1. Toronto, Canada November 2010 P A Y M E N T S Y S T E M S R E V I E W S C E N A R I O P L A N N I N G W O R K S H O P S T R I C T L Y P R I V A T E A N D C O N F I D E N T I A L Vin D’Agostino, Payments Strategy  2010 JPMorgan Chase & Co. All rights reserved. Confidential and proprietary to JPMorgan Chase & Co.

2. C:\Documents and Settings\r073200\Desktop\CA B2B Payments Discussion_10Nov02_v6.pptx Global B2B Payments Volume (USD trillion) The global B2B marketplace is approaching $100 trillion in payments volume. Source: First Annapolis Consulting, Visa Commercial Consumption Expenditure (CCE) Index. Index includes: intermediate inputs, wholesale and retail purchases, private fixed investment, and government capital expenditures. P A Y M E N T S S T R A T E G YP A Y M E N T S S T R A T E G Y 4 YR CAGRs CA: 11% LAC: 20% U.S.: 8% Asia: 14% CEU, MEA: 24% EU: 15% Total: 13% $61.8 $69.0 $81.8 $90.3 1 P A Y M E N T S Y S T E M S R E V I E W S C E N A R I O P L A N N I N G W O R K S H O P

3. C:\Documents and Settings\r073200\Desktop\CA B2B Payments Discussion_10Nov02_v6.pptx The most prevalent B2B payment methods include checks, cards, wire transfers, and ACH transactions. Source: Aite Group. P A Y M E N T S S T R A T E G YP A Y M E N T S S T R A T E G Y 2 P A Y M E N T S Y S T E M S R E V I E W S C E N A R I O P L A N N I N G W O R K S H O P

4. C:\Documents and Settings\r073200\Desktop\CA B2B Payments Discussion_10Nov02_v6.pptx Key themes among B2B payments: P A Y M E N T S S T R A T E G YP A Y M E N T S S T R A T E G Y Wires Checks Commercial Cards EFT (ACH)  SWIFT: growing in popularity but gaps in requirements of corps and SMEs limits adoption  Bank Wire: high cost / urgent electronic payment channel; growing market; strong need for off-shore and cross border wire solutions; heightened regulatory environment requires more cooperation from clients  Reducing check volume through electronification provides greater efficiency across economies  Two ways to reduce checks: eliminate them (e.g. through migration to cards / ACH) or convert them to digital formats (e.g. captured via ACH)  Rapid product innovation in B2B card space  P-Cards evolving into sophisticated A/P tools  Suppliers appreciate certainty of card payments  High acceptance costs stifle adoption  Attractive / low cost electronic payments channel  Well endorsed by larger corps; less prominent among SME segment  Extended remittance data formats (CTC/CTX) and EDI conversion capabilities are attractive  Would benefit most from strong set of standards (e.g. around data formats) Purchase-to-Pay (P2P)Solutions  Both ACH and cards integrate well with P2P  Fragmented market with various vendors  Can be Integrated with biz systems  Goal is to strive to create an end-to-end global solution for businesses of all shapes and sizes Types of PaymentsKey Themes  Lack of consistent standards, both locally and globally Sets the stage for cards/ACH 3 P A Y M E N T S Y S T E M S R E V I E W S C E N A R I O P L A N N I N G W O R K S H O P

5. C:\Documents and Settings\r073200\Desktop\CA B2B Payments Discussion_10Nov02_v6.pptx A key issue among major payment systems is the abundance of paper checks, which is a major driver of the electronification of payments. U.S. B2B Payments Value Mix 20042010E Check ACHWireCard Source: AFP Electronic Payments Survey, First Annapolis Consulting. Why paper checks are a problem (opportunity)?  Check processing is costly  Environmental impact  Requires government resources  Fraud issues  Reduces efficiency of system P A Y M E N T S S T R A T E G YP A Y M E N T S S T R A T E G Y 4 P A Y M E N T S Y S T E M S R E V I E W S C E N A R I O P L A N N I N G W O R K S H O P

6. C:\Documents and Settings\r073200\Desktop\CA B2B Payments Discussion_10Nov02_v6.pptx Bank Wire Solutions Reasons Why AttractiveReasons Why Challenging  Trusted way to securely move money  Immediacy of payment  Increased competition has led to more attractive pricing  Need for cross border payments and off-shore clearing is growing  New technologies provide inroads to new products, services, and markets  Banks are focused on automating client services which drives efficiency in the broader economy  Vendors are enhancing service quality through greater transparency and improved service levels  Heightened regulatory / compliance environment requires more cooperation from client  Market infrastructure pricing is likely to continue to increase (e.g. 14% increase in U.S. Fed charges)  Costs to maintain the payments infrastructure will continue to increase  Emergence of new currencies such as Euro and RMB will impact payment strategies P A Y M E N T S S T R A T E G YP A Y M E N T S S T R A T E G Y 5 P A Y M E N T S Y S T E M S R E V I E W S C E N A R I O P L A N N I N G W O R K S H O P

7. C:\Documents and Settings\r073200\Desktop\CA B2B Payments Discussion_10Nov02_v6.pptx Commercial Cards Solutions P A Y M E N T S S T R A T E G YP A Y M E N T S S T R A T E G Y Reasons Why AttractiveReasons Why Challenging  Provides spend management capabilities to limit fraud and control purchase behavior  Provides improved payment terms (time between purchases and paying card company)  Significant investments in innovation continue to be made by top issuers  Provides certainty of payment to suppliers  Reduces A/R staff and provides operational/back office efficiencies  Evolving into an increasingly sophisticated A/P tool and is generally offered in tandem and integrated with electronic A/P solutions  Increasing supplier card acceptance remains challenging due to high acceptance costs and confusing merchant contracts  ACH is a simple, low cost, alternative  Products not well understood by less sophisticated organizations  Merchant acquiring contracts are confusing  Integration issues with current business process systems  Buyers are used to checks 6 P A Y M E N T S Y S T E M S R E V I E W S C E N A R I O P L A N N I N G W O R K S H O P

8. C:\Documents and Settings\r073200\Desktop\CA B2B Payments Discussion_10Nov02_v6.pptx Purchase-to-Pay (P2P) Solutions P A Y M E N T S S T R A T E G YP A Y M E N T S S T R A T E G Y Reasons Why AttractiveReasons Why Challenging  Proven solutions in market today  Eliminates manual processes through automating AP functions  Creates greater efficiency and cost savings within A/R and A/P departments  Integrating a P2P solution with an existing business system brings an organization closer to achieving end-to-end processing capabilities  Companies and banks yearn to leverage common functionalities  Banks and non-bank vendors are investing in innovation  Fragmented market for solutions with multiple vendors and lack of standards  Multiple supplier communities and eco-systems created by P2P solutions complicate introducing changes  Issues with providing consistent global experiences  Lack of strong standards  Issues with systems integrations (time consuming, painful)  Buyers are used to checks 7 P A Y M E N T S Y S T E M S R E V I E W S C E N A R I O P L A N N I N G W O R K S H O P

9. C:\Documents and Settings\r073200\Desktop\CA B2B Payments Discussion_10Nov02_v6.pptx Appendix P A Y M E N T S S T R A T E G YP A Y M E N T S S T R A T E G Y 8 P A Y M E N T S Y S T E M S R E V I E W S C E N A R I O P L A N N I N G W O R K S H O P

10. C:\Documents and Settings\r073200\Desktop\CA B2B Payments Discussion_10Nov02_v6.pptx A/R and A/P departments could be more efficient and P2P solutions drive needed changes. Source: First Annapolis Consulting, 2008 Visa Global Cash Management Survey of 800 corporate financial executives from 11 countries. Sixty-two percent of respondents held the position of CFO, treasurer, or controller. Half of survey respondents were from the U.S. with the remaining respondents in descending order from the U.K, Canada, South Africa, Japan, Brazil, South Korea, Mexico, Australia, France, and Germany. Respondents had at least 100 employees and annual revenues of USD 25 million or more. The majority of respondents were from companies with at least 1000 employees and annual revenues of USD 100 million or more. A/R and A/P staff actually performing the work have disincentives to pursuing efficiencies. 9 P A Y M E N T S Y S T E M S R E V I E W S C E N A R I O P L A N N I N G W O R K S H O P

11. C:\Documents and Settings\r073200\Desktop\CA B2B Payments Discussion_10Nov02_v6.pptx There are many challenges to modifying AP department processes, but payments are one of the least painful element in the process to change. Source: First Annapolis Consulting, 2007 PayStream Advisors, Inc., "AP Automation for the European Market," Q1 2007. Payment is viewed as substantially less “painful” 10 P A Y M E N T S Y S T E M S R E V I E W S C E N A R I O P L A N N I N G W O R K S H O P

12. C:\Documents and Settings\r073200\Desktop\CA B2B Payments Discussion_10Nov02_v6.pptx The market has been gradually adopting electronic invoicing solutions and P2P solutions are likely to win the market over. Source: First Annapolis Consulting, PayStream Advisors 4Q 2009 survey of 275 U.S. enterprises from a diverse set of sectors. (60% < $500 mil, 20% $500 mil to $2.5 bil, 20% over $2.5 bil in annual sales.) Projections from “Beyond Plastics,” Citi, GSA SmartPay® 2010 Conference. 11 P A Y M E N T S Y S T E M S R E V I E W S C E N A R I O P L A N N I N G W O R K S H O P

13. C:\Documents and Settings\r073200\Desktop\CA B2B Payments Discussion_10Nov02_v6.pptx The market suggests that ACH payments are favored over cards…however, this is likely the result of low card acceptance and product familiarity issues. Source: First Annapolis Consulting, 2007 AFP Electronic Payments Survey of 493 members and customers in Sept 2007. Distribution of respondents by annual revenue: 7% under $50 million; 5% $50-99.9 million; 9% $100-249.9 million; 15% $250-499.9 million; 13% $500-999.9 million; 31% $1-4.9 billion; 8% $5-9.9 billion; 5% $10-20 billion; 7% over $20 billion. The median was $1.13 billion. 12 P A Y M E N T S Y S T E M S R E V I E W S C E N A R I O P L A N N I N G W O R K S H O P

14. C:\Documents and Settings\r073200\Desktop\CA B2B Payments Discussion_10Nov02_v6.pptx Suppliers appreciate most the certainty of payment that is associated with commercial cards over other payment solutions, mainly checks. Source: First Annapolis Consulting, and NAPCP, End-user survey on supplier acceptance, Nov / Dec 2009. Note: Frequencies are for "regularly cited" responses only. A response of "Decreases hard-dollar costs (e.g., banking fees, paper invoices, postage)" grouped within "Lower AR process costs." A response of "Competitive advantage over non-accepting suppliers" grouped within "To be preferred.“ 23% of respondents were deemed to be “High Capture” with annual p-card spend equal to or greater than 4% of annual revenue (private sector) or budget (public sector). 13 P A Y M E N T S Y S T E M S R E V I E W S C E N A R I O P L A N N I N G W O R K S H O P

15. C:\Documents and Settings\r073200\Desktop\CA B2B Payments Discussion_10Nov02_v6.pptx As travel and procurement expenses join up, T&E and p-card integration is inevitable. OldNewpositivenegative the autonomous travel manager → integrated into procurement Enhance coordination of card spend processes Clamp down on travel expenses Quest to commoditize cards and key off rebate regional / local spend mgmt → global category management Consolidate travel data and provider / supplier vendor relationships globally stand-alone travel reporting → integrated travel / p-card online solution Emulate a consumer web interface look / feel Review performance through dashboards Integrate receipt / invoice imaging with card Combine and reconcile data from disparate systems (agency, expensing, card) Track travelers (where, least-cost itineraries) multiple one-offs → one global solution Lead bank with partners in certain regions Multiple banks feeding into one online solution 14 P A Y M E N T S Y S T E M S R E V I E W S C E N A R I O P L A N N I N G W O R K S H O P

16. C:\Documents and Settings\r073200\Desktop\CA B2B Payments Discussion_10Nov02_v6.pptx The most prominent complaints among suppliers that resist cards largely center around high acceptance costs. Source: First Annapolis Consulting and NAPCP, End-user survey on supplier acceptance, Nov / Dec 2009. Note: Frequencies are for "regularly cited" responses only. Responses of "regularly cited" for "Cant find acquirer" and "PCI compliance" were less than 5% of overall respondents. 15 P A Y M E N T S Y S T E M S R E V I E W S C E N A R I O P L A N N I N G W O R K S H O P

17. C:\Documents and Settings\r073200\Desktop\CA B2B Payments Discussion_10Nov02_v6.pptx Acceptance is the major issue standing in the way of increased commercial card usage. Source: First Annapolis Consulting and NAPCP, End-user survey on supplier acceptance. Note: Inferred supplier acceptance rates calculated by multiplying the midpoint of each percentage response option range by the percent of respondents who ticked a percentage response. 75%51%34%28%26%26%21% Inferred supplier acceptance rate 16 P A Y M E N T S Y S T E M S R E V I E W S C E N A R I O P L A N N I N G W O R K S H O P

18. C:\Documents and Settings\r073200\Desktop\CA B2B Payments Discussion_10Nov02_v6.pptx P-cards are evolving into an increasingly sophisticated tool. industry overview Bypass purchase orders Automate POs and A/P Rebate Automate spend management Issue card for every auth user Supplier / project / mtg cards Mandate card for low tickets Optimize form of payment Past Purchasing Card Evolution Future Source: First Annapolis Consulting market observations. RPMG 2010 Purchasing Card Benchmarking Survey. 17 P A Y M E N T S Y S T E M S R E V I E W S C E N A R I O P L A N N I N G W O R K S H O P

19. C:\Documents and Settings\r073200\Desktop\CA B2B Payments Discussion_10Nov02_v6.pptx There are many barriers to electronification of payments that currently exist. Source: First Annapolis Consulting, 2007 AFP Electronic Payments Survey of 493 members and customers in Sept 2007. Distribution of respondents by annual revenue: 7% under $50 million; 5% $50-99.9 million; 9% $100-249.9 million; 15% $250-499.9 million; 13% $500-999.9 million; 31% $1-4.9 billion; 8% $5-9.9 billion; 5% $10-20 billion; 7% over $20 billion. The median was $1.13 billion. 18 P A Y M E N T S Y S T E M S R E V I E W S C E N A R I O P L A N N I N G W O R K S H O P