Overview Drivers Solutions Considerations Emerging Technologies 2

Industry Overview Electronic Payments 2004 Electronic Payment Volume exceeded Paper Check Volumes Integration of Industry Overview Electronic Payments 2004 Electronic Payment Volume exceeded Paper Check Volumes Integration of ARC (Accounts Receivable) Check Conversion Commercial Electronic Payments grow by 23. 7% 2005 Online Banking Customers grew by 27% to nearly 40 MM Bill Payment use increased by 36% 2008 Over 18. 2 Billion ACH Payments = $29 Trillion First full year for BOC (Over 78 million payments) WEB volume increased 19. 7% to 2. 1 billion payments B 2 B payments exceeded 1 billion addenda records Addenda Record growth represented a 14. 6% increase over 2007 3

Industry Overview Paper Checks 2003 - 2006 The number of checks paid decreased 6. Industry Overview Paper Checks 2003 - 2006 The number of checks paid decreased 6. 4 percent per year Paper check volume decreased 6. 7 billion by the end of the period Average Value of Checks Paid increased from $1, 104 in 2003 to $1, 366 in 2006. Paper check volumes continue to decline Gee, Thanks! Although still in circulation, checks are going the way of the. . . 4

Industry Overview Image Exchange Federal Reserve consolidated all Paper Check Processing to Cleveland Office Industry Overview Image Exchange Federal Reserve consolidated all Paper Check Processing to Cleveland Office in February 2010. Check Images processed in Atlanta Remote Deposit Capture has grown 8 times in market size from 2006 – 20081 Many municipalities have adopted a hybrid of Remote Deposit Capture and ACH Conversion 1 – Global Concepts Study (June 2008) 5

Industry Overview Commercial Cards Government prepaid applications offer substantial global opportunity with recent estimates Industry Overview Commercial Cards Government prepaid applications offer substantial global opportunity with recent estimates placing the total opportunity at $284 billion 1 Government usage of prepaid cards has become one of the fastest-growing segments of prepaid in recent years 2 The average Travel Card rate of expected increase of 2011 over 2008 spending levels is 4. 7% for Government and Not-for-Profit segments. PIN Debit Card usage now exceed Credit Card usage Three Primary Government Opportunities: Social Benefits and Entitlement Employee Payroll and Incentives Government Business and Operations Consider your ‘Un-Banked’ partners and constituents. 1 -Study by CPI 2 -Boston Consulting Group, May 2008. Research commissioned by Master. Card 6

Payment Drivers Business Drivers - Innovators Mostly Private Industry / Large Billers Telecom (Phone Payment Drivers Business Drivers - Innovators Mostly Private Industry / Large Billers Telecom (Phone / Internet / Cable) Credit Card Companies § Encouragement to Go Green! Payment Providers Pay. Pal OBO Pay E-Wallets Bank Issued Credit Cards Capitalizing on Consumer Safety Regulations and Products Points Programs = More Usage = More Revenue 7

Payment Drivers Consumer Drivers / Adopters Why is this happening and who’s making it Payment Drivers Consumer Drivers / Adopters Why is this happening and who’s making it happen? Consumers want: Ease of Use Security Rewards Confidence – Comes from regulations § Regulation E § Credit Card Warranties 8

Payment Drivers Government (ABA Newsbytes: April 20, 2010) Treasury Goes Green & Saves Green Payment Drivers Government (ABA Newsbytes: April 20, 2010) Treasury Goes Green & Saves Green Broad New Initiative Will Increase Electronic Transactions, Save More Than $400 Million, 12 Million Pounds of Paper in First Five Years Alone WASHINGTON – With Americans poised to celebrate the 40 th anniversary of Earth Day this week, the U. S. Department of the Treasury today announced a broad new initiative to dramatically increase the number of electronic transactions that involve Treasury and millions of citizens and businesses, a move that is expected to save more than $400 million and 12 million pounds of paper in the first five years alone. In addition to greatly reducing costs, enhancing customer service and minimizing Treasury's environmental impact, the move from paper to electronic transactions will increase reliability, safety and security for benefit recipients and taxpayers. Full Article: http: //www. treas. gov/press/releases/tg 644. htm 9

Payment Drivers So many drivers. . . WHY? Consumers and businesses want multiple payment Payment Drivers So many drivers. . . WHY? Consumers and businesses want multiple payment choices Checks? (Yes! Checks!) How many are dropped in the mail at 11: 59 PM each April 15 th? ACH Debits Card Payments In the end it’s all money! Ease of use Cost Safety / Security Added benefits 10

Solutions You’re telling me I have to accept ALL of these payment types? How Solutions You’re telling me I have to accept ALL of these payment types? How am I supposed to manage this process? Determine your strategy Make use of available tools 11

Solutions ACH Check Conversion vs. Image Exchange What is the difference? ACH Check Conversion Solutions ACH Check Conversion vs. Image Exchange What is the difference? ACH Check Conversion Image Exchange ACH Network Check Clearing Network ACH Rules Check 21 Law Authorization Required No Authorization Required Opt-Out Provisions / Bus Check Limitations No Opt-Out or Business Check Limitations Only Sends Data Transmits Images with Data Generally 100% Next Day Availability Varies The benefit of funds availability is stronger than you think. Ask yourself two questions: What are the dollars running through your unit? What are the cost differences? 12

Solutions Multi-Channel Payment Platforms Accept payments via: Integrated platform to your Web Site ACH Solutions Multi-Channel Payment Platforms Accept payments via: Integrated platform to your Web Site ACH Payments Card Payments CSR IVR (Interactive Voice Response) County of Quahog How To Pay Property Taxes Payments can be made by the following methods: Mail - P. O. Box 001 Quahog, RI 90058 Please make checks payable to: Stuart Griffin, Quahog County Treasurer Phone - Call (213) 555 -1212 (Credit card only) Online (Credit card or e-check) Electronic Funds Transfer (EFT) In Person Mail Lockbox (Bank Provided / In-House) Convert Checks to ACH 13

Solutions Multi-Channel Payment Platforms What payment channels are available? Web Payments ACH Credit Card Solutions Multi-Channel Payment Platforms What payment channels are available? Web Payments ACH Credit Card Check § Converted to ACH § Image Exchange 14

Solutions Multi-Channel Payment Platforms How do I know the payment is good? Identity Verification Solutions Multi-Channel Payment Platforms How do I know the payment is good? Identity Verification Account Validation Payment Acceptance Databases Offered by both private companies and financial institutions Use caution with private companies, you could be taking a gamble 15

Solutions Here’s a question for you: Do I care if the payment is good? Solutions Here’s a question for you: Do I care if the payment is good? What is the service being offered? § Is this a product walking out of the door? § Can I turn off the service? § What are the chances of collection? § What is the true risk? Can I charge penalties for returned payments? § How much can I charge? § What does my bank charge? § What is the difference? § Is this a revenue opportunity? 16

Solutions Online Bill Pay Large volumes from Bill Pay Providers? FIS Fiserv Online Resources Solutions Online Bill Pay Large volumes from Bill Pay Providers? FIS Fiserv Online Resources i. Pay Consider Consolidated Receivables One file from all Bill Pay providers Single ACH Credit 17

Solutions FIS Fiserv Current Non-Electronic Bill Pay Flow i. Pay 18 Solutions FIS Fiserv Current Non-Electronic Bill Pay Flow i. Pay 18

Solutions FIS Fiserv i. Pay Bill Pay Flow with Bill Consolidator 19 Solutions FIS Fiserv i. Pay Bill Pay Flow with Bill Consolidator 19

Considerations What are my current Payment Challenges? Do I have a Payments Strategy? If Considerations What are my current Payment Challenges? Do I have a Payments Strategy? If I change my payment strategy: What is the True Benefit? Cost Savings § Hard Dollar - Immediate § Efficiencies – Over Time Expedited Availability Can I leverage the strategy throughout multiple departments? What will it cost to implement? How will this be funded? What is my ROI? How will training be conducted? How will I track my success? Who is my Payments Czar? 20

Emerging Technologies The Future is Now! I’m telling you Marty, paper is out, electronic Emerging Technologies The Future is Now! I’m telling you Marty, paper is out, electronic is on its way out, Your kids will be making Wireless Payments ! 21

Emerging Technologies Kiosk Payments Constituents can pay their bills through kiosks located at your Emerging Technologies Kiosk Payments Constituents can pay their bills through kiosks located at your offices, convenience stores all over the country, or delegated to your region. Scan Bill, Enter Account or Lookup Pay by ACH or Swipe Card Convenience Fee Revenue 22

Emerging Technologies Mobile Payments ACH or Card Multiple Uses Pay Utility Bills Send funds Emerging Technologies Mobile Payments ACH or Card Multiple Uses Pay Utility Bills Send funds to Students Pay your share for Dinner § No more “I left my wallet at home” § You will remember your phone before your wallet! 23

Emerging Technologies The Future Same Day ACH Federal Reserve expects deployment Q 2 2010 Emerging Technologies The Future Same Day ACH Federal Reserve expects deployment Q 2 2010 No changes to ACH Rules – Only number of processing windows Financial institutions must opt-in with one another Faster Returns = Reduced Risk Same Day Settlement More Mobile Technology Pay Merchants by Phone RFID – (Radio Frequency Identification) Multiple Payment Options 24

Emerging Technologies Some Vision – Where are we headed? Why carry a wallet? Your Emerging Technologies Some Vision – Where are we headed? Why carry a wallet? Your cell phone may contain all of this on a SIM Card: Driver’s License with Picture, Thumbprint, Vehicle Registrations, SSN All Payment Cards All Bank Accounts Blood Type Donor Information Complete Medical Records The name of your Big Brother born in 1984 25

The Convergence of Payments Questions 26 The Convergence of Payments Questions 26