1. Advances in Payment Strategies An Industry Perspective May 8, 2012 R. Keith Henry, Vice President Nancy Mirfin, Senior Vice President

2. Making the Business of Payments Pay Payables management helps you: Enter vendor invoices Match volumes received Store vendor records Establish Accounting Distribution & Approvals Manage Cash Outflows Generate Payments 2

3. Most organizations have centralized A/P functions. Accounts Payable Departments report that 81%-100% of invoices are received via paper. Estimated cost of processing paper invoices average $3.25 to $7.80 per invoice. Payables Depts. report their most significant challenges revolve around managing paperwork, getting approvals and operating in a timely manner. Companies tend to use purchase orders for more than 25% of their invoices. Many organizations report that average invoice processing time is five days or less. About half (48%) spend more than 10 hours per month resolving invoice exceptions. About two-thirds of organizations frequently or always capture early payment discounts. 3 Payables Characteristics

4. CategoryDescriptions/Examples EconomyIn the current environment, organizations are looking internally at their own processes to identify immediate improvements TechnologyWhile consumer adoption of electronic payments matures, business electronification has significantly more room for growth. Technology and emerging payment types will continue to be drivers of change (EIPP, EBPP, e- commerce, Image Capture/Remote Deposit) Risk ManagementIncreasing emphasis on risk management across all payment types, (privacy, security, theft) Regulatory IssuesIncreased legislation and regulatory guidelines are being imposed on payments industry, (Card Act, interchange, surcharge) 4 Key Trends Affecting Payments Market

5. Efficiency (Total of 51%)Top Performers Median Total cost of the process “process accounts payable” per invoice $5.06$9.59 Total cost of the process “process accounts payable” per $1,000 of revenue $.039$0.51 Number of invoices processed per “process accounts payable” FTE 15,8319,552 Number of disbursements per “process accounts payable” FTE 6,0253,839 AP Productivity Index Metrics (2010) 5 Payables Metrics

6. 6 From Costly Paper Processing to e-Invoicing

7. A vast majority of commercial payments are still being made with checks Source: Purchasing Card Benchmark Survey Results, R. Palmer and M. Gupta Purchasing Cards have captured 32.1 percent of transactions below $2,500 There is still a much lower penetration rate (14.6 percent) of Purchasing Card use on transactions between $2,500 and $10,000 3.2% 5.4% 6.4% 8.8% 32.1% 14.6% 58.3% 71.2% below $2,500between $2,500 and $10,000 Paper checks Purchasing cards ACH transfers Wire transfers & others 7 Business-to-Business Segment Payments

8. % Shift from Checks and Other Payment Methods to Commercial Payment Cards Source: 2011 Visa Inc. Global Cash Management Survey commissioned by Visa Inc. and conducted by Survey.com, a firm specializing in internet market research % of total payments What percentage of your commercial payments do you anticipate shifting from checks/other payment methods to commercial payment cards in the next 12 – 18 months? 8 Payment Migration: Next 12-18 Months

9. Employee Purchasing cards For smaller dollar decentralized purchasing Reduces time for receipt and payment of goods A lot of value for both buyer and vendors Employee Travel cards For travel & entertainment expenses Preferred method of payment for these vendors Improves financial controls (SOX compliance) Vendor Ghost cards For preferred (contract) vendor ordering Facilitates online ordering and payment A lot of value for both buyer and vendors Limited ability to set transaction controls Card-Based Settlement 9 Making Cards Part of Your Payment Strategy

10. PAYMENT MECHANISMS 1.Consider existing PAYMENT MECHANISMS; checks, ACH, Wire and Card. TYPES OF PAYMENTS 2.Consider existing TYPES OF PAYMENTS; Vendor, MRO*, Petty cash, Travel, Fleet and Entertainment. PROCESSES 3.Consider the PROCESSES related to each type of payment as it is completed through your organization. RISK 4.Consider the RISK related to each payment mechanism. COST 5.Consider the COST of processing these various types of payments; Material differences in the economics of the various payment alternatives create the opportunity to pursue an optimum payment mix and a winning proposition for the payor. 10 Payables Optimization

11. Review all areas of disbursement for opportunities: Travel, MRO – Fleet, Petty Cash and Vendor Payments. Agree internally where a card will be used to replace the current payment type; Card first, Electronic second. Establish goals for penetration by payment categories; What is my mix today? Include Card as a viable payment option on all existing (as permitted) and future contract(s) negotiations. RFPs released for capital expenditures should specify that card will be the payment vehicle. Select a Partner that has the ability and resources to assist with perpetual vendor enrollment, not just one time. Offer ACH as a second option, if card is not viable. Consider making your payment sooner… a point of negotiation available when using card. Select a partner that can provide consolidated reporting in order to track overall program spend and traction. Strategize annually on how to move additional payments to card. Select a partner that can consolidate your spend from all program payments into one for a heightened annual rebate. 11 Best Practices in Payment Optimization

12. Various Models- A Comparative View Benefits — Faster to market - “plug & play” — Leverage technology — Introduce “self-servicing” using the Web — Electronic settlement — Dynamic Negotiation Issues — Data Security - PCI, NACHA, PHI — Funds held as a portion of compensation — Reconciliation — Integration 12 Alternative Payment Electronic Solutions

13. Check –Use of Positive Pay & Payee –Reconsider “reverse” positive pay versus segregation of duties –Controls over check stock & secure ink –Signature control ACH –Use ACH debit blocks or filters (half of the organizations with ACH fraud loss in 2009 did not) –Reconcile accounts –Return fraudulent ACH debits on a timely basis (22% did not). Card –Prompt charge back –Reconcile card payments –Expand use of ghost cards to improve visibility Other –Vendor Master File controls –Address Verifications AFP Fraud Risk Survey, March, 2011 13 Best Fraud Protection Practices

14. ●Payment initiation platform to centralize disbursement function through a single payment file ●Value-added capabilities enable settlement of card-based transactions through traditional client A/P processes – allows clients to leverage a new payment method for disbursements! ●Satisfies all payment requirements for card payments, check issuance, ACH or wire transfers ●Flexible platform architecture offers easy data integration and process control ●Optimizes payment mix by migrating from costly paper disbursements to more financially rewarding methods such as cards 14 Consolidated Payables – Overview

15. Paper Invoices E-Invoices Front-End Centralized invoice capture, routing and approval PO, Receiving, Payment and other business rule data Invoice Imaging Recognition Custom Matching Workflow Routed to Designated Process Owner Exception Items Managed by Designated AP Contact Approved Items Posted into Client ERP for Payment Client ERP Payment Execution File Transmitted to Bank Settlement Execution: Check Printing ACH Wire Transfer Card Settlement Reconciliation File 15 Complete Solution

16. ? 16 Questions