©2007 Bank of the West. Member FDIC

The Convergence of PaymentsDrivers and Solutions

John M. Curtis, AAPVice 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 2007

3

Industry Overview

Paper Checks

2003 - 2006

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 2006.

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 2010.

Check Images processed in Atlanta

Remote Deposit Capture has grown 8 times in market size from 2006 – 20081

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 billion1

Government usage of prepaid cards has become one of the fastest-growing segments of prepaid in recent years2

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 2008. Research commissioned by MasterCard

1-Study by CPI6

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: http://www.treas.gov/press/releases/tg644.htm

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 benefits10

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 Conversion Image Exchange

ACH Network Check Clearing Network

ACH Rules Check 21 Law

Authorization Required No Authorization Required

Opt-Out Provisions / Bus Check Limitations No Opt-Out or Business Check Limitations

Only Sends Data Transmits Images with Data

Generally 100% Next Day Availability Availability 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 QuahogHow To Pay Property Taxes Payments can be made by the following methods: Mail - P.O. Box 001  Quahog, RI  90058Please make checks payable to:Stuart Griffin, Quahog County Treasurer  Phone - Call (213) 555-1212 (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

$

Mike’s Bank

$

Phil’s Bank

$

Tammy’s Bank

CheckFree

FIS

$

John’s Bank

$

Natalie’s Bank

Metavante

Fiserv

$

Taryn’s Bank

$

Nick’s Bank

Princeton eCom

iPay

Current Non-Electronic Bill Pay Flow 18

Solutions

$

Your Bank

$

Mike’s Bank

$

Phil’s Bank

$

Tammy’s Bank

CheckFree

FIS

$

John’s Bank

$

Natalie’s Bank

Metavante

Fiserv

$

Taryn’s Bank

$

Nick’s Bank

Princeton eCom

iPay

Bill Pay Flow with Bill Consolidator19

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 Q2 2010

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 1984

25

The Convergence of Payments

Questions

26