Trends in Business Deposits Larry Middleman CUBG National Conference August 22, 2012

PayPal Makes Play for More Mobile, POS Transactions “What’s in a name? At San Jose, Calif. Headquartered PayPal, potentially a lot. That’s because the payments innovator has now dropped “website” from its U.S. product names as it rolls out a suite of tools said to be aimed at helping small businesses collect money.” Online payments In-person, offline payments – ability to accept credit cards, PayPal, and checks in person using your smartphone, and a free thumb-sized credit card reader and app Mobile payments Invoicing Debit cards CU Times, 4/6/12

Deposit Services and Fee Income

Deposits? Who Wants Deposits?? The goal of most credit unions in today’s market is increased fee income, not increased deposits

What Credit Unions are Doing in Business Deposits… Some are doing nothing Few are starting out with a simple program Many are ramping it up past the basics A small number are doing the whole thing well

How to REALLY Get it Done Two tiered basic business checking account Account analysis Remote deposit capture ACH origination for business Business online banking Sweep and balance management

Account Analysis

Account Analysis Defined Account Analysis is an informational tool used to determine the balance levels needed by a commercial business in order to offset fees for services provided by the credit union. The business member’s account balances are used to compensate for the service charges associated with the account(s) activity.

Standard Charges for Account Analysis Account maintenance ACH – monthly maintenance Cash deposit ACH debits Checks deposited – on us ACH credits Checks deposited – transit RDC – monthly maintenance Checks paid RDC – per item Image clearings – on us Wire transfers Image clearings – transit Other fees can be added at the credit union’s discretion Cash Coin

Systems: Multiple Analysis Packages Example taken from ComCore Vol. 5: Administrative Options, Page 58

Systems: Account Rollup Consolidated Account Analysis Operating Account 1 Operating Account 2 Payroll Expense Account

Systems: Analyzed Money Market Consolidated Account Analysis Operating Account 1 Operating Account 2 Payroll Expense Account Money Market

Sweep Services and Balance Management

Sweep: Target Balance Excess Funds Deficit of Funds 1 2 1 2 Operating account Line of credit Money market account 1 2 Deficit of Funds Operating account Line of credit Money market account Reg D 1 2

Low Balance Transfer Linear Funding Linear funding allows the peg balance to be funded via a series of individual transfers from multiple accounts. A fee can be set for each transfer if desired

High Balance Transfer High Balance Transfers allow the member to transfer excess funds to payoff loan balances or to an income account.

So who wants to make money on business deposits?????

A Case Study… Bank of America Credit Union Difference Lower Service Charges $630 $319 $311 Higher Earnings on Available Balance $97 $125 $28 Total Monthly Benefit $339 Annual Benefit of Banking with CU $4,068

One more point… Are credit unions EVER going to use deposit account as a loan risk management tool ???

And that’s the way it is…