Technology Trends in 2004 Wednesday, October 1 Mark Condon, SVP Research & Advice

1. Technology Trends in 2004 Wednesday, October 1 Mark Condon, SVP Research & Advice

2. Technology & Delivery Channels

3. The Cloudy Crystal Ball • “Never make forecasts, especially about the future.” --Samuel Goldwyn • “I think there is a world market for maybe 5 computers.” --Thomas Watson, 1943 • “640K of memory ought to be enough for anyone.” --Bill Gates, 1981 • “I never worry about the future. It comes soon enough.” --Albert Einstein • “The best thing about the future is that it only comes one day at a time.” --Abraham Lincoln

4. Take Aways • Technology is of tactical value. • Strategic value is understanding what members value and why. • Convenience and trust are value drivers. • Risk management is critical. • Electronic payment volume will grow. • Authentication and verification eases fears. • 9/11 accelerated desire for greater security. • Your value proposition supports lifestyles, choices, goals, aspirations and dreams.

5. What, me worry?

6. Today’s Agenda • Current Trends • The Changing Value Proposition • The Need to Localize

7. The Reality of Technology Today • It’s the muscle behind member service. • It drives product and service development and delivery. • It shapes a credit union’s interaction with members. • It’s tactical, not strategic.

8. Industry Trends • Focus shift from products to consumers • Rapid technology development • Expanding communication channels • Geographically dispersed markets • Limited resources

9. Members’ Expectations • Anytime, anywhere convenience • Consistent experience across touch points • Personalized and seamless service • Accurate information • Focus on security and privacy

10. Credit Union Technology Offerings Source: CUNA’s 2002/2003 Technology/E-Commerce Survey

11. Top Three Technologies • Multi-channel delivery • Customer relationship management • Security and privacy Source: TowerGroup

12. Multi-Channel Delivery • Number of channels used: One – 17% Two – 21% Three – 22% Four – 20% Five – 14% Source: TowerGroup Primary Market Research

13. Channel Integration US Annual “Customer Interaction” Volume (in Billions)

14. Online Activities, 2000-2002 Banking has outpaced other activities when it comes to rate of growth among Internet users. 2000 2002 Growth (millions of (millions of 2002 rate Americans) Americans) (%) Bank online 164% 14M 37M 32% Buy/make a reservation for travel 90% 31M 59M 50% Buy a product 78% 41M 73M 62% Participate in online auction 69% 13M 22M 20% Play a game 45% 29M 42M 37% Buy or sell stocks 40% 10M 14M 12% Get hobby information 38% 65M 90M 77% Get financial information 32% 37M 49M 42% Source: Pew Internet & American Life Project Surveys, March 2000, January2002, May-June 2002, June-July 2002, September 2002

15. Projected Use of Online Banking US Households Source: TowerGroup Primary Market Research

16. Average Percentage of Members That Are Active Users* of EBP (by asset size) * Pay at least one bill per month Note: Limited to credit unions that offer PC-based electronic bill payment (EBP) services. Source: CUNA’s 2002 National Member Survey

17. Consumers use PFIs for Deposit Products Source: TowerGroup—Primary Market Research

18. …but Not Their Investment Dollars Institution Type Holding Majority of Investment Dollars Source: TowerGroup—Primary Market Research

19. …Nor Their Loan Products Products Least Commonly Owned at Primary Institution (Percentage of Owners Owning at Primary Institution) Source: TowerGroup—Primary Market Research

20. Check Electronification Electronic Check Payment Trends & Check Electronification Impact on Transaction Processing Transactions (Billions) Sources: Federal Reserve System; TowerGroup estimates

21. E-Transactions are Steadily Reducing Paper Volumes U.S. Non-Cash Retail Transaction Volumes 2001 75.4 billion 2007 115 billion Checks Debit Card Credit Card Emerging POS* Retail ACH Stored Value (Swipe) *Contactless and Mobile ($5 and up only) Source: TowerGroup

22. Loyalty Metrics % of U.S. Retail Consumers Who Are… Source: McKinsey, TowerGroup

23. By 2004, total mobile subscriptions surpass cards issued by any individual brand Mobile Cellular Devices vs. Plastic Payment Cards (1997–2007) # of customers (millions) Total Mobile Subscribers Total Visa Cards Total MasterCard Cards Total American Express Cards Source: TowerGroup estimates

24. “I feel it is currently unsafe to perform any kind of Online transacting involving my money” % of US Households Source: TowerGroup—Primary Market Research

25. Costs Incurred by U.S. Financial Institutions Due to Identity Theft, 2001-2006 Source: Celent Communications, August 2002

26. Credit Union Use of NetworkSecurity Measures Note: Limited to credit unions with a Web site that have some network security measures in place. Multiple responses were allowed. Source: CUNA’s 2002/2003 Technology & E-Commerce Survey

27. The Value Proposition • Convenience • Access • Flexibility • Trust • Security • Policy

28. Determine Your Value Proposition • Understand Members’ Needs and Goals • Observations • Quantifiable • Channel Preferences • Current • 3 to 5 Years • Payment Methods • Fee Impact • Core Processor • Security & Privacy • Policies • Procedures • Authentication • Verification

29. Report PowerPoint Presentation Video #20583 #23507 #30006 Order by phone: 800/356-8010, ext. 4157 Order online: http://advice.cuna.org and click on “Reports” 2003/2004 Credit Union Environmental Scan Resources

30. Order these reports by phone: 800/356-8010, ext. 4157 Order online: http://advice.cuna.org and click on “Reports” Oct. 24 – Oct. 28 Honolulu, Hawaii Register for the CUNA Future Forum: http://training.cuna.org 2003/2004 Credit Union Environmental Scan Resources