tiaa direct epoints

TIAA-CREF INTERNAL — FOR INTERNAL USE ONLY

TIAA Direct ePoints ProgramNew York City Innovation Intern Team

August 2, 2012

TIAA-CREF INTERNAL — FOR INTERNAL USE ONLY 2

Agenda

► Approach & Market Dynamics

► Program Overview

► Customer Experience: “A Year in the Life”

► Business Case

► Implementation

► Conclusion

► Appendix


We looked at a number of factors impacting today’s financial institutions and found enormous opportunities

TIAA Direct’s Unique

Mission & Position

Target Customer (Millennial) Attitudes

Banking & Technology

Trends

OPPORTUNITY FOR GROWTH

Bank frustrations

Charitable giving

Local impact

Not-for-profit

“Financial services for the greater good”

Mobile banking

Civic banking

Virtual currency

Gamification

Social media

Online financial management

(Mint.com, etc.)

Crowdfunding (Kickstarter,

Crowdrise, etc.)


The data supporting TIAA Direct’s entry into innovative philanthropic partnerships is substantial

• 70% of Americans give to charity each year

• 60% of people who give have affinity to local charities

• Causes related to children and education are two of the top donor

recipient categories every year

• Americans give to elicit positive feelings and to feel connections to

causes

Giving back to the community is important and

influences consumer decisions

• 75% of Millennials give every year (more than the average)

• 43% of Millennials want to give “in the moment”

• Millennials are the segment most likely to be influenced to buy products

because they offer social benefits

• 32% of the Millennials want to see the tangible progress of organizations

Millennials are highly influenced by the needs of

their local communities

• 75% of Millennials share non-profit organized events via social media

• More than 70% of Global 2000 organizations will have at least one

gamified application by 2016

• The amount of money raised by crowdsourcing has increased 91% in the

past year

New technology, ranging from

mobile to social, is key to engaging

MillennialsSources: Mintel Oxygen, TIAA Direct NYC Innovation Intern Team survey; The Millennial Impact Report


Agenda




► Business Case

► Implementation

► Conclusion

► Appendix


TIAA Direct is uniquely positioned to truly embody the TIAA-CREF mission to “serve those who serve others”

TIAA Direct ePoints ProgramPartnerships

Build relationships with strategically-aligned non-profit organizations that will reflect TIAA-CREF’s mission and

cultivate the next generation of TIAA Direct customers through

new marketing channels

CommunityDevelop eCommunity

dashboard that facilitates engagement with TIAA Direct as

“more than just a bank”, enabling offline interactions,

transparency, and real recognition of customers’ value

to the bank

PointsSystematically reward all levels

of value-add customer engagement with the bank

Allow customers to earn and track ePoints and allocate to the

charitable project(s) of their choice – creating an emotional connection with the customers

Engagement. Education. Empowerment. Every day. TIAA Direct ePoints.


Rewards can entice customers to open accounts, but none on the market take our unique approach to giving back

reward customers for spending on their debit cards.&

&reward customers for saving.

can do both, offeringcompetitive products whilefostering education and job creation.


Reward

Recognize

Cultivate

TIAA Direct ePoints reinvent traditional banking rewards

A next-generation banking rewards program that allows customers to give back to

individual local community projects and causes is unprecedented

Celebrate and share in customers’ community impacts

Enable customers to earn and track points to be donated to non-profit partners

Build out a system to reward all levels of customer interaction with the bank, placing value and emphasis on positive customer engagement

Points Partners Community


Reward customer engagement & build“virtual equity”

Reward all levels of value-add customer engagement Build “virtual equity” that can be tracked via a user’s online account

Customers can earn ePoints through…

Deposits Loans Banking Activities

Referrals & Events Promotions

ePoints are determined based on an action’s relative profitability to the bank and/or perceived added customer relationship value*


*Projected actual ePoint values provided in Appendix


How do customers earn ePoints?


Deposits

Opening accounts (high-yield savings, interest checking, money market, CD)

Maintaining average monthly balance of certain predetermined levels

Rationale

Reward customers for initiating a relationship with the bank

Reward customers for depositing and saving money – as opposed to other rewards programs that primarily reward customers for spending

Save for yourself while doing good for your local community


Deposits




LoansTaking out a mortgage

Taking out a Home Equity Line of Credit (HELOC)

RationaleReward customers for engaging in high-revenue/high-margin bank product offerings

TIAA Direct is already willing to pay hundreds of dollars if it does not match a competitor’s rate – why not contribute to a social cause when customers choose TIAA Direct?

Build a life with a new home or investment, while helping others do the same


Loans



Customers can earn ePoints through…Banking Activities

Engage in traction-building activities (direct deposit, BillPay)

Engage in cost-cutting and revenue-generating activities (remote deposit)

RationaleReward customers for engaging and enrolling in programs that build traction / stickiness across their accounts, while also generating revenue for TIAA Direct

Stay engaged and simplify your finances


Banking Activities



Customers can earn ePoints through…Referrals & Events

Invite friends and family to open TIAA Direct accounts via word-of-mouth and social media

Register for and attend co-branded events with core non-profit partners via TIAA Direct Community Page

RationaleReward customers for helping build the brand and generate additional TIAA Direct deposits and revenue

Reward customers for participation in brand-building offline events

Share the experience with friends & family


Referrals & Events



Customers can earn ePoints through…Promotions

Initiate daily/weekly multiplier deals (e.g. 2X points in June for opening a savings account), account anniversary bonuses for loyalty (e.g. 1.25X on all points after 5 years with the bank), etc.

RationaleImplement gamification to build excitement, engagement, and consistent awareness .

Stick around, have fun, and earn more!


Promotions


How do customers use ePoints?

Customer earns points

through banking actions

Customer allocates points to individual

local project(s)

TIAA Direct converts

points to $ and sends to partner non-

profit with specific local

project allocation

TIAA Direct adds points

to non-profit’s total “vote tally” for end-of-year grant

competition

Customers can also gift earned points to other

TIAA Direct customers at no

cost Non-profit with the most ePoints will win a lump grant on top of

individual contributions

ePoint allocation for each non-profit throughout the year is

totaled

Customers are reminded to allocate all earned ePoints, and

TIAA Direct tallies votes

Continuous – “Giving in the Moment” Year-End Award



The program will be built with non-profitsaligned with TIAA-CREF’s mission & values

Mission

Education, K-12 Teachers, Millennials, Crowdfunding, Parents

800K participants/ donors, 54K schools supported, $120M

raised, 6.5M students helped

Served 450K students, trained 5K

teachers, 50 countries, Clinton Global Initiative

$305M invested, 26,500 clients served, 4,250 active clients, 1,300+ jobs created

“An online charity connecting you to

classrooms in need.”

“Inspiring students to stay in school, seize

business opportunities, and plan for success.”

“Investing in individuals. Improving

our world.”



The ePoints program creates a newmarketing channel for TIAA Direct

TIAA Direct ePoints program opens up a brand-new, tightly-targeted, and self-perpetuating 360° marketing channel

TIAA Direct builds mutually-

beneficial partnerships and

commits to community-based giving

Non-profits market TIAA Direct’s program

directly to volunteers, donors, and

constituents via social media, mailings, email, and their

websites in order to raise funds

Volunteers, donors, and constituents build brand

affinity/recognition, open accounts, and tell their friends via social

media



Marketing reach to non-participants is currently limited to traditional channels

Traditional Media

Online Marketing / Social Media



The ePoints program brings marketing “closer to home” through a variety of media

Traditional Media

Online Marketing / Social Media

Community Events

Affiliate Marketing / Direct Email



Partner Case Study: DonorsChoose.org

Ms. Smith is a middle school theater teacher in Berwyn, IL, who funded her classroom through DonorsChoose.org

Opportunity to foster community through

education and giving

2007

Many students involved with Latin Kings gang

No stage, costumes, or props

No financial support for the theater program

Maximum $250 personal tax deduction for contributions to her classroom

2012

Theater is the school’s most popular program, with 90 students

Students want to stay after school to participate

Alumni participate in end-of-year show to be part of the community again

$10K+ raised through 300+ projects, with an average of 9 donors each



eCommunity online & mobile dashboardis an online home for “all things ePoints”

PointsTrack earned ePoints

balance and contributions via web

or mobileLearn about new ePoint-earning opportunities

Allocate ePoints to local projects or give them to fellow TIAA

Direct customers

EventsLearn about and

register for upcoming co-branded /

sponsored TIAA Direct non-profit partner events

Engage with the bank offline to build a

sense of community and vested interest

Earn ePoints!Blog & Discussion

BoardRead personal entries written by TIAA Direct employees and our

partnersDiscuss financial

topics and community events with fellow

customers

Acknowledgement

Track funds raised for various highlighted

projectsSee how points are

being put to useReceive personalized messages from those

impacted by donations


The TIAA Direct eCommunity can facilitate

positive community

impact at no additional customer expense


Agenda




► Business Case

► Implementation

► Conclusion

► Appendix


ePoints will serve as a unique marketing “hook” for attracting new banking customers

ENGAGE. EDUCATE. EMPOWER.Through these ePoints non-profit partnerships!

Bank without compromiseOpen an account with great rates, no monthly fees, and convenient ways to manage your money.

HIGH-YIELD SAVINGS

1.25% APY*

TIAA Direct offers a market-leading

APY, is a trusted and established institution, and I

can help the community by

earning ePoints?


Sign off

Accounts Pay Bills Transfers ePoints eCommunity Enter Keyword(s)

Use Mobile/ Online Bankin

g

Earn Points!

Select a

CAUSEDonate Points!

Use Mobile/ Online

Banking

Earn Points!

Select a CAUSE

Donate Points!

How do these TIAA

Direct ePoints work?

Customers will be able to utilize the TIAA Direct website and eCommunity to learn about how the ePoints program works


Open a prepaid card and high-yield savings account.

Earn 850 ePoints!

Link phone bill to BillPay Link cable bill to BillPay

Earn 200 ePoints!

Maintain $50K average daily balance in savings

account.Earn 150 ePoints!

Customers will be able to earn points through both online & mobile engagement


Bank Benefit

Interchange Fees

Stickiness

Retail shopping.Groceries.

Restaurants.Gas.

Vacations.

Every time I use my TIAA Direct prepaid card, I earn ePoints!

Customers will earn points on every prepaid card purchase


John registers for a co-

branded non-profit golf

tournament and shares it on Facebook!Earns 100

points!

Bank Benefit

Marketing

Awareness

Offline Engagement

The eCommunity will drive online-to-offline engagement with the overall TIAA Direct banking experience

>

>

>

>

>

GIVE!BlogEvents

Charity Golf Tournament• August 15,2012

Fundraising Baking Competition• August 31,2012

Entrepreneurship Development Workshop• October

3 ,2012

Upcoming Registered

The 40 Block Walk •May 19,2012

Charity Gala, Bronx•June 27 ,2012

Share Event on :

Home Page

Sign off

Accounts Pay Bills Transfers ePoints Enter Keyword(s)eCommunity

SearchBy Category

By Location

By Organization

By Name

Earn 100 points for every event you attend!

Partnered with :


Sign off

Accounts Pay Bills Transfers ePoints Enter Keyword(s)

GIVE

eCommunity

Share us on :

Home Page GIVE!Events Message Board

Learn more!

Learn more!

Learn more!

Engagement with eCommunity

The eCommunity will allow customers to learn about TIAA Direct’s charitable partners

Over the course of the

year, John has collected 2100 ePoints – and now he

wants to donate them.

BankBenefit


Welcome, John!You have 2,100 ePoints. How would you like to donate them?EVERY ePoint can make a difference.

Customize your search:

Enter Zip Code 12508

Sign off

Great news! There are 5 projects in your area.

St. Mary’s School Fishkill needs $8,500 for their new gymnasiumDonate Points!

St. Columba School needs $4,500 more for their new arts program Donate Points!

Click here for more

Enter Category School

The eCommunity portal will allow customers to donate points to very specific and local projects with immediate needs


Sign off

Accounts Pay Bills Transfers ePoints

Home Page

Enter Keyword(s)eCommunity

GIVE!Events Message Board

Our Partners: $ 2,910,004.76 Donated to Date

what we do?The Network for Teaching Entrepreneurship inspires young people from low-income communities to find their paths to success.

I made a difference!

Customers can observe the tangible progress of local community projects through the eCommunity portal


Agenda




► Business Case

► Implementation

► Conclusion

► Appendix


Targeting the ePoints core customer base will enable TIAA Direct to double projected customer accounts in 2013

Core Customers• TIAA-CREF Participants: Adults

aged 18 – 34 • Students: Adults aged 18 – 34• Non-Participants: Adults aged 25

– 34 in the K-12 industry, higher education, or healthcare

Core Customers (23.0M)

Have an Online-Only Bank Account (8.5M)

Donate to Charity (5.7M)

Would Switch Banks for Better

Value (3.0M)

Incremental Customer Opportunity = 120,000 individuals (184,400 accounts) in Year One

Marketing Reach


ePoints is a high-ROI marketing and community-building opportunity for TIAA Direct

3-year NPV Annual Profit*$0.0

$10.0

$20.0

$30.0

$40.0

$50.0

$60.0

$70.0

$80.0

$61.2

$4.8

$20.7

$48.4

2013 2014 2015

• Primary profit drivers are mortgages and savings

• Projected 2013 Incremental Revenue = $72.3M

• Projected 2013 Incremental Accounts = 184.4K

• Recommended 2013 Donation = $4.5M

• $500K year-end grant

• Average donation per customer = $27.40

• ePoint donation value = $0.01

• Fixed costs (development and human resources) = $2M * No discount rate applied

Incremental Profit ($M)


The TIAA Direct ePoints program will incrementally accelerate both projected account openings and profits in 2013

Expected Incremental Accounts Cash Flows Year 1 Year 2 Year 3 Year 1 Year 2 Year 3Checking 41,403 223,068 325,318 ($3,951,088) ($20,450,614) ($26,536,869)Savings/MMA 76,788 413,713 603,351 $3,532,248 $20,582,677 $36,115,328 CD 5,885 31,707 46,241 $270,710 $1,577,448 $2,767,864 Debit Cards 22,358 120,457 175,672 ($399,251) ($1,700,260) ($708,297)Mortgage 7,323 17,664 28,121 $11,750,925 $32,708,413 $55,644,388 Home Equity Loan 3,930 15,754 29,941 $1,267,268 $7,383,544 $18,904,262 Prepaid 25,813 82,076 154,694 $645,313 $3,067,632 $7,097,067 Personal Loan 898 1,876 3,101 $80,820 $389,740 $740,571 Variable Profit $15,196,944 $43,558,579 $94,024,314 Fixed Costs ($2,000,000) ($1,500,000) ($1,500,000)Grant Donations ($4,500,000) ($4,500,000) ($4,500,000)Net income before taxes $8,696,944 $37,558,579 $88,024,314 Taxes (45%) ($3,913,625) ($16,901,361) ($39,610,941)Net income after taxes $4,783,319 $20,657,219 $48,413,373 Discounted Cash Flow (r = 12%) $4,783,319 $18,321,309 $38,083,308 Total Accounts 184,397 906,314 1,366,439

Profits per Account Type

• Incremental to projected accounts and profits in current five-year growth plan• Profit per account factors in both new and existing customer cash flows• Account growth rate matches five-year growth plan• Attrition rate applied = 21% (industry rate), which is higher than TIAA Direct• Net income allows for donation amount to grow as program profitability grows


Agenda




► Business Case

► Implementation

► Conclusion

► Appendix


The bank faces low barriers to entry, and can leverage its strengths to temper risk and discourage market replication

Strengths• Strong brand name in

education and healthcare industries

• Substantial capital backing• Established relationships with

educators and administrators• Current online user

experience easily expandable to create ePoints platform with nonprofit partner APIs

• High savings APY and diversified products

Weaknesses• Limited brand

recognition beyond current base of TIAA-CREF participants

• Millennials comprise <20% of current TIAA-CREF participants

• Limited experience creating and maintaining an online experience for a user community

• No history to determine the right amount to give to be profitable and also relevant to customersOpportunities

• Leverage brand credibility within core industries as a differentiator from other charitable programs

• Leverage existing participant relationships to create a community of giving

• Encourage behaviors that customers would already be inclined to do instead of asking them to spend

• Leverage expressed interest of key nonprofit partners to offer a unique customer experience

Threats• ePoints can be

replicated in other rewards offerings

• Competitors historically have donated broadly to cover a wide customer base

• Other options / communities for charitable giving exist and come to mind before a bank does

Inte

rnal

Exte

rnal

Mitigating Factor: It is costly for competitors to reconfigure any currently existing programs. Any changes also risk upsetting customers using existing rewards.

Recommendation: Invest in more marketing in the long run.

Mitigating Factor: They may cover a wider range of interests but with fewer opportunities for people to get engaged at a deeper personal level.

Recommendation: Keep an open dialogue with engaged customer and nonprofit partners to match their needs with our goals.

Mitigating Factor: TIAA Direct aligns with the brand and mission of TIAA-CREF, which has a strong reputation for doing social good. Our deep relationships with nonprofit partners will help to reinforce this message to a broader audience.


TIAA Direct must allocate resources to a specific set of next steps in order to ensure a successful ePoints program build

Trans

parenc

y

Technology

Key Next Steps

Develop front-end user experience (web & mobile) for assigning, tallying, and allocating

points (gamification techniques)

Develop / acquire database solution for tracking and converting total

points

Build API integrations with partners (DonorsChoose model) for accurately

distributing points and monetary donations

Hire incremental FTEs for partnership / program management and back-office administration (customer service, finance, operations, etc.)

Key Considerations

Implement phased deployment (pilot to determine key drivers of customer engagement)

Focus on transparency at all levels of communication with customers and partners

Fully disclose operational costs when donating to non-profits

Leverage not-for-profit status

Maintain focus on superior customer service – a major pain point for many banking customers

and a value-add differentiator


The future holds exciting additional opportunities for ePoints program expansion and increased market leverage

Technology•Tie card products to foursquare and edRover to leverage check-in and geo-location technologies•Giving portal (leverage Network for Good technology platform)

Products & Services•Charitable donation matching program (i.e. Advanta Kiva credit card model) •Explore various revenue stream models related to ATM charges at 40,000+ “free” ATM locations•Build out additional prepaid card functionalities

ePoints Program•Partner with a travel company (i.e. Southwest Airlines) to further incentivize customers in the points-earning process•Provide option for customers to buy points through community portal•Integrate small business loans, personal loans, automatic loan payment plans, P2P, and e-statements in points model


Agenda




► Business Case

► Implementation

► Conclusion

► Appendix


The TIAA Direct ePoints program is a rare triple bottom-line “win-win-win” for the bank, customers, and local communities

TIAA Direct

Double expected first year accounts – increase revenue and

profits

Encourage behaviors that reduce costs

Support brand and mission

Community Reinvestment Act benefits

Generate data to identify valuable customers

Customers

A “good bank”: Broad range of competitive financial products*

Doing “right”: Giving back to local communities seamlessly*

Voice within a trusted financial institution (virtual equity)*

Creating “wow”: Fun and functional everyday banking

experience*

Addresses major pain points*

Community

Support education and job creation

Leverage talents of interested Millennials

Increase engagement and funds to support projects

Support of a trusted financial institution

*Source: Booz & Company TIAA Direct Strategic Plan, 6/20/12


TIAA Direct has a unique opportunity to build a customer experience that is truly unique in the financial services market


High-impact non-profit partners are already buying in

Charles Best, Founder & CEO, DonorsChoose.org (one of Fast

Company’s Most Innovative

Companies in the World) “Nearly all corporate

loyalty/rewards programs invite customers to support institutions or

macro causes. However, few companies have tapped into the power of micro-giving, allowing ‘citizen philanthropists’ to support projects that personally speak to

them, see exactly where their money is going, and hear back from the people they’re helping. Your proposal for TIAA Direct

represents the next generation of cause marketing.”

Erica Dorn, Director of Community Development, ACCION

“ACCION USA is very supportive of any program that increases the bankability of our entrepreneur

clients and supports the mission of providing microloans to small

business owners in the United States. We look forward to forging a relationship with TIAA Direct

through the innovative offering that your team has built.”


thank you!

Questions?


Agenda




► Business Case

► Implementation

► Conclusion

► Appendix


Projected/recommended ePoints structure based on product-based profitability analyses

Deposits Sign UpsAverage Daily Balance pm

$10K-$49999.9

$50K - $199,999.99 $200K+

Interest Checking 250 50 150 300

Money Market 750 50 150 300

High Yield Savings 750 50 150 300

CD 500 50 150 300

Loans $0 - $499,999.99 $500K - $999,999.99 $1M +

Mortgage 1750 3500 7000

HELOC 750 1500 3000

Referrals Bonus ePoints

Interest Checking 25

Money Market 50

High Yield Savings 50

CD 50

Mortgage 100

HELOC 50

Activity Bonuses Bonus ePoints

Enroll in Direct Deposit 100

Enroll in Bill Pay/eBills 100

Complete Remote Deposit 5

P2P Transfers 5

Register for/Attend Event through Community Page 100

Promotion Opportunities

Daily/Weekly Multiplier Deals (e.g. 2X ePoints for opening a savings

account in June 2013)

Account Anniversary Bonus (e.g. 1.25X on all ePoints after 5 years)

Rolling bonus ePoints based total credit spend ($1 = 1 point)

Rolling bonus ePoints based on total prepaid spend ($1 = 0.5 points)

Donate to charity through eCommunity at no cost

Deposits Open account

Average Daily Balance Bonus (Monthly)

$10K-$49999.9

$50K - $199,999.99 $200K+

Interest Checking 250 50 150 300

Money Market 750 50 150 300

High Yield Savings 750 50 150 300

CD 500 50 150 300

1 point = $0.01


Sample FAQs

Why wouldn't someone just donate to a non-profit directly instead?• Customer can facilitate giving to charitable organizations at no cost to themselves, while

continuing his or her normal personal giving routine.

• TIAA Direct community of donors to help generate enthusiasm, tangible progress, gamification.

• Social media interaction with actual educators, healthcare practitioners who are current TIAA-CREF clients.

Why microfinance?• Microfinance (in our case ACCION USA) provides a unique opportunity to give back to local

community in ways that a traditional charity do not.

• Appeals to constituents from underserved communities, both domestic and international.

• Microfinance relationships can help bridge the gap between unbanked and newly-banked entrepreneurs and the underserved international market.

What if a customer does not allocate his/her ePoints? • The earned ePoints will be automatically evenly distributed amongst the partner organizations on

an institutional level at the end of the year.