It's Alive – Bringing a Payment Strategy to Life May 24, 2016 Adrienne D. Terpak, CTP Corporate and Specialty Banking Segment Manager Treasury Management Services Presentation for:

Agenda  Strategic Thinking  Payment Strategy  Current environment  Looking forward  Change management  Bring your strategy to life  Measure success  Payment Trends & Innovation  Parting Thoughts 2

Strategic Thinking 3 Strategy Where are we? Where do we want to go? What changes have to be made? How should changes be made? How shall we measure progress? "Sound strategy starts with having the right goal." ― Michael Porter, University Professor, Institute for Strategy & Competitiveness, Harvard Business School

Payment Strategy 4

Where are we now? Drivers for Change 5

Where do we want to go? Forming a Strategy 6 Payment PolicyPayment Strategy Make Timely Payments Electronify Payments Minimize CostsMigrate to STP Basic Efficiency Enhanced Efficiency Contract Compliance Technology / Integration Reporting Visibility / MIS Mitigate Risk Optimize Economic Value

What needs to change? Payment Strategy Design 7 Available resources, job functions, segregation of duties, approvals Payment type, amount and purpose 1. Roles and Responsibilities Type, frequency, dollar amounts, contractual terms, goals Help to determine the payment type and channel used 2. Supplier Segmentation Cash, check, ACH, wire, card Cost, technology, speed, convenience, security, reporting, preferences 3. Payment Formats and their Utility Manual vs. automated - in-person, phone, fax, online, file transfer Cost, technology, speed, convenience, security, reporting, preferences 4. Delivery Channel Segregation of duties, security, authentication, audits Bank solutions – Positive Pay, ACH Blocks/Filters 5. Fraud Protection and Company Liability Source: AFP Payments Decision Guide to Creating a Payables Strategy, Part 1, 2013

Roles & Responsibilities 8 Job Functions & Responsibilities –Functional areas –Clearly defined titles and roles –Initiation, Approval, Exceptions Payment Controls –Segregation of Duties –Approval Levels –Vary by payment type / purpose? –Information Access Payments Procurement Accounts Payable Treasury Finance/ Accounting Accounts Receivable Source: AFP Payments Decision Guide to Creating a Payables Strategy, Part 1, 2013

Supplier Segmentation 9 Supplier Type Frequency Spend Supplier Contract –Price –SLAs –Payment Terms –Payment Type Experience / Relationship Preferred Commodity Strategic Competitive Supplier Type Matrix Example Value Risk Source: AFP Payments Decision Guide to Creating a Payables Strategy, Part 1, 2013

AmountSpeedTimingFinalityConvenienceCostTransparencyRisk Recon & Posting Remittances Payment Formats & Their Utility 10 Source: AFP Payments Decision Guide to Creating a Payables Strategy, Part 1, 2013 Assess buyer & seller needs Analyze payment type trade-offs

Delivery Channel 11 Channel Considerations  Channel - consumer v. business  Payment Direction  Infrastructure  Cost to use  Convenience  Interfaces (v. Integration)  Channel Security  Speed to make payment  Remittance Details  Trading Partner ability to receive payment ChannelPayment Types Supported In-personCash, Check, Card, ACH MailCheck, Card OnlineACH, Card, Wire MobileCheck, Card, ACH, Wire (ltd.) Secure File TransferCheck, ACH, Wire, Card EDIACH, Wire, Card EXAMPLE: Payment Initiation Channel Alignment Source: AFP Payments Decision Guide to Creating a Payables Strategy, Part 1, 2013

Fraud Protection & Company Liability 12 Fraud Prevention  Segregation of Duties  Dual Authorizations  Multi-factor Authentication  Documented Procedures  Formal Audits  Employee Checks  Separate or Standalone Computers  IT Security  Fraud Prevention Software/Solutions  Automation with Controls  Culture Rules & Regs Fed Regs NACHA UCC Card Networks OFAC FDIC FinCEN SOX Rules & Regs Fed Regs NACHA UCC Card Networks OFAC FDIC FinCEN SOX Source: AFP Payments Decision Guide to Creating a Payables Strategy, Part 1, 2013

How should changes be made? Engagement 13 Top Down C-Level Direction Good Bottom Up – Grass Roots WIIFM? Better Engage and get buy-in at every level! Best

How do we bring it to life? Managing the Change 14 Source: John Kotter's 8-step organizational change model

How do we measure success? Best Practices / Considerations 15 Trends – Macro and Micro Industry Standard Formats Organizational Culture Trading Partner Preferences Goals (Interim / Long-Term) with Timeline Communications / Awareness / Reporting Administration & Oversight K EEP THE P AYMENT S TRATEGY A LIVE !

Payment Trends and Innovation 16

CFOs Looking Ahead 17

Real-Time Payments 18

Innovation & Fintech 19

Innovation & Fintech 20

Parting Thoughts - Resources 21 Bankers Peers AFP Fed, NACHA, etc. Search Engines –Studies –Surveys –White Papers –Reports

Parting Thoughts 22 “A good plan today is better than a perfect plan tomorrow.” George S. Patton

23 Questions? Thank You ADRIENNE D. TERPAK, CTP Corporate and Specialty Banking Segment Manager Treasury Management Services TD Bank, America's Most Convenient Bank Phone: Adrienne.

Appendix 24 Industry Resources "2015 Payments Fraud and Control Survey Report." Association for Financial Professionals (AFP). AFP, 19 May Web.. "Executive Order 13636: Cybersecurity Framework." Cybersecurity Framework. The National Institute of Standards and Technology, 12 Nov Web. "Innovation in Payments: The Future Is Fintech." BNY Mellon, 08 Oct Web. fintech.pdf. "Payments Decisions Guide - Creating a Payables Strategy, Part 1." AFP Payments Guides. Association for Financial Professionals, Web.