What Does a Payment Provider Provide? Ralph Joy Senior Vice President Payables & Account Services Steve Stone Senior Vice President Strategic Business Development

What Are The Minimum Requirements For Payment Providers? Process payments Process only authorized payments Collect money from the party that owes, pay the party that’s owed: settlement Handle payment exceptions Monitor and control risk

What Types of Payments Exist? Coin and currency Checks Wire transfer (EFT) Debit and credit cards Automated clearing house (EFT)

What Are Customers Asking Payment Providers to Provide? (What Would Payment Providers Need to Do In Any Case?) Make payments owed: checks, EFT “Traditional” payment processing services: wholesale vs. retail Collect payments due: checks, EFT, cards(?) Open and maintain accounts: Activity & funds repositories Provide information pertaining to payment activity Resolve problems, answer questions Risk management Transaction / operational risk Provide liquidity and manage liquidity risk Balanced legal / compliance risk mitigation Control credit risk (unique to banks) Minimize strategic and reputation risk

How Do Providers’ and Customers’ Needs Differ? Provide credit vs. Control credit risk Quality vs. Service price Balanced terms & conditions vs. Minimal risk

How Do Providers Differentiate Their Services? Hours of operation and service Input, output and reporting options Degree of integration between systems Multi-currency or global capabilities Use of the web: reporting, initiation, service Industry specialization: credit, service capabilities, knowledge Cost of processing  Service pricing Comprehensive solutions….not just all types of payments

Liquidity Risk Why would a customer need $5,000,000,000 of liquidity?

Quality...How Will You Know It When You See It? TQM: what does it mean? Service standards: agreements, guarantees Independent assessments: Baldridge awards, ISO9001 Service: when and how?

PAYMENTS -- The Next Generation

Community of Financial Services Process Chain Value Ease Trading Lack of full range financial service offerings an obstacle to e-commerce activity. How can financial services be used to differentiate B2B e-commerce interactrion? What is the best way to integrate settlement solutions? How can the e-procurement process chain be extended? Community of Financial Services Process Chain Value Reduce the financial risk associated with B2B e- commerce “We’ve never dealt with this company before. How do I know I will get paid?” Ease Trading Partner Anxiety What do buyers / sellers need to know prior to or after a payment is made? How can e-commerce and related payment services facilitate a customers A/R or A/P management? Information Value

A financial settlement solution for the on-line B2B exchanges that incorporates….. ….. and provides value through the exchange to the end users.

e-Commerce Value Matrix PNC Bank’s Digital Community Settlement Service adds value to the e-commerce experience…... e-Commerce Value Matrix Extend Process Chain Beyond Procurement Use Flexible Settlement Options - Payment Control Eliminate ‘Off Line’ Activity Enhance Client Satisfaction Access to Information Increase Cash Flow - Reduce Cycle Time Generate New Revenue - Repeat Business Differentiates e-Commerce Strategies

Are B2B Needs the same as B2C or C2C Needs?? Aren’t Banks Obsolete? Why Use A Bank? Banks = or ? Banks can take deposits and make loans High on trust scale: reliability and confidentiality Risk management: credit, settlement, liquidity, legal, operational Access to the payments system: own the card networks Infrastructure investments: ACH, Chip cards, on line scoring, etc. Are B2B Needs the same as B2C or C2C Needs??