Credit Card Processing & Controlling Costs February 10, 2015 © 2014 Wells Fargo Bank, N.A. All rights reserved. Member FDIC. Paul Uher SVP, Regional Sales Manager

Topics  Card processing 101  Trends in the consumer bill payment space  Innovation focused on bill payment & mobile 1

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Merchant components of cost 3 Networks Assessment Fees VS -.11% MC -.105% DS -.105% Network Access Fees VS - $.0195 MC - $.0185 DS - $.0185 Issuing Bank 450+ Interchange Rates/Categories ex. 2.95% + $.10 Interchange gets paid to issuing bank. Wells Fargo can help you manage this cost. Processor Service charge fee required to authorize, settle, fund and service your account. ex. IC +.30% IC – Interchange rate charged by issuing bank.30% - service charge fee charged by WF 5%90%5%

4 What is the 4 th component?

5 Reduce cost, complexity and risk POSWeb IVR Mobile ERPMOTO Single integration for multiple channels Consolidated reporting Common Goals

Source: United States Federal Trade Commission, Consumer Sentinel Network July 12th, 2014 Credit card fraud continues to grow 37% incurred by merchants mainly at point of sale from counterfeit cards $399 average amount of loss 10% of all Americans have been a victim of credit card fraud 6

Recent data breaches (# accounts compromised) In the last year, millions of accounts have been compromised Target Corp. 40 million November Home Depot 56 million September Neiman- Marcus 1 million October Source: need attribute here 7

E urocard M asterCard V isa The time for change has come – and the deadline is October 15, 2015 Has reduced “card present fraud” by 84% in Europe 1 Liability for counterfeit card transactions will shift to merchants not supporting new EMV standards 1 Visa and EMVCo studies 8

An EMV card has embedded chip with encrypted information Transmitted when in close proximity of EMV reader Nearly impossible to counterfeit 9

Fraud Management  Decision Manager  Protect e-commerce profits with fraud protection tools  Evaluate transactions in real-time  Develop a comprehensive fraud protection strategy  Spend less time on manual reviews  TransArmor  Securely process credit card data with tokenization 10 Layer 1 EMV Chip technology adds security at the exact time the card is being authenticated by the terminal (card present only) Layer 2 Encryption Secures transaction data as it is sent for authorization Layer 3 Tokenization Tokenization replaces sensitive payment card transaction data in the merchant environment TransArmor solution

In the meantime, Mobile Wallet is changing the way people pay N ear F ield C ommunication Only a small percent of merchants have upgraded to NFC terminals The growth potential is large 11

How Mobile Wallet works * *** Enter Password...choose pay method...hold close to NFC reader...data transfers Mobile wallet 12

All data and transmissions are encrypted Smart phones can be password protected, GPS located and disabled if lost or stolen ********* This technology increases security… 13

** * * …reduces fraud risk… EMV and NFC transactions can enforce additional security if PIN entry is used Apple Pay integrates fingerprint biometrics as other manufacturers work to add voice and face recognition 14

Consumer Behavior is Changing 15 U.S. mobile payments (Billion $) >50% CAGR 16% of smartphone owners have made a mobile bill payment One Billion smart phones sold in 2013 Half of all e-bills were delivered via a biller website or mobile app Nearly 50% of businesses plan to optimize their mobile commerce site Sources: First Data, Carlisle & Gallagher Consulting Group, Square, Intuit, internal analysis With SmartPhones being the catalyst

of Smart Phone users have enabled a Mobile Wallet application 20% iPhone iTunes account owners are now Apple Pay™ eligible 800M Apple Pay enabled devices projected in use in U.S. by end of decade 70M of installed credit card terminals are currently NFC compatible and yet… 2% Sources: Apple statistics: mobile-payment Other statistics: wallets-by

Mobile bill pay is exploding 17 Mobile bill pay more than doubled from 2012 to % of households paid a bill with their smartphone in 2013, compared to 8% in 2012 Source: Mobile bill payment surge, Fiserv, February

Quick Response (QR) codes  2D barcodes read by smartphones or tablets  Codes are printed on paper bills  Bill recipients use smart phone apps to “read” codes  Can redirect to biller’s homepage, biller’s bill payment site, or a bank’s online banking site  Most popular amongst year olds (55% of scans)  Utilized by various billers and bill aggregators 18 Source: DST Output 2012

19 Technology for the Next Generation

IBM 5100 portable computer 55 lbs GB $20,000 Apple iPhone 6 6 oz. 128 GB $500 Over the years… Some things have undergone massive change

Uses for Mobile apps and payments  Parks & Rec payments and gift cards  Tax payment collection by field agents or installment payments  DMV appointment scheduling and payment  Parking & citation payments  Hearing scheduling  Hunting and fishing permit purchases  Utility payments 21 Source: DST Output 2012

Thank You Paul Uher SVP and Regional Sales Manager Treasury Management | © 2014 Wells Fargo Bank, N.A. All rights reserved. For public use. 22