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

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

3 BITS Proprietary and Confidential © BITS BITS Mission Statement 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

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

5 BITS Proprietary and Confidential © BITS 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 How BITS Works

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

7 BITS Proprietary and Confidential © BITS BITS Members 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 AmSouth Bancorporation Aon Corporation Associated Banc-Corp AXA Financial, Inc. BancorpSouth, Inc. BancWest Corporation Bank of America Corporation The Bank of New York Company, Inc. Bank of Tokyo-Mitsubishi Trust Company BANK ONE CORPORATION BB&T Corporation Capital One Financial Corporation The Charles Schwab Corporation Charter One Financial, Inc. The Chubb Corporation Citigroup Inc. Citizens Financial Group, Inc. City National Corporation

8 BITS Proprietary and Confidential © BITS BITS Members 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 First National of Nebraska, Inc. First Tennessee National Corporation First Virginia Banks, Inc. FleetBoston 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

9 BITS Proprietary and Confidential © BITS BITS Members Household International, Inc. HSBC USA Inc. Hudson United Bancorp Huntington Bancshares Incorporated ING Americas Jefferson ‑ Pilot Corporation J.P. Morgan Chase & Co. KeyCorp Legg Mason, Inc. M&T Bank Corporation Marshall & Ilsley Corporation MassMutual Financial Group MBNA Corporation Mellon Financial Corporation Mercantile Bankshares Corporation Merrill Lynch & Co., Inc. MetLife, 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.

10 BITS Proprietary and Confidential © BITS BITS Members 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. SouthTrust Bank The St. Paul Companies, Inc. State Farm Insurance Companies State Street Corporation SunTrust Banks, Inc. 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

11 BITS Proprietary and Confidential © BITS BITS Affiliate Members 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

12 BITS Proprietary and Confidential © BITS ECP at BITS 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. An early project was directed at better quantifying ECP’s value, and that work suggested the potential for significant economic benefit.

13 BITS Proprietary and Confidential © BITS ECP at BITS In 1998 the BITS Board of Directors approved a set of industry goals relating to ECP adoption: –By % 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. 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.

14 BITS Proprietary and Confidential © BITS ECP at BITS 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.

15 BITS Proprietary and Confidential © BITS ECP at BITS 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.

16 BITS Proprietary and Confidential © BITS ECP at BITS 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 There are, however, approaches to offset those risks.

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

18 BITS Proprietary and Confidential © BITS For Further Information Catherine Allen CEO BITS