Companion Card Strategy to Serve Customer Security and Transaction Needs

1. Companion Card Strategy to ServeCustomer Security and Transaction Needs February 11, 2014

2. Contents Introduction Market Drivers of the Consumer Need for a Companion Card Companion Card Branding and Features Sales Approach Payoff and Next Steps

3. Introduction Community and regional banks can serve a growing market through a companion card, added to the current debit card, to enhance transaction security and functionality.

4. Introduction PaySoundSM Companion Card • Checking account set up. • Debit card only. • No bill pay or ACH debits. • No NSF/OD fees; mandatory opt out. • $1.00 fee per check if written. • Fee for ACH; checks The Companion Card is simply a checking account with a “opt out” debit card linked in online banking.

5. Introduction Key market drivers for consumer demand for a “companion card” are: • New capability to transact with alternatives that settle to a bank account. • Concerns about security and compromised cards with shopping risk. • Growth of mainstream prepaid for specialized use. • Growth of online shopping.

6. 33% of Volume 2012 ACH (25%) Online (7%) Mobile (1%) $ $ Information Risk Transacting Planning Acct Contextual Value • FI Checking Acct • Revenue • Relationship • Risk • Regulatory • Compliance (ID) $ $ $ a) New Payment Capabilities Payment Networks: (PayPal, Google, Dwolla) Aggregators (BillFloat, PinPoint, Mint, BillMyParents, Banno) Bank Routing # & Account # Debit Card # Online User Name/Password Merchants (Walmart, Target, Home Depot) Billers and Services (Online/Phone Payment; Manilla, Doxo, Volly) Telephone (Isis, Boku, Verizon, AT&T (de-coupled debit) We are losing revenue from our customers using alternative payment methods that settle to our accounts.

7. 3. “Payment Context” Drives Revenue “In-store payments are PayPal’s to lose…” Don Kingsborough, PayPal Banks need to think of providing payment methods for specific transaction types.

8. a) New Payment Capabilities Checking’s Leaky Account • Remember, losing a debit transaction costs more than just interchange: • Interchange loss (net, exempt banks) $.26 • NSF/OD fee (2% of transactions) $.60 • Total $.86 The alternatives are growing for settlement, creating a leaky account. Today we tell our customers, as do others, where to not use their debit card, the primary transaction device we provide. Source: Our Analysis, Industry and NACHA Data

10. a) New Payment Capabilities Prepaid Card User Survey Use of alternative payment methods, such as prepaid or PayPal, are already used as a “companion” to checking.

11. b) Concerns About Security and Shopping Risk Source: Unisys Corp. 68% of consumers are concerned by card use compromised by fraud and identity theft.

12. c) Growth in Mainstream Prepaid for Specialized Use GPR prepaid use is growing 30%+ a year and penetrating all segments, serving over 10% of households. Source: The Wall Street Journal

13. c) Growth in Mainstream Prepaid for Specialized Use Prepaid Cards

14. c) Growth in Mainstream Prepaid for Specialized Use The benefits driving the growth of “prepaid” can be provided in a checking account: • No overdraft fees ever. (73%)* (positions Reg E opt out as a benefit) • Control over spending. (58%)* • Retail access for loading. • Second chance options where CheckSystems scores are low. * Analysis of GPR Branded Prepaid Cards, Bretton Woods, 2012

15. d) Growth in Online Purchases Online retail sales are growing rapidly.

16. The Need for A Companion Card Consumer Needs Payment Methods Transaction Segments Online Shopping • Protection if card stolen • Spending control • Avoid Overdraft fees • Credit Card • PayPal, Alt. • Prepaid • Protection if card stolen • Spending/charge control • Avoid Overdraft fees Shopping/ Travel Control • Prepaid Youth Spending • Card for youth • Avoid Overdraft fees • Prepaid Partition Funds for Target Payment • Separate account • Prepaid Consumers need a second or companion card for specialized transactions.

17. Companion Card Branding and Features The Companion Card with payments branding serves customer needs or a small business payroll card for $5.95 per month.

18. Companion Card Branding and Features Checking Accounts Payments Services “Payments” branding should be employed rather than checking branding.

19. Companion Card Branding and Features A premium companion card for $14.95/ mo. includes: • Multiple companion cards. • Higher spending limits. • Lifelock identity theft protection (see their program at http://www.lifelockbusinesssolutions.com/introduce-lifelock/texas-bank-chooses-lifelock-to-protect-customers-and-attract-new-ones/)

20. Companion Card Branding and Features The bottom line Protect yourself for less. Monitor your financial statements and credit reports for suspicious activity that can lead to identity theft. At $120 a year, it's just not worth it FIs should be aware that some authorities doubt the benefit of LifeLock and others.

21. Companion Card Branding and Features A better approach may be to provide the Companion Card so the customer can protect their main account, and access to credit information and management.

22. Companion Card Branding and Features The sales approach fits with your current approach by adding a question: Would you like to customize your account with a companion card that allows you to: • Shop without concern that your card information could be stolen. • Shop online. • Use for travel, for youth or to hand to your domestic service providers. • No overdraft fees ever. • A card to load and unload quickly and easily from online banking.

23. Payoff: 9% Service Charge Growth Companion Card Fee Revenue Increase The revenue model shows growth in service charge revenue of 9%.