Section 4: Payment Processing, Billing, and Risk

1. Section 4: Payment Processing, Billing, and Risk

2. This section prepares you to understand processing details, consumer billing, and possible risks associated with bill pay including potential blocks to bill pay accounts. By the end of this section, you will be able to: Explain the finer points of bill pay processing, as required from customer questions and issues Decide how your consumers are billed for bill pay Mitigate the two types of bill pay risk Support consumers if they experience a debit return or a bill pay fraud situation, including a blocked account Section Objectives

3. Payment Processing

4. Remittance Methods FIS uses one of the following two methods to remit payments: • Electronic - If the payee is found in the database, the payment is sent out electronically. • All electronic payments go through the Federal Reserve • The payment has the consumer’s account number with that Payee listed • The financial institution sees the standard ACH code/description when received from the Automated Clearing House. • Direct Check - If the payee is added manually, the payment will be sent out via direct check. • The direct check is drawn against the consumer’s account (the MICR line is printed with your FI’s routing number and the consumer’s account number). • The direct check is printed with the consumer’s name, address, account number with the payee, payment date and payment amount. • The consumer’s account is debited when the payee deposits the check at their financial institution. FIS will not know if the check has been cashed. • Stop payments must be placed on the FIhost system. The check number can be found in CST. • The direct check is void after 90 days.

5. When setting up a payment, the consumer can click on a calendar to view options for the Deliver By date. Deliver By Date Deliver By date - the date that FIS guarantees the payment will arrive at the payee. This should be the bill’s due date. Note: This date can be set out to a year in advance. Current Date – underlined but not selectable on the calendar. Note: Payments are only processed on days when the Federal Reserve is open for business. Weekends and holidays are grayed out on the calendar. For electronic payments, if scheduled by 3:00pm Central time, the earliest Deliver By date is one business day in the future. After this cutoff, the earliest Deliver By date is two business days out. For check payments, if scheduled by 3:00pm Central time, the earliest Deliver By date is three business days in the future. After this cutoff, the earliest Deliver By date is four business days out.

6. Mon Tues Wed Thurs Fri Sat Sun 1 2 3 4 5 6 8 9 10 11 12 13 7 15 18 20 14 16 17 19 22 25 21 23 24 26 27 28 29 30 Schedule Payments - When will the debit hit? Example #1 Due date for the bill: Friday the 19th Form of Payment: Check Last day to set up bill to guarantee on-time arrival: 3:00 pm CT on 16th Funds debited when the check clears the consumer’s account Example #2 Due date for the bill: Monday the 22nd Form of Payment: Electronic Last day to set up bill to guarantee on-time arrival: 3:00 pm CT on 19th Funds debited via ACH: 22nd

7. Monday Bank Holiday Tuesday Business Day Friday Business Day Saturday Sunday Processing Automatic Payments Sometimes a payment date for a automatic payment falls on a non-processing day. When this occurs FIS processes that payment on the previous banking business day. Tip: Advise consumers to check their automatic payments at the beginning of each month and adjust if needed.

8. FIS covers any late-payment related charges (up to $50.00) should a payment arrive after its due date, as long as the consumer scheduled the transaction in accordance with FIS’ on time payment guarantee. FIS sends the late-payment related charges to the consumer, not the Payee. Note:This guarantee pertains to Check and Electronic payments; see next page for payment guarantee details on Expedited Payments. On Time & Secure Payment Guarantees

9. Payment Guarantees - Expedited Payments

10. As a provider of "pay anyone" Bill Pay services, FIS recognized the need for implementation of an OFAC (Office of Foreign Assets Control) suspect list analysis solution to identify potential payee suspects. They implemented a procedure for identifying and reporting exact payee name and address matches with the SDN list. If a match suspect is identified, FIS calls your financial institution with the payee name and associated payments. It is the financial institution’s responsibility to contact that consumer. Read more on FIS’ OFAC screening solutions on the Client Site at https://www.diclientsite.com/prodserv/bill_pay_metavante.html OFAC Compliance

11. Restrictions on Use

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13. Billing

14. Consumer Billing • The financial institution has the choice to handle billing internally or have FIS bill the consumer. This billing arrangement is set up during the implementation process. There are two types of fees: monthly fees, and all other fees like debit returns. The financial institution decides if FIS debits the consumer for monthly fees, other fees, or both. • The following applies if FIS is handling the billing:When does the consumer pay monthly fees? • Between the 1st and the 5th of the month, the consumer sees an ACH debit for the monthly fees in their account history, typically labeled “Bill Payment Service Fee” (this label depends on your processor). • How are the fees routed to the financial institution? • Intuit Financial Services’ invoice, which is processed on the last business day of the month,  includes all of FIS’ charges; for example, you may see a New User Setup fee, Per User Fee or Per Item Fee. Note: These may differ on your invoice - it all depends on your contract with FIS. The financial institution decides if they want to use any credit from the general ledger account to reconcile Intuit Financial Services' bill. • When does the financial institution receive the fee revenue? • On the 20th of the month Intuit Financial Services credits or debits the financial institutions’ general ledger account with the consumers' fees.

15. Bill Pay Risk: Debit Returns, Fraud, and Blocks

16. Types of Risk There are two types of risk with FIS Bill Pay & Presentment. Credit risk: Credit risk is defined as the potential for a payment to get returned. NSF is the most common reason, but any return reason code applies. • Ways to manage credit risk: • Up-sell, or even require, an overdraft account for all bill pay users. • The FI can decide to pay or return an ACH debit from FIS if funds are not available. If paid, this essentially transfers the risk to your financial institution. • Talk to your ACH department. They should know how to identify ACH debits coming from FIS. Create procedures for when to return or not return the payment back to FIS. For example, some financial institutions always pay checks or ACH debits from FIS for wealth management customers. • If you return a check, the check is returned to the payee, not to FIS. Fraud risk: Fraud risk is defined as the potential for a payment to be made fraudulently, i.e. not approved by the bill pay consumer. • Ways to manage fraud risk: • Be upfront with FIS and their Fraud team about your business model, e.g. let them know if you have a lot of customers in foreign countries. • Know that most often a fraud alert is a false positive. • Understand how FIS manages fraud risk by reading the “FIS Bill Pay Risk Factors and Mitigation” document (found on the Client Site).

17. FIS uses a risk-based processing model, which means the payment is sent to the payee without verification of funds or confirmation that the account is still open. * These next few pages on credit risk pertain to electronic payments only. If a check is returned, it is not routed back to FIS but rather the bill pay consumer’s financial institution. Credit Risk – Debit Processing • How are transactions identified? • The ACH file that FIS sends to the financial institution is identified with FIS’ company ID of M391165550. • The description that the consumer sees for their bill pay transactions within Internet Banking and on their statements is “Online bill pay” (the financial institution may change the description – limited to 16 characters).

18. Credit Risk – Debit Returns If the financial institution returns an ACH debit back to FIS, FIS places a block on the bill pay account.

19. Credit Risk – Blocks Below are questions you may hear when supporting consumers whose accounts are blocked because a payment was returned to FIS.

20. Credit Risk – Expedited Payments • How are debit returns handled for Expedited Payments? • Expedited Payment Debit Return • If FIS’ debit for an expedited payment is returned, the same process that is in place to handle a debit return for a standard payment is followed. • To recap: • The Bill Pay account is placed in a Blocked status. • FIS attempts to debit the account a total of 3 times. • The Block remains in affect until 3 days after FIS successfully collects on a re-debit attempt. • After 3 failed attempts, the account goes to collections. • The financial institution is charged for each debit return the amount in their Bill Pay contract. • Convenience Fee NSF • If FIS’ debit attempt on the consumer’s account for the convenience fee is returned, no further attempts are made to collect it. • However, the uncollected convenience fees are deducted from the month-end settlement owed to the financial institution. In addition, the financial institution is charged for one debit return. The consumer’s account is not blocked if the debit return on an Expedited Payment is only for the convenience fee portion. Expedited payments, as you learned in Section 3, is an add-on feature, so this page may or may not apply for you.

21. FIS offers a Fraud Management Service that checks all outgoing payments to mitigate fraud exposure. The service includes transaction monitoring, alerting and case management. Fraud Risk – Fraud Monitoring Fraud monitoring begins immediately upon implementation, and the system achieves optimum scoring of bill pay activity once 90 days of history has been accumulated by the scoring models. False-positives are more common during this 90-day “learning” period.

22. Fraud Risk – Fraud Alerts When a consumer calls in asking questions about a fraud alert, it’s important to explain the basics and help with troubleshooting.

23. Fraud Risk – Blocks If FIS does block the account because no one can be reached, this information is important to resolve the situation in a timely manner.

24. Practical Applications – Payment Processing • How does FIS determine how a payment is sent? • How many days does the consumer need to leave for processing? • Check payments • Electronic payments • Today is Feb 1st and you have a bill that is due on the Feb 13th. When is the last day you can set up the bill in order for the Payee to receive payment on time for an electronic payment? For a check?

25. Practical Applications – Payment Processing (cont’d) • When does the money come out of the consumer’s account and when is the Payee paid? • When can the consumer cancel a payment and how? • What are the advantages of using FIS’ consumer billing? • Describe the steps FIS takes if the financial institution returns a Bill Pay item. • How do expedited payment debit returns differ from regular payment debit returns?

26. Section Objectives - RECAP In this section, you learned how to: • Explain the finer points of bill pay processing, as required from customer questions and issues • Decide how your consumers are billed for bill pay • Mitigate the two types of bill pay risk • Support consumers if they experience a debit return or a bill pay fraud situation, including a blocked account