Banking-as-a-Service Christopher Huppert, SVP Treasury Management Payments Product Manager Carolina Cash Adventure May 23, 2016 © 2016 Wells Fargo Bank, N.A. All rights reserved. For public use.

22 Agenda  Trends in Financial Services  What are Application Programming Interfaces?  What is Banking-As-A-Service (BaaS)?  What does it mean for you and why should you care about BaaS and APIs in treasury management?

© 2015 Federal Reserve System. Materials are not to be used without consent. Communicate the 5 Desired Outcomes Federal Reserve: Strategies for improving the U.S. Payment Systems

44 Faster Payments Real-Time Payments Initiative Same Day ACHMasterCard Send VISA Direct P2P Payment Providers

55 Security Protecting your accounts from Unauthorized Activity Validating that the account details that you accept from your customers, your vendors and your employees is accurate Using new signals to improve account security: Biometric authentication Geolocation

66 Efficiency Develop technologies and rules that foster greater ubiquity and interoperability among payment directories for person-to-person (P2P), person-to- business (P2B) and business-to-business (B2B) payments Accelerate the adoption of secure electronic business-to-business (B2B) payments by working with stakeholders to address barriers to electronic payment adoption by businesses and leverage work by the Remittance Coalition X9 TR Remittance Standards Inventory Technical Report Available as free download from X9.org website under Standards, Remittance Coalition

77 International

What is an API? API Application Programming Interface Banking-as-a-service Real-time Instructions Developers data api perform task Channel software Immediate Response System Efficiencies Release Leverage Portal Services Functionality Imbed send users Standards development documentation access Simple Provide REST / JSON useful example interface powerful SDK expose users mobile Communicate tools data web information SDK consume

99 Enables direct & real time communication between back-office systems e.g., corporate-to-bank or bank-to-cloud ERP – easier for you to: Teach your IT and support Use Implement Receive enhancements Set of programming instructions Lets one software application ask another to perform a task or a series of tasks Application programming interface (API) Always on and performing real-time e.g., vs. instant messaging

10 Companies that use or provide APIs Google Uber Netflix Salesforce.com Enables unbundling of product offerings Companies can pick and choose which capabilities to use within their own business processes Why Application programming interfaces (API)? Companies can expose an API so others can use it to design capabilities rather than developing it themselves

11 How APIs are used Like a LEGO city, companies often build their product offering by combining products and services from a variety of other companies LEGO is a trademark of the LEGO Group, which does not sponsor, authorize or endorse.

12 How APIs are used API API LEGO and the LEGO logo are trademarks of the LEGO Group. ©2015 The LEGO Group. All rights reserved.

13 How companies can use APIs Uber uses services from a variety of other companies via APIs

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15 Facebook, Google and PayPal each wrote a block of code which allows Uber to use a select portion of their product or service. API

Banking-As-A-Service (BaaS): A new channel for companies to access banking products and services

17 BaaS: A new distribution channel

18 BaaS: A new distribution channel Allows companies to  Pick and choose which function(s) to use and embed them where they choose  Have real-time access to bank data and functions for their use  Leverage JSON/REST standards for APIs to implement and use functions quickly  Automate access to banking services Banking from the cloud

19 BaaS: A new distribution channel Supplements – does not replace – existing channels BranchATMPC – Home banking Portal – Online banking Mobile banking Banking as a service Allows companies’ systems to use treasury management services & data whenever, wherever they need, instead of making them come to banks, e.g., sending us files, accessing sites, asking for information Can eliminate persons logging into banking portal to access bank services/data Gives companies more choices: use bank functions within their choice of UI, software, context, workflow, etc.

Why should you care about BaaS and APIs? API Application Programming Interface Banking-as-a-service Real-time Instructions Developers data api perform task Channel software Immediate Response System Efficiencies Release Leverage Portal Services Functionality Imbed send users Standards development documentation access Simple Provide REST / JSON useful example interface powerful SDK expose users mobile Communicate tools data web information SDK consume

21 4 potential benefits Mitigate risk Automate treasury operations Enhance customer experience Improve customer service

22 Automate treasury operations – today… End of Day 1 End of Day 2 Bank Status Origination Consolidated Payables File Channel Today, some companies wait until the end of the day to collect and gather payments so they can create a consolidated payables file containing a batch of ACH payments that have been gathered throughout the day Clearing House

23 Automate treasury operations – tomorrow… Using APIs, individual ACH payments can be sent over as they occur throughout the day. They are then batched by a bank and passed through to the necessary clearing network. This allows you to get payments off your desk and receive periodic status updates as the individual payment is processed. End of Day 1End of Day 2 Bank Status API Bank Origination Status API Bank Origination API Bank Origination Status Clearing House

24 Mitigate risk – validate payees and their bank accounts Credit Check API Customer Name XXXXXXXXXXX Bank Account # XXXXXXXXXXX National Bank Account database Real Time Delayed Response Social Security Number XXXXXXXXXXX

25 Improve customer service Customer Call Center Site or System Online Banking Portal *A bank can host and makes available in real-time thousands of images of paid items and invoices Customer Call Center Site or System API

26 Enhance customers’ experience through mobile apps Pay Using Your Bank Welcome to Rancho Smith Mall! Scan a Receipt Latest Mall Offers Store Map Schedule an Appointment Track Mall Loyalty Points API

27 How can businesses benefit from Banking-as-a- Service?  Validate bank account information of the recipients of payment  Allow company back end systems to communicate directly with banks’ back end systems  Receive bank data real-time  Capture a more current, up-to-the minute, cash position  Migrate away from batch processing  Increase customer engagement through existing mobile channels  Accept mobile payments from customers through company’s mobile app  Implement a non-password method of authentication for end users’ access to digital channels

28 Potential business case metrics  # of hours saved & reduced cost of development of function  Amount of time (days/weeks/months) saved in rolling out your offering to your customer  Amount of hours & dollars saved in support & maintenance (including rolling out enhancements)  amount of time to produce cash position  Amount of time to do reconciliation  Increase in customer sales (i.e., revenue/profit to the company)  Reduce fraud/increased mitigation of risk  Amount of time for your company’s customer service group to respond to calls/questions/requests for information

29 Now what? Ask questions about what you heard in this session. Ask your developers/IT partners about APIs – do they know what they are? Do they understand the potential benefits? What questions or concerns do they have? What challenges are you facing today might be solved with real-time interaction with your banks?

Thank you!