©2007 Bank of the West. Member FDIC The Convergence of Payments Drivers and Solutions John M. Curtis, AAP Vice President and Senior Product Manager Bank of the West

The Convergence of Payments Agenda  Industry Overview  Drivers  Solutions  Considerations  Emerging Technologies 2

Industry Overview Electronic Payments  2004  Integration of ARC (Accounts Receivable) Check Conversion  Electronic Payment Volume exceeded Paper Check Volumes  Commercial Electronic Payments grow by 23.7%  2005  Online Banking Customers grew by 27% to nearly 40MM  Bill Payment use increased by 36%  2008  Over 18.2 Billion ACH Payments = $29 Trillion  First full year for BOC (Over 78 million payments)  WEB volume increased 19.7% to 2.1 billion payments  B2B payments exceeded 1 billion addenda records  Addenda Record growth represented a 14.6% increase over

Industry Overview Paper Checks   The number of checks paid decreased 6.4 percent per year  Paper check volume decreased 6.7 billion by the end of the period  Average Value of Checks Paid increased from $1,104 in 2003 to $1,366 in  Paper check volumes continue to decline Although still in circulation, checks are going the way of the... Gee, Thanks! 4

Industry Overview Image Exchange  Federal Reserve consolidated all Paper Check Processing to Cleveland Office in February  Check Images processed in Atlanta  Remote Deposit Capture has grown 8 times in market size from 2006 –  Many municipalities have adopted a hybrid of Remote Deposit Capture and ACH Conversion 1 – Global Concepts Study (June 2008) 5

Industry Overview Commercial Cards  Government prepaid applications offer substantial global opportunity with recent estimates placing the total opportunity at $284 billion 1  Government usage of prepaid cards has become one of the fastest-growing segments of prepaid in recent years 2  The average Travel Card rate of expected increase of 2011 over 2008 spending levels is 4.7% for Government and Not-for-Profit segments.  PIN Debit Card usage now exceed Credit Card usage  Three Primary Government Opportunities:  Social Benefits and Entitlement  Employee Payroll and Incentives  Government Business and Operations  Consider your ‘Un-Banked’ partners and constituents. 2-Boston Consulting Group, May Research commissioned by MasterCard 1-Study by CPI 6

Payment Drivers Business Drivers - Innovators  Mostly Private Industry / Large Billers  Telecom (Phone / Internet / Cable)  Credit Card Companies  Encouragement to Go Green!  Payment Providers  PayPal  OBO Pay  E-Wallets  Bank Issued Credit Cards  Capitalizing on Consumer Safety Regulations and Products  Points Programs = More Usage = More Revenue 7

Payment Drivers Consumer Drivers / Adopters Why is this happening and who’s making it happen?  Consumers want:  Ease of Use  Security  Rewards  Confidence – Comes from regulations  Regulation E  Credit Card Warranties 8

Payment Drivers Government (ABA Newsbytes: April 20, 2010) Treasury Goes Green & Saves Green Broad New Initiative Will Increase Electronic Transactions, Save More Than $400 Million, 12 Million Pounds of Paper in First Five Years Alone WASHINGTON – With Americans poised to celebrate the 40th anniversary of Earth Day this week, the U.S. Department of the Treasury today announced a broad new initiative to dramatically increase the number of electronic transactions that involve Treasury and millions of citizens and businesses, a move that is expected to save more than $400 million and 12 million pounds of paper in the first five years alone. In addition to greatly reducing costs, enhancing customer service and minimizing Treasury's environmental impact, the move from paper to electronic transactions will increase reliability, safety and security for benefit recipients and taxpayers. Full Article: 9

Payment Drivers So many drivers... WHY?  Consumers and businesses want multiple payment choices  Checks? (Yes! Checks!)  ACH Debits  Card Payments  In the end it’s all money!  Ease of use  Cost  Safety / Security  Added benefits 10 How many are dropped in the mail at 11:59 PM each April 15th?

Solutions You’re telling me I have to accept ALL of these payment types? How am I supposed to manage this process?  Determine your strategy  Make use of available tools 11

Solutions ACH Check Conversion vs. Image Exchange  What is the difference? 12 ACH Check ConversionImage Exchange ACH NetworkCheck Clearing Network ACH RulesCheck 21 Law Authorization RequiredNo Authorization Required Opt-Out Provisions / Bus Check LimitationsNo Opt-Out or Business Check Limitations Only Sends DataTransmits Images with Data Generally 100% Next Day AvailabilityAvailability Varies What are the dollars running through your unit? The benefit of funds availability is stronger than you think. Ask yourself two questions: What are the cost differences?

Solutions Multi-Channel Payment Platforms Accept payments via:  Integrated platform to your Web Site  ACH Payments  Card Payments  CSR  IVR (Interactive Voice Response)  Mail  Lockbox (Bank Provided / In-House)  Convert Checks to ACH 13 County of Quahog How To Pay Property Taxes Payments can be made by the following methods: Mail - P.O. Box 001 Quahog, RI Please make checks payable to: Stuart Griffin, Quahog County Treasurer Phone - Call (213) (Credit card only) Online (Credit card or e-check) Electronic Funds Transfer (EFT) In Person

Solutions Multi-Channel Payment Platforms  What payment channels are available?  Web Payments  ACH  Credit Card  Check  Converted to ACH  Image Exchange 14

Solutions Multi-Channel Payment Platforms  How do I know the payment is good?  Identity Verification  Account Validation  Payment Acceptance Databases  Offered by both private companies and financial institutions  Use caution with private companies, you could be taking a gamble 15

Solutions Here’s a question for you:  Do I care if the payment is good?  What is the service being offered?  Is this a product walking out of the door?  Can I turn off the service?  What are the chances of collection?  What is the true risk?  Can I charge penalties for returned payments?  How much can I charge?  What does my bank charge?  What is the difference?  Is this a revenue opportunity? 16

Solutions Online Bill Pay  Large volumes from Bill Pay Providers?  FIS  Fiserv  Online Resources  iPay  Consider Consolidated Receivables  One file from all Bill Pay providers  Single ACH Credit 17

Solutions FISFiserviPay Current Non-Electronic Bill Pay Flow 18

Solutions FISFiserviPay Bill Pay Flow with Bill Consolidator 19

Considerations What are my current Payment Challenges? Do I have a Payments Strategy? If I change my payment strategy:  What is the True Benefit?  Cost Savings  Hard Dollar - Immediate  Efficiencies – Over Time  Expedited Availability  Can I leverage the strategy throughout multiple departments?  What will it cost to implement?  How will this be funded?  What is my ROI?  How will training be conducted?  How will I track my success?  Who is my Payments Czar? 20

Emerging Technologies The Future is Now! I’m telling you Marty, paper is out, electronic is on its way out, Your kids will be making Wireless Payments ! 21

Emerging Technologies Kiosk Payments  Constituents can pay their bills through kiosks located at your offices, convenience stores all over the country, or delegated to your region.  Scan Bill, Enter Account or Lookup  Pay by ACH or Swipe Card  Convenience Fee Revenue 22

Emerging Technologies Mobile Payments  ACH or Card  Multiple Uses  Pay Utility Bills  Send funds to Students  Pay your share for Dinner  No more “I left my wallet at home”  You will remember your phone before your wallet! 23

Emerging Technologies The Future  Same Day ACH  Federal Reserve expects deployment Q  No changes to ACH Rules – Only number of processing windows  Financial institutions must opt-in with one another  Faster Returns = Reduced Risk  Same Day Settlement  More Mobile Technology  Pay Merchants by Phone  RFID – (Radio Frequency Identification)  Multiple Payment Options 24

Emerging Technologies Some Vision – Where are we headed?  Why carry a wallet?  Your cell phone may contain all of this on a SIM Card:  Driver’s License with Picture, Thumbprint, Vehicle Registrations, SSN  All Payment Cards  All Bank Accounts  Blood Type  Donor Information  Complete Medical Records  The name of your Big Brother born in

The Convergence of Payments Questions 26