ACH, EIPP, STP… OMG!

1. ACH, EIPP, STP… OMG! Sifting Through the Jargon to Develop a Cohesive ePayment Strategy. 06/06/12

2. Agenda 1 The current landscape and where we’re heading 2 The options available to you 3 How to get started Source: Forbes Global 2000; PayStream Advisors, 2010: Association for Financial Professionals, 2010

3. Paper-based Payables Volume is a ResourceDrain for Companies of All Sizes In 2010, the Global 2000 had… 1 11.2 billion invoices What is your organization’s costfor ineffective payables processing? 2 85% of invoices are paper 3 57% of payments are check Source: Forbes Global 2000; PayStream Advisors, 2010: Association for Financial Professionals, 2010

4. The Tide is Rapidly Shifting Source: IAPP, Accounts Payable Automation Survey, Sept. 2010

5. The Tide is Rapidly Shifting Healthcare Source: IAPP, Accounts Payable Automation Survey, Sept. 2010

6. Payment and Reconciliation Electronic payments are a significant opportunity for cost savings Aberdeen Group May 2010 Study: "Global Payments: Maximizing Cash Flow with Electronic Payments and Process Automation" Accenture 2007 Study: "The Roleof Procurement Cards in theSource-to-Settle Process" Reconciliation Costs Payment Costs Illustrative Example Only

7. Which Paperless Option is Best?

8. Lots of Tools in the Payables “Tool Kit” • E-Payments • ACH/EDI • Commercial Cards • Wire • Electronic Accounts Payable • Dynamic Adjustment Accounts • Single Use Accounts • Ghost Accounts • Electronic Invoice Presentment& Payment • End-to-End Automation

9. Most Organizations Use More than One Business Purchase Landscape Cap Ex COGS EDI WIRES CHECKS ACH CARDS Ad Hoc MRO

10. The Options 1 ACH 2 2 Wire Transfers 3 Cards 4 Electronic Accounts Payable (EAP) 5 Electronic Invoice Presentment and Payment (EIPP)

11. COMMON USES BENEFITS • Collections – Utilities, Charitable, RE, Membership • Disbursement – Payroll, Dividends, Refunds, Pension Payments… • B2B Trade Payables • B2C One Time or Repetitive Collections or Disbursements • International ACH Payments • Check Conversion – ARC,BOC, POP • Decoupled Debit – POS • Return Fee Collection • Low Cost per Item • Supports both Debit and Credit • B2B or B2C • Ideal for Repetitive Transactions • Can Contain Remittance Info that Travels with the Payment – Native Electronic Payment • Ubiquitous Acceptance through Banking System • Long Established NACHA Format Supported by all ERP Systems, NACHA File Software and Services Widely Available • “Green” Alternative 1 ACH has Broad Acceptance and Uses

12. 1 Key Considerations – ACH ACH • Payables/Receivables (DR/CR) (22,32,27,37) • Payment that are the right fit for ACH? (COGS, MRO) • Payment Applications (PPD, CCD, CTX, IAT, WEB) • File creation (WEB,PC, Direct File) • Format (NACHA format, Non-NACHA format) • Addenda (STP 820, ANSI X12 formats, tax addenda) • Rules and operating guidelines? (REG E, Reg CC, UCC4A) • Returns, notification of changes, authorizations and enrollment • Driving adoption (Direct Payment, Direct Deposit, UPIC) • Remittance Reporting (EDI, Data Capture, Formatting, STP)

13. 2 Wire Transfers Speed Payment Processing COMMON USES BENEFITS • Where funds need to be available immediately, and where finality of payment needs to be certain – mortgage closing, broker dealer, high dollar value B2B transactions • Can be used in conjunction with other payment types, e.g., a draw wire to fund an ACH credit file • Has high potential for wider B2B usage once the new FED wire remittance is in place • Funds available for immediate use • Initiation flexibility and security • Automated batch input can send large volumes in automated fashion • Accurate, safe, and confidential • Increased financial flexibility • Simplified transfers, repetitive and voice initiated options

14. 2 Key Considerations – Wires WIRES • Type of wire input (Voice, Phone, PC, Web, Direct Connection) • Network (FED, SWIFT,CHIPS, internal) • Wire type (Repetitive, Semi-Repetitive, Free Form) • Wire cutoff times per bank but follow Federal Reserve • Security requirements • Wire instructions (valid characters for each network, BNF, OBI, BBI fields) • New FED wire remittance data • Wire reporting and advice information • Tracking

15. 3 Cards are Easy to Use COMMON USES BENEFITS • Decentralized purchases • Large number of purchases –small amounts per purchase • Travel, fuel, private aviation expenses • Easy to use • Network standardization • Transfer of risk from supplier to card issuer • Increased productivity • Revenue share opportunities • Reduced processing costs • Better cash flow forecasting CARDS

16. Key Considerations – Cards 3 CARDS • Supplier adoption is key • Buyers need to articulate benefits to suppliers • The more spending you push onto the card, the greater the benefits to all • Consider mandating their use • Enhanced spending controls (optional) • Payment analytics can spot employee misuse (optional) • Still growing 16

17. Virtual Card Accounts 4 COMMON USES BENEFITS • Management of strategic supplier relationships • Single Use Accounts • “Ghost” Accounts • Virtual Accounts • Straight Thru Processing • Enhanced visibility and control • Reduced operating costs from process improvements • Reduced fraud • Improved on-time payment • Increased early payment discounts • Improved revenue sharing opportunities • Enhanced cash flow forecasting abilities CARDS 17

18. Virtual Card Accounts 4 Considerations • Ideal if you have a substantial number of regular suppliers who offer discounts for early payment • Significant IT investments are not necessarily required by either buying and selling organizations • For best results, need to “sell” epayments as the standard for conducting business to all internal/external partners 18

19. 4 Virtual Card Accounts • Over 25% of organizations have adopted virtual purchasing cardaccounts • For organizations with $1 billion+ revenue, the adoption rate is nearly double • Over the next three years, EAP use will grow byover 40%* *Source: 2010 RPMG “Purchasing Card Benchmark Survey Report”

20. Electronic Invoice Presentment &Payment (EIPP) 5 COMMON USES BENEFITS • When the buyer’s goal is invoice-to-payment automation • When the goal is to reduce your payment costs, reduce your paper use and maximize your efficiency • Bank can pay the suppliers how they want to be paid • Buyers can pay the bank the way they want to pay • Bank acts as the “converter” • Easily converts paper to electronic • Everything - from invoice to final payment – is electronic • Buyer and supplier to have equal access to data – promotes collaboration, mitigates disputes • Payment method neutrality • Fewer lost or missing invoices • Minimize fraud and duplicate invoices • Finance options for buyersand suppliers • Maintain a complete audit trail CARDS 20

21. Electronic Invoice Presentment &Payment (EIPP) 5 Considerations • Significant IT investments are not necessarily required by either buying and selling organizations • Implementation may take a little more time • Rebates are not part of it, but the cost savings might exceed any possible rebate 21

22. 5 Electronic Invoice Presentment &Payment (EIPP) • Incremental benefits available... eliminating large capital investment • Buyer and supplier benefits are not dependent on each other • EIPP solutions are reaching critical mass

23. 5 Electronic Invoice Presentment &Payment (EIPP) • Almost 16% of organizations have adopted Electronic Invoice Presentment and Payment (EIPP) tools • Currently, $1 billion+ organizations have the highest adoption rates • 50% of organizations have plans to adopt within the next three years

24. 5 How EIPP Works INVOICE FINANCE PRESENT PROCESS PAY • Cooperative approach between two participants • Buyer – uses EIPP for A/P • Supplier – uses EIPP for A/R • Both parties review and manage their transactions online • Both parties have real-time visibility to invoice and payment status • Both parties collaborate online to resolve disputes or exceptions

25. How Do I Get Started? Map out current payable and receivable processes Obtainsenior managerbuy-in Consult with banking partners Driveadoption Review IT resources; determine desired automation level Consult with trading partners todetermine interest and effort required

26. The Low-Hanging Fruit Z COMMERCIALCARDS B2B PAYMENTNETWORKS WIRES FORIMMEDIATEFUNDS, HIGHVALUE PAYMENTS INVOICE PROCESSINGAND PAYMENTSOLUTIONS ACH FORRECURRING LOWVALUE PAYMENTS 26

27. Is Now the Right Time? Should I wait for the mobile revolutioninstead? You needto get started yesterday You have tools now to fit your needs Mobile and other innovation will build on these options Cards, EIPP, ACHand Wires will form the backbone for the foreseeable future

28. Questions

29. Thank You! Jeff Pape SVP Group Product Manager Corporate Payment Systems U.S. Bank jeffrey.pape@usbank.com Greg Rettinger AVP Global Treasury Management, AAP U.S. Bank gregory.rettinger@usbank.com