BUILDING TOMORROW™

rbs.com/gts

24th February 2012

Innovation in Banking

Tony Clegg & Tom Macdonald

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Cards in Public Sector

Tony Clegg - Business Development Manager

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GPC III

RBS only dual scheme issuer in GPCIII i.e. MasterCard and Visa

MasterCard OneCard preferred solution with Integrated MI package

Comprehensive reporting system – Smart Data Online

Solutions encompass both Travel & Entertainment and Purchasing style spend

Tiered rebate structure available, based on annual spend and settlement period

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Rebate matrix

Size of customer Size of customer Size of customer(annual value of transactions) (annual value of transactions) (annual value of transactions)

% Rebate

Standard terms - 14 days For early settlement - 7 days For delayed settlement - 28 days

Up to £499,999 per annum 0.000%

% Rebate % Rebate

Up to £499,999 per annum 0.000%

£500,000 to £999,999 0.10% £500,000 to £999,999 0.175% £500,000 to £999,999 0.000%

Up to £499,999 per annum 0.00%

£1,000,000 to £2,999,999 0.15% £1,000,000 to £2,999,999 0.225%

£3,000,000 to £4,999,999 0.20% £3,000,000 to £4,999,999 0.275%

£5,000,000 to £9,999,999 0.425%

£1,000,000 to £2,999,999 0.000%

£3,000,000 to £4,999,999 0.050%

£5,000,000 to £9,999,999 0.150%

£10,000,000 to £29,999,999 0.40% £10,000,000 to £29,999,999 0.475% £10,000,000 to £29,999,999 0.200%

£5,000,000 to £9,999,999 0.35%

£30,000,000 to £49,999,999 0.45% £30,000,000 to £49,999,999 0.525%

£50,000,000 to £74,999,999 0.50% £50,000,000 to £74,999,999 0.575%

£75,000,000 to £99,999,999 0.675%

£30,000,000 to £49,999,999 0.225%

£50,000,000 to £74,999,999 0.275%

£75,000,000 to £99,999,999 0.325%

In excess of £100,000,000 0.65% In excess of £100,000,000 0.725% In excess of £100,000,000 0.375%

£75,000,000 to £99,999,999 0.60%

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Comprehensive Controls

Individual transaction limit

Cardholder monthly limit

Corporate monthly limit

Merchant Category Group Blocking (inc option to prohibit cash withdrawals)

Preferred Vendor

‘Approved’ Supplier lists

‘Hosted’/Virtual cards

Smart Data On-Line (SDOL)

Corporate Liability Waiver/ Lost or Stolen Card Liability

£50k per c/holder

£1.5 Million per programme

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Declining Balance Cards - Uses and Benefits

Declining balance cards are an ideal solution for any programme where there is a need for a set budget or a fixed spending amount.

- Incentives and Per Diem

- Recruiting and Relocation

- Rewards and Recognition

- Temporary Workers Expenses

- Training Budgets

- Allowances

Travel and Expense

- Board Meeting Arrangements

- Conferences & Conventions

- Parties

- Sales / Team Meetings

- Trade Shows & Events

- Product Launches

Meetings & Events

- Consulting Projects

- Disaster Recovery Projects

- Educational Grants

- Government Grants

- Pilot / Test Programmes

- Short-Term Projects

Projects

Examples of Declining Balance usage would be…

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Virtual Cards

A rapidly growing area for cards use

No Cards issued

Virtual cards can be set up in any name as not constrained by Chip & Pin regs

Usually set up in name of Department or key supplier

If with key supplier, card number is lodged with supplier

Purchases made and charged to card

Data supplied is usually level 3 compliant removing requirement for VAT receipts

Card details held securely

Coding can be added as part of transactions to assist cost allocation

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Reporting options

Functionality Includes :

Integrated MI systems or 3rd Party solutions available

Large variety of reporting options, allowing you to compile, track and manage transactions.

VAT reports accredited by Customs and Excise as evidence for VAT reclaim.

Manipulate raw data to produce your own bespoke reports.

Web based services that enable you to access management information reports, helps analyse your cardholder’s spending, ensure internal policies are being adhered to.

Create your hierarchy for reporting purposes.

Cardholder logon

Assignment of GL Codes

Download data to your General Ledger/Account software systems

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Summary benefits

RBS Commercial Cards through GPC, can offer increased value to both internal and end user customers through ;

Reducing the need for cash - Global Acceptance

Cash flow management – Free up cash flow of upto 45 days from date of purchases

Process efficiency – Reduce cost of invoice processing by approximately £33 (manual versus electronic)

Cost control - Card transaction limits and monthly card limits – Tight Control on Spending

On line Management Information – 24/7 visibility of Purchases

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Innovation in Banking

Tom Macdonald - Cash Management

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Banking Innovation

Banking landscape more regulated to ensure greater future stability

Liquidity and cash flow management increasingly important

European initiatives driving efficient business interaction across the single market

Technology continues to transform how we pay and interact

Growing expectations for mobility, speed and interoperability

Online is moving to Mobile as smart phone and tablet use increases

Consumers are changing faster than businesses but what does this mean in the way they pay businesses?

Backdrop

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Regulation – Stability and Compliance

Europe Basel III

1) International Agreement on the amount of capital held by banks

– Goes live from 2013

US Dodd Frank Act

1) Promotes the stability of the US financial system

– Improves accountability and transparency

– Protects American taxpayer by ending bailouts

– Protects consumers from abusive financial services practices

UK independent Commission on Banking

1) Ring fences UK retail operations

2) Improves loss absorbency, e.g. equity/leverage

3) Sets higher UK capital requirements for systemically important FIs

The New Landscape

Prudential Regulatory Authority

1) New entity that will sit alongside the Financial Conduct Authority

2) PRA works with Bank of England to ensure market stability

3) FCA supervises the individual organisations

Payment Services Oversight

1) Banking Act 2009 gives the BoE responsibility in the UK for ensuring that critical payment schemes operate prudently

– More banks will join schemes in their own right

– Bacs payments will move to a £20m value cap from May 2012

2) UK Payments Council tasked to oversee and drive these changes

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Inclusion – improve access & inclusion

Integrity – robust and secure systems

Innovation – research, enhance, facilitate

UK Payments Council

Key Objectives

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Innovation

Mobile Payments Service - development of a ‘proxy’ database to route payments to a bank account using a linked mobile phone number

Multiple Authorisation for all business online channels to support small business demand for online banking services

Investigating solutions to ensure electronic payments are made to the right payee

Inclusion

Linked closely to innovation

Working closely with the Charities & Voluntary sectors to ensure that payment services meet the needs Frameworks/concepts easy to recycle

Recent research on how older people interact with the service sector for payments

Integrity

• Payment system resilience e.g. Bacs transaction value cap of £20m from end May 2012

• Develop minimum standards for customer authentication on internet and telephone banking

• New best practice guidance on Payment Referencing for Billers and Payers in late 2010

Payments Council – National Payments Plan

Activity

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UK Payments Trends 2010 - 2020Winners and Losers

Debit Cards

100%

Credit Cards

41%

Direct Debits

24%

Auto Credits

22%

Standing Orders

17%

ATM

3%

CHAPS

9%

Cash

35%

Cheques

100%

40%

All Payments(Non Cash)

Source: Payments Council UK Payment Markets 2011

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Wider Innovation

Business Efficiency

Worldwide Government initiatives driving business and citizen e-enablement and activity

Across Europe, mandatory B2Gov e-invoicing is spreading - Denmark, Finland, Italy, Spain and Sweden have done and other countries are expected to follow

e-invoicing generally is experiencing 30-40% annual market growth

In turn it supports better cash flow management and accounts payable/ receivable process efficiency,

The SEPA project aims by end 2014 to deliver across participant countries mandated use of SEPA credits and direct debits

For consumers UK drive to get more people on line and extend broadband reach/ speed

So what might the future look like?

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Fast growing expectations – consumers and businesses

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Customers today demand payment methods that :

Conform to the highest standards

Don’t have onerous identification methods

Are completed within hours

Use devices that exist for other reasons

Are 100% accurate and reliable

Are widely accepted by businesses

Are globally usable

Are value for money

Use data to enhance the bank’s offer, but not intrude

Do you agree?

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And what might this mean?

Cash is dead

Replaced by mobile phones and contactless cards

Or by biometric identification and verification which brings up a list of cards/accounts to choose from stored on ‘the

cloud’

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Possible Consumer Scenario

Possible Corporate Scenario

Most are straight-through, enabled by....

With transparent pricing

Freeing people to provide insights and build relationships

Mobile, globally accepted and secure

And data is used to improve tailoring and support

...E-invoicing

And approval on the go

Efficient*

Insightful*

Flexible*

Networked*Efficient*

Insightful*

Flexible*

Networked*

*Source: characteristics of a Bank of the Future

Paper is dead: all payments are initiated

electronically

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Innovation Activity

Intelligent Deposit Safes

• Service piloted in live customer premises

• Proposition under assessment for potential full delivery

• Secure solution for cash takings

• Technology counts cash reducing errors and saving time

• Combats fraud from employees and counterfeit notes

Mini Cash in Transit Pick Up

• Regional customer pilot conducted of Bank Branch alternative

• Proposition under assessment for potential full delivery

• Bank provides small CIT vans collect notes/coin from customer premises (£3k - £10k)

• Order coin to be delivered with collections

• Business cheques also collected

PayAway-IP Direct Mobile App

• Mobile app for iPhone & iPad

• View BACS reports and file submissions ‘on the move’

• Mobile app for iPhone and iPad - File authorisation

Mobile Channel

• Assessing Mobile Channel opportunities

• Potential prototypes being worked on:

• SME E-invoicing prototype on handheld and iPAD

• Quick apps - “bookshelf” and “expenses”

• Mobile app for iPhone and Blackberry users linked to Bankline

• Mobile wallets/Payment options

PayAway-IP Direct – new features

• Evaluating enhancements based on customer feedback:

• Sage integration (50 and 200)

• Direct Debit Manager

• Bureau module

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Summary

The act of starting something for the first time

Introducing something new

A new method of doing something

“If at first the idea is not absurd, then there will be no hope for it.” (A. Einstein).

Definition of ‘Innovation’

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