U.S. Bank Payment Analytics Overview

Payment Fraud Trends 2 Reference: Association of Financial Professionals (AFP), 2011 Payments Fraud and Control Survey  A majority of organizations have experienced payment fraud  Organizations are seeking tools to mitigate their risks from fraud

Payment Fraud Trends 3 Reference: Association of Financial Professionals (AFP), 2011 Payments Fraud and Control Survey Commercial cards have built-in fraud controls:  Restrict card use to specific types of merchants  Establish spending limits for specific timeframes  Set purchase and transaction limits  Run reports that track and monitor expenses

4 Commercial Cards: the Benefits  Commercial cards have become the payment tool of choice for all types of business-related expenditures Enhanced Control –Set and control spend categories and transaction limits –Help ensure compliance with company policies Increased Efficiency –Replace cumbersome paper-based processes with an automated payment solution –Reduce cost, time and resources needed to procure and pay for goods and services

Commercial Cards: the Challenge  Organizations plan to expand commercial card usage over the next three years Reduce check usage by more than half Double use of commercial cards 5 More Time & People More Spend More Transactions More Review More Reports How do you efficiently and cost-effectively monitor transactions for employee fraud and misuse?

Risk within a Card Program  Perception: Risk of loss is quite high  Reality: Actual dollar loss is much lower 6 Program Size$100 MM Average Transaction Size 1 $ Total Transactions per Year$317,460 Estimated Amount of Fraud and Misuse Rate 2 $2.38 Amount per Year20% Estimated Amount of Policy Violation Rate 2 $60 per $1 MM in spend Amount per Year$60, Total Amount per Year$140, References: 1, Purchasing Card Benchmark Survey Results, Palmer & Gupta U.S. Bank survey of commercial card clients 79% of organizations have allowed perceived risk to be a barrier for card growth 3

Cost of Manual Audits  High cost to manually audit transactions Labor Intensive Inefficient Error-prone Program Size$100 MM Average Transaction Size 1 $315 Total Transactions per Year$317,460 Cost to Audit per Transaction 2 $2.38 Audit Sample Size20% Number of Audits Annually63,492 Annual Cost of Audit per Year$151,111 7 References: Purchasing Card Benchmark Survey Results, Palmer & Gupta 2 NAPCP Understanding the Processing Costs and Related Costs

How to Mitigate These Issues? 8 Reign in your audit costs? Reduce your risk exposure? Grow your commercial card program? U.S. Bank Payment Analytics

What is Payment Analytics? 9  Enhances auditing practices by providing 100% commercial card transaction monitoring Rules Management: Compares each transaction to your customized rules to identify out-of-policy spend Case Management: Gives program managers timely information and tools to audit and resolve out-of-policy transactions

Moving from Reactive to Proactive 10 Value of Action Time Detects relationships between transactions over time Event(s) ProactiveReactive Issue(s) Problem(s) Loss(es) $ $$$

How Does Payment Analytics Work? 11 Payment Analytics Transaction Alerts Cases RULES

The “Brains” behind Payment Analytics  Defined templates contain logical arguments (i.e., rules) WHEN THEN statements  Client assigns parameters to the rules WHEN a transaction meets all the conditions of the rule, THEN create a response –Alert: Notifies stakeholders via when rule violations occur –Case: Allows users to track progress towards resolving an issue and violations over time 12

Available Rule Templates  Unauthorized Merchant Category Code (MCC) Alert  Merchant Watch List Alert  Transaction with a Non-Preferred Merchant Alert  Split Transaction Alert  Split Purchase Alert  Transaction Close to Single Purchase Limit Alert  Large Spend Increase over Average Spend Alert  Excessive Use of Convenience Checks Alert  Excessive Cash Withdrawals Alert  Corporate Travel Card Purchase in Cardholder’s Postal Code Alert  Weekend/Holiday Purchase Alert  Account Opened/Maintained with Limits Exceeding Standards Alert 13

Benefits Improve Compliance: Manage out-of-policy spend and detect fraudulent activities Enhance Control: Audit 100% of transactions versus a random sample Reduce Risk: Route flagged transactions to the appropriate personnel for review Increase Efficiency: Streamline the audit process with rules that are consistently and continually applied across all transactions Boost Cost Savings: Automate routine audit tasks Broaden Visibility: Record all case details in one central database Expand Revenue Share Opportunity: Realize growth incentives by identifying spend leakage

15 Questions and Next Steps  Contact your Account Coordinator or ServicePoint to get signed up with Payment Analytics ©2011 U.S. Bank National Association. All trademarks are property of their respective owners. CPS 1062 (R-11/11)