Paper to Electronic: Automating Receivables Bill Coward, VP Electronic Receivables Consultant June11, 2014

Agenda Trends  What is causing new payment trends  Who is impacted Minimize paper – transition to electronic receivables  How to move forward efficiently and cost-effectively  Highlight best practices and payment trends Leverage technology to navigate the complexity of payment processing  Identify the pricing components of card processing  Outline best practices to insure lowest possible costs are achieved

© 2013 Wells Fargo Bank, N.A. All rights reserved. Member FDIC. Innovation is driving change 2 trend Mobile trend Applification trend Cashless Society trend Social Shopping trend T-Commerce

© 2013 Wells Fargo Bank, N.A. All rights reserved. Member FDIC. Which industries need a payments strategy? 3

© 2013 Wells Fargo Bank, N.A. All rights reserved. Member FDIC. Not just retailers anymore 4 Most widely held procurement cards are with the Federal government Moving toward pre-paid/stored value cards Government Healthcare reform has decreased reimbursement: providers are being asked to do more with less Increased upfront collection reduces DSO/Cost collection Flexible Spending Accounts - $2,500 Healthcare Mass exodus from paper to electronic Recurring payments Fraud risk is low Insurance and Utilities

© 2013 Wells Fargo Bank, N.A. All rights reserved. Member FDIC. Why? 5 1) Mail-in payments declining2) Biller direct is preferred3) Card payments still growing4) The underbanked need alternatives5) Finally embracing e-bills

© 2013 Wells Fargo Bank, N.A. All rights reserved. Member FDIC. 6 Common goals… Reduce cost, complexity and risk POSWeb CC/IVR Mobile ERPMOTO Single integration for multiple channels Consolidated reporting

7 The AR treasure hunt

Take your AR to best-in-class 8 Clear payments in 1.3 days Reduce manual intervention by 50% $0 Adopt new technology with capital expenses Source: May 2012 Aberdeen study

The changing AR landscape  Increased complexity, cost, risk  Dual processes for checks, electronic payments  High cost to maintain, upgrade infrastructure  USPS service reductions  Regulatory pressures  No fallback with single-site operations 9

Today - Aging Silo’d $$$ Reactive Best-in-class Advanced Integrated $ Proactive Visibility and control Technology Payment channels Cost to process Time to process Customer service How leaders unlock hidden value 10

Your AR treasure map 11 Current technology Reduced exceptions Automated posting Multiple payment channels Electronic billing Single data file

12 Where do you begin?

Present bills/statements electronically How it works  Leverage one supplier, one combined billing file for electronic and print delivery Value  Eliminates print/mail expense  Faster delivery improves DSO  Greater efficiency for AR staff 13

Enable multiple payment channels How it works  Manage all channels in one workflow  Deposit all items electronically Benefits  Increase customer satisfaction  Cut processing costs  Improve DSO Give your customers choices 14

Take your AR to best-in-class 15 Clear payments in 1.3 days $0 Adopt new technology with capital expenses Data Source: May 2012 Aberdeen study Reduce manual intervention by 50%

Best-in-class accounts receivables 16 Source: Aberdeen, May x better5x better

17 Source: Nilson, Federal Reserve, NACHA, ATM&Debit News, WF Analysis Number of Transactions (billions) Payment Landscape Debit card ACH Stored value Checks Credit card

Things to think about…

Leverage technology to navigate the complexity of payment processing 19

Interchange A percentage fee applied, according to Visa/MasterCard regulations, to the dollar value of each transaction. What is it? The fee is paid by the acquirer to the issuer. This cost is then passed through to you. Who Pays for it? 20

Interchange Equipment/ Software/ Gateway fees Assessments & Access Fees 3 rd party fees Monthly service and statement fees Non Bank auth fees Compliance fees Downgrade fees What do Merchants Pay? Components of Merchant Pricing 21

What impacts interchange costs Card Type System Configuration Merchant Category Code Payment Channel 22

Interchange optimization You are in control. Best Practice Address Verification Service Settle batches on time Send correct processing flags B2B Line item details Review statements monthly and track for anomalies Be aware of Card Brand changes Periodic reviews with your acquirer Why? Provides some risk mitigation and lower interchange rate Lower interchange rate, easier reconciliation Lower interchange rate, improves chargeback rights Lower interchange, data passes to Payer Quickly identifies process issues Spring/Fall releases often have systemic changes that impact interchange Confirms process optimization 23

24 Level III and Large Ticket Data Requirements Level II Data  Tax Indicator denoting presence of sales tax  Itemized Sales Tax amount (must be greater than $0)  Customer Code Level III Data  All Level II Data  Transaction Summary (order date, invoice number, etc.)  Line Item Detail (i.e. item description, product code, quantity, unit cost) Reality Check – There are limited software and payment gateway applications that are certified to capture the required data to process Level III and Large Ticket transactions

Article by The Aberdeen Group “Do not lose sight of the importance of quality. Selecting and enabling technology is more complicated than checking a box or finding the lowest-cost provider.” 25