Big 10 & University Credit Union Conference Top Industry Trends: What To Watch Out For Ronald Mazursky Strategic Initiatives Group May 12, 2017 May 12 2017

Agenda I. Credit Union Performance Trends II. Industry Trends Infrastructure Evolution User Experience Mobile Migration May 12 2017

Credit Union Performance Trends May 12 2017

Credit Unions Gain Strength in 2016 Source: Callahan, Peer-to-Peer Analytics, February 2017 May 12 2017

Credit Union Mergers and Acquisitions Industry consolidation continues Source: Callahan as of 9/30/16 May 12 2017

CU Loan Product Offerings Highlight Growth Opportunity Percent of Credit Unions Offering Loan Types Source: Callahan, Custom Reporting for JHA, February 2017 May 12 2017

Loan Portfolio Mix Reveals Opportunity Source: Callahan, Custom Reporting for JHA, February 2017 May 12 2017

2017 Predictions The U.S. economy will grow by 2.5% Fed Funds rate to hit 1.4% by year-end 10-year Treasury to top 3% Credit union membership to increase by 3.5% New auto, credit cards, and mortgage to be strong Delinquency at .75% Net charge-offs down to .5% Savings balances grow by 5.5% (down from 6%) Source: CUNA, Economic and Credit Union Forecast, 2017 May 12 2017

2017 Credit Union Loan Growth Expected to Slow Almost 11% throughout parts of 2016 CUNA predicts 9% loan growth in 2017 Source: Callahan, “Callahan Peer-to-Peer Analytics”, February 2017 May 12 2017

Consumer Debt Avoidance to Impact Lending 80% of borrowers surveyed are resistant to taking out new loans 39% Would avoid debt if possible 41% Would avoid debt at all costs Source: Filene, Confidence in Borrowing Survey, 2016 May 12 2017

Agenda I. Credit Union Performance Trends II. Industry Trends Infrastructure Evolution User Experience Mobile Migration May 12 2017

2/3 of banks saw organic growth of customers over the past year… I. Trends – Infrastructure Evolution 2/3 of banks saw organic growth of customers over the past year… DATADRIVEN Organic Acquisition/Merger 58.3% 41.7% 67% Source: SI-16 Survey Question: Background Q 3 and Q4. Q3: How has the number of customers at your bank changed over the past year? Q4: If there has been growth in the number of customers over the past year, where has the majority of the growth come from?

54% of banks expect to see 6-25% decline in branch traffic I. Trends – Infrastructure Evolution But, bankers expect to see a significant decline in branch traffic over the next 5 years DATADRIVEN 81% of banks foresee a decline in branch traffic over the next five years! 7% of banks expect to grow branch traffic during this period 54% of banks expect to see 6-25% decline in branch traffic Source: SI-16 Survey Question: Background Q 7. What change do you anticipate in your branch traffic volume in the next five years?

Continued Demand for Branch Automation I. Trends – Infrastructure Evolution Continued Demand for Branch Automation Source: SIG, “Strategic Initiatives Banking Study 2016”, May 2016 May 12 2017

The Sudden Emergence of Fintech I. Trends – Infrastructure Evolution The Sudden Emergence of Fintech May 12 2017

Investments in U.S. Fintech peaked in 2015 I. Trends – Infrastructure Evolution Investments in U.S. Fintech peaked in 2015 May 12 2017

The Broad Reach of the Fintech Market I. Trends – Infrastructure Evolution The Broad Reach of the Fintech Market Source: venturescanner.com/infographics (April 24, 2017)

Infrastructure is Being Upgraded I. Trends – Infrastructure Evolution Infrastructure is Being Upgraded Source: Venture Scanner Financial Technology Startup Landscape Trends and Insights (January, 2017) May 12 2017

Agenda I. Credit Union Performance Trends II. Industry Trends Infrastructure Evolution User Experience Mobile Migration May 12 2017

User Experience Matters to Consumers II. Trends – User Experience as Differentiator User Experience Matters to Consumers Recent consumer research reveals that: 81% Are frustrated dealing with a company that isn’t easy to do business with 73% Expect customer service to be easier and more convenient 61% Want customer service to be faster 44% Complain on social media about poor customer experiences Source: Accenture Global Consumer Pulse Survey, 2016 May 12 2017

What Consumers Want II. Trends – User Experience as Differentiator Source: Omni-channel and Retail Banking – Why All The Buzz?, IDC Financial Insights, September 2014 May 12 2017

Tech Trends Enhance the Member Experience II. Trends – User Experience as Differentiator Tech Trends Enhance the Member Experience Biometrics Artificial Intelligence Chatbots April 26

II. Trends – User Experience as Differentiator Biometrics May 12 2017

MasterCard and USAA II. Trends – User Experience as Differentiator May 12 2017

Biometrics Overtake Passwords II. Trends – User Experience as Differentiator Biometrics Overtake Passwords Fingerprint Scanning Leads in Consumer Confidence May 12 2017

II. Trends – User Experience as Differentiator Chatbots May 12 2017

Chatbot Examples II. Trends – User Experience as Differentiator May 12 2017

Chatbots Growing Faster Than iOS Apps II. Trends – User Experience as Differentiator Chatbots Growing Faster Than iOS Apps Chatbot growth exceeding that of smart device apps, consumers are more accepting of them, and will likely become part of financial services delivery in the next several years. 170% growth in a three month period Source: Citi Research, TechCrunch, Company Reports May 12 2017

50+% of Consumers Use or are Interested in Using Voice Chatbots II. Trends – User Experience as Differentiator 50+% of Consumers Use or are Interested in Using Voice Chatbots 84% use or want to 70% use or want to 62% use or want to 50% use or want to SOURCE: BI Intelligence, February 2017 May 12 2017

87% of FIs Have or are Planning for Chatbots II. Trends – User Experience as Differentiator 87% of FIs Have or are Planning for Chatbots Source: Financial Institutions Bullish on Chatbots, The Financial Brand, January 2017 May 12 2017

Chatbots Reduce the Cost of Customer Service II. Trends – User Experience as Differentiator Chatbots Reduce the Cost of Customer Service Nearly 30% Annual Customer Service Rep Salary Savings SOURCE: BI Intelligence, Company Reports, December 2016 May 12 2017

Chatbot Research & Demos II. Trends – User Experience as Differentiator Chatbot Research & Demos May 12 2017

Agenda I. Credit Union Performance Trends II. Industry Trends Infrastructure Evolution User Experience Mobile Migration May 12 2017

U.S. Demand for Mobile Devices III. Trends – Mobile Migration U.S. Demand for Mobile Devices Source: Pew Research Center May 12 2017

Mobile Adoption Not Limited to Gen Y III. Trends – Mobile Migration Mobile Adoption Not Limited to Gen Y Source: First Annapolis Consulting, Inc. Study of Mobile Banking & Payments (3rd Ed.) May 12 2017

Increased Demand for Mobile Banking III. Trends – Mobile Migration Increased Demand for Mobile Banking Source: First Annapolis Consulting, Inc. Study of Mobile Banking & Payments (3rd Ed.) May 12 2017

III. Trends – Mobile Migration As customer bases grow and branch traffic declines, online and mobile become the channels of preference DATADRIVEN Source: SI-16 Survey Question: Online and Mobile Banking Q1 and Q2. Q1: Indicate your current perspective on using online channels to apply for each of the following new accounts/services. Q2: Indicate your current perspective on using mobile challenges to apply for each of the following new accounts/services.

III. Trends – Mobile Migration As customer bases grow and branch traffic declines, online and mobile become the channels of preference DATADRIVEN Source: SI-16 Survey Question: Online and Mobile Banking Q1 and Q2. Q1: Indicate your current perspective on using online channels to apply for each of the following new accounts/services. Q2: Indicate your current perspective on using mobile challenges to apply for each of the following new accounts/services.

The Bottom-Line Fintech partnerships present opportunities to capitalize on their strengths Improvement in user experience supports improved ROI Support exists for tech trends - biometrics and chatbots are gaining consumer and FI acceptance and demand Mobile banking and payments appeals to all May 12 2017

Thank You Ronald Mazursky Director of Strategic Initiatives Strategic Initiatives Group rmazursky@jackhenry.com May 12 2017