ECP Forum Introduction Catherine A Allen CEO BITS

ECP Forum Introduction Catherine A. Allen CEO BITS ECP Forum Birmingham, Alabama January 14, 2003 BITS Proprietary and Confidential © BITS 2002.

A Bit About BITS n CEO-created and CEO-driven Technology and Business Strategy Group n Sister organization to The Financial Services Roundtable n Founded in 1996 to address areas in which there is need for collaborative industry action n Focuses on emerging technologies, payments and e-commerce n Two membership categories: – BITS Members – BITS Affiliates BITS Proprietary and Confidential © BITS 2002. 2

BITS Mission Statement n The BITS Mission is to serve the financial services industry’s needs at the interface between commerce, technology and financial services. Commerce Financial Services Technology BITS Proprietary and Confidential © BITS 2002. 3

Imperative for Collaborative Action Exists in a Number of Areas Payments and Delivery Channels Legal and Public Policy Business Practices and Standards Communications, Research & Education Security and Risk Management E-Commerce Market Development BITS Proprietary and Confidential © BITS 2002. 4 Industry Infrastructure

How BITS Works Identifies Critical Issues Assesses Impact on Financial Institutions and What to Do Makes Recommendations to the BITS Board Implements Action Steps Monitors Results and Reports Back to BITS Board BITS Proprietary and Confidential © BITS 2002. 5

BITS Initiatives 2002 -2003 Future BITS FSR Identity Theft Victims Assistance Center Payments Strategies Authentication Issues Standards Aggregation Services Privacy Patent Issues Fraud Reduction Program and Related Initiatives Security Program and Related Initiatives Crisis Management Coordination Today Operational BITS Proprietary and Confidential © BITS 2002. Strategic 6

BITS Members n n n n Bank of America Corporation n The Bank of New York Company, Inc. n Bank of Tokyo-Mitsubishi Trust Company n BANK ONE CORPORATION n BB&T Corporation n Capital One Financial Corporation n The Charles Schwab Corporation n Charter One Financial, Inc. n The Chubb Corporation n Citigroup Inc. n Citizens Financial Group, Inc. n City National Corporation ABN-AMRO North America, Inc. ACE INA AEGON USA, Inc. Allfirst Financial, Inc. Allianz Life Insurance Company of America of North America Allied Capital Corporation AMCORE Financial, Inc. American General Am. South Bancorporation Aon Corporation Associated Banc-Corp AXA Financial, Inc. Bancorp. South, Inc. Banc. West Corporation BITS Proprietary and Confidential © BITS 2002. 7

BITS Members n n n n n Comerica Incorporated Commerce Bancshares, Inc. Compass Bancshares, Inc. Countrywide Credit Industries, Inc. Credit Suisse First Boston Cullen/Frost Bankers, Inc. Edward Jones Investments F. N. B. Corporation FMR Corp. (Fidelity Investments) Fifth Third Bancorp First Commonwealth Financial Corporation n First National of Nebraska, Inc. n First Tennessee National Corporation BITS Proprietary and Confidential © BITS 2002. n n n 8 First Virginia Banks, Inc. Fleet. Boston Financial Corporation Ford Financial Fortis, Inc. /Assurant Group Fulton Financial Corporation General Motors Acceptance Corporation The Goldman Sachs Group, Inc. Guaranty Financial Services Harris Bankcorp, Inc. The Hartford Financial Services Group, Inc. Hibernia Corporation

BITS Members n n n n n Household International, Inc. HSBC USA Inc. Hudson United Bancorp Huntington Bancshares Incorporated ING Americas Jefferson‑Pilot Corporation J. P. Morgan Chase & Co. Key. Corp Legg Mason, Inc. M&T Bank Corporation Marshall & Ilsley Corporation Mass. Mutual Financial Group MBNA Corporation Mellon Financial Corporation BITS Proprietary and Confidential © BITS 2002. n n n 9 Mercantile Bankshares Corporation Merrill Lynch & Co. , Inc. Met. Life, Inc. Minnesota Life Insurance Company National City Corporation National Commerce Financial Corporation Nationwide Northern Trust Corporation Old National Bancorp Pacific Century Financial Corporation The PNC Financial Services Group, Inc.

BITS Members n n n n n n n Provident Bankshares Corporation Provident Financial Group, Inc. Providian Financial Corporation Raymond James Financial, Inc. RBC Centura Banks, Inc. Regions Financial Corporation Riggs National Corporation Sky Financial Group, Inc. South. Trust Bank The St. Paul Companies, Inc. State Farm Insurance Companies State Street Corporation Sun. Trust Banks, Inc. BITS Proprietary and Confidential © BITS 2002. 10 Synovus UBS Warburg LLC Union Planters Corporation U. S. Bancorp United Bankshares, Inc. USAA Wachovia Corporation Waddell & Reed Financial, Inc. Washington Mutual, Inc. Wells Fargo & Company Whitney Holding Corporation Zions Bancorporation Zurich North America

BITS Affiliate Members n n n American Bankers Association (ABA) America's Community Bankers (ACB) Association for Payment Clearing Services (APACS) Canadian Bankers Association (CBA) Canadian Payments Association (CPA) CUNA ECCHO Independent Community Bankers of America (ICBA) NACHA PULSE EFT VISA USA BITS Proprietary and Confidential © BITS 2002. 11

ECP at BITS n BITS has focused on payments infrastructure efficiency since its founding, and recognized early the potential value of electronic check presentment (ECP) to both customers and FIs. n An early project was directed at better quantifying ECP’s value, and that work suggested the potential for significant economic benefit. BITS Proprietary and Confidential © BITS 2002. 12

ECP at BITS n In 1998 the BITS Board of Directors approved a set of industry goals relating to ECP adoption: – By 2001 100% of the industry’s largest FIs processing 50% of their check volume through ECP. – By the same date 50% of medium sized institutions processing some portion of their check volume through ECP. n Industry progress is reviewed with the Board on a regular basis, and this series of ECP Forums grew out of a recognition that progress in some markets among smaller FIs has been slower than desired. BITS Proprietary and Confidential © BITS 2002. 13

ECP at BITS n Today’s session is designed to suggest solutions to issues that have hindered the ability of mid and small size FIs to adopt ECP in certain markets. BITS Proprietary and Confidential © BITS 2002. 14

ECP at BITS n From an operating perspective, work in various BITS working groups suggests that ECP will reduce risk overall and has the potential to mitigate some key concerns: – Fraud Impact: Faster clearing reduces fraud potential. – Physical Transport Impact: Electronic transmission limits dependence on physical transportation. BITS Proprietary and Confidential © BITS 2002. 15

ECP at BITS n Working group output suggests that ECP may introduce new short term risks relating to the inability of the paying bank to inspect the physical check document before or after posting: – Forgeries or counterfeit documents – Alterations n There are, however, approaches to offset those risks. BITS Proprietary and Confidential © BITS 2002. 16

Sponsoring Organizations n American Bankers Association (ABA) n America’s Community Bankers (ACB) n BITS n Electronic Check Clearinghouse Organization (ECCHO) n Small Value Payments Company (SVPCo) BITS Proprietary and Confidential © BITS 2002. 17

For Further Information Catherine Allen CEO BITS Cathy@FSRound. org 202 -289 -4322 BITS Proprietary and Confidential © BITS 2002. 18