Imaging for Profitability and Efficiency

Sarah Canepa Bang, CEO Financial Service Centers Cooperative, Inc. Kim Hester, EVP Co-Op Financial Services Jeff Swinford, Payment Systems Operations Manager Wescorp

Introduction Front end image capture is here – Branch – Teller – Merchant – Home – ATM – Kiosk

The Need for Capture Cost Reduction Process Streamlining Convenience for Members Better/Consistent service For Members

Opportunities in Capture Merchant Capture - 67% of retail banks (89% of commercial banks) have implemented or have an (Remote Deposit Capture) RDC pilot program in place. Celent Mar 08 Checks are the lifeblood of Small Micro Businesses (SMB) – checks represent % of receivables for 41% of SMBs and 70% of receivables for two thirds of SMBs. Celent Jun 07

Opportunities in Capture Merchant Capture – About Half of SMBs receive less than 3 checks a day and on average they are making one trip a week to the bank to make the deposits. “Desk Float” Larger SMBs see more checks per day – Consumer RDC may be the answer.

Opportunities in Capture Consumer RDC – 90% of teller transactions are check related Celent Dec 2007 – 25% of all checks written in 2006 (7.2 bil) were received by consumers. Fed Reserve Payment Study 2007 The case is especially relevant to CUs – Pennies per deposit – Makes deposits easier – Grow deposits

Early CU Adopters Digital FCUMAMar 0816,000 Sharon CUMANov 072,000 Hanscom CUMANov 071,200 Service CUNHDec 074,500 Randolph BTXSpring 08 N/A Star One CUCA Jun 08N/A

Results No evidence of fraud unique to channel Favorable reduction in branch traffic Lower processing costs than branch deposits Exception rates similar to branch deposits Good user experience – Helps to have intuitive user interface, decent image analytics, support staff with personal experience. Celent Sep 08

Results Digital FCU Goals – Increase percent of members relying on DCU for PFI relationship Reduce cost of remote deposits Integrated with online banking platform, using shared branch platform for back end integration to accounts Thorough automated deposit review

DCU Results 3,000 members signed up in the first two weeks –based solely on an Internet link 16,000 users with first five months (10% of their online user base) Zero fraud; zero losses

Issues to consider Low cost Easy to Support Simple SIMPLE user interface TWAIN scanner support

Opportunities for ATM/Kiosks B of A – In 2008 began replacing existing machines with image capable ATMs – currently at 5,800, by 2010 plan to have 13,000 of their 18,000 ATMs image capable 7-Elevens Vcoms Branch Automation

Applications and Vendors

Branch Capture Tried and True Most common application Least expensive entry point Considerations – In house software versus ASP model? – Adjustments at point of capture or remote location? – Handling on us items

Teller Capture Branch capture at the teller line Items captured as part of deposit End of day balancing is streamlined Possible interface with a fraud solution Considerations – More expensive – Compare costs to increased efficiencies – Items indexed to core system – Images available through home banking – Future of checks?

Merchant Capture Capture process at the end user (the merchant location) Costs are shifted to merchant Benefit: no branch visits Considerations – CU maintains responsibility – Business rules – Exceptions – Posting transactions

Home Capture Scan item at home to deposit to account Same contractual issues Considerations – Some products require additional infrastructure – Back office bundling versus cash letter directly to Fed. – Member send or keep/destroy original item – Settlement occurs once item is received (Image versus original item) – On line solution

ATM/Kiosk Image Capture Convert deposited items to images at ATM’s Eliminates daily service Big savings for the credit union Considerations – All new technology – Some tangible success stories – ATM upgrades (software and hardware) – ROI

Now What? Confused yet? Branch, Teller, Merchant, Home, ATM/Kiosk (and yes, even phone) Can all of these capture points reside on one platform with one settlement point? How do you choose which option to go to? What should I be looking for? How do I know that I am choosing the right solution?

Choosing the Right Solution Things to consider: – Settlement – Archiving – Day Two Processing (returns, adjustments, etc.) These are all back office type processes that must be considered – Pricing – Hidden Costs?

Things to Consider Settlement – Availability of Funds – 100% immediate or other – Compensating Balance – what is required and is it interest bearing – Account type – how are the funds settled? Do you have to manually move funds to gain earnings?

Things to Consider Archiving – How long are your items available online – How long are they archived – Can your members access deposited images via online banking – Moving to a different solution – does everything move with you – Multiple capture points – are they all settled and archived together or different platforms

Things to Consider Day Two Processing – How do you receive your return items – How are they processed – do you have dedicated staff – Who is working the adjustments – staff or your provider – Adjustments on the books – you give your member immediate credit, right?

Things to Consider Pricing – Investment Cost of software or license Hardware (scanners, servers) Annual Maintenance – Daily Processing Processing or per click fees at the front-end (is there a per file or batch fee?) Archiving Costs Clearing costs – Day Two Costs to handle adjustments and other day two items – Vendor Support Call Center support when issues arrive

Questions you should ask… How long have they been doing capture? Do they have item processing experience, or is this just a secondary add-on product? How many installations? References? Focus – Credit Union’s or Banks? Interfaces with your core system, image solutions, points of settlement, etc. that you already invested in. Will they listen to your needs or force sell on you what they have now? Are they open to helping you understand the full end-to-end cost in deploying these types of solutions?

Jeff Swinford Product Manager WesCorp FCU work cell