How To Profitably Respond to the W almart/AMEX Bluebird Card and Other DDA Alternatives

1. How To Profitably Respond to the Walmart/AMEX Bluebird Card and Other DDA Alternatives August, 2013 Configuring and Marketing a Checking Account as a Companion Card

2. Agenda A Payments Approach to Checking Revenues Recommendation Prepaid Payment Card Services and Bank Strategy Next Steps Appendix: Walmart/Amex Bluebird

3. A Payments Approach to DDA Revenues While service charges on deposits are falling, “payments” providers like PayPal are growing revenues over 20% annually. Service Charges on Deposits Banks < $10 Billion, 2009 - 2012 PayPal Revenues 2009 - 2012 Source: FDIC, PayPal, in millions

4. Scan & Pay A Payments Approach to DDA Revenues The “payments” revenue strategy is exploding.

5. A Payments Approach to DDA Revenues A “payments” approach to segmenting and pricing transaction services is winning relationships and earning fees consumers willingly pay. • Financial institutions focus on “accounts,” which still provide settlement, but their undifferentiated value is at the bottom of the pack in the hierarchy of consumer payment methods, venues and management. • Payment providers create value by focusing on the use, context and experienceof specific payments, such as where the payment occurs or the context of before or after the payment. • Use, context and experience segmentation of individual payments drives new revenue and value that often is in addition to an existing account.

6. A Payments Approach to DDA Revenues Large $1.69 69% more Latte $5.00 500% More Consumers pay more for products and services according to use, context and experience.

7. A Payments Approach to DDA Revenues Transaction account services must be segmented through the context of payment: avoiding overdraft fees, not overspending, spending control, shopping online, and ease of “handing” someone card money.. over 30% per year.

8. Recommendation We recommend establishing a checking account that behaves like a prepaid card to offer a “companion card” payment service. Cross sell customers who want the prepaid option. Attract accounts that want entry with prepaid option. Provide account for small business/employers for direct deposit for specific employees where volume is not sufficient for Payroll card strategies.

9. Recommendation Payoff • Capture 5% of existing accounts with add on companion card generating $100 in revenue. • Acquisition benefit leveraging service as a “payroll” card for small business. • Payments expansion: “fresh start” components for accounts on ChexSystems. • Thwart inroads by Walmart and other prepaid vendors. • Leverage Bluebird marketing for your benefit.

10. Recommendation:Checking Account Configured as GPR Prepaid Card • Radio • :30 second ad on local stations • Print – short run in local publications • Horse Trader • Quill • Standard News • Howell County News • Summersville Beacon • Direct Mail

11. Understanding “Payments” Services vs Checking • GPR Prepaid Cards • Buy card and put specific amount of funds on card. • “Multi-account” credit card/debit card except funds come only from amount “pre-loaded.” • Can re-load at merchants, direct deposits or through bank accounts. • Gift Cards • Buy card and put specific amount of funds on card. • Works like a credit card/debit card except funds come only from amount “pre-loaded.” • One time use only. What Is A GPR Prepaid Card vs a Gift Card?

12. Segmentation on Use, Context and Experience • GPR Prepaid Cards • Buy card and put specific amount of funds on card. • While “prepaid,” overages can still happen but no fees. • “Multi-account” credit card/debit card except funds come only from amount “pre-loaded.” • Can re-load at merchants, direct deposits or through bank accounts. • Debit Only, Opt Out Checking • Debit card only and “return all” so only access funds deposited. • While “prepaid,” overages can still happen but no fees. • Works like a credit card/debit card except funds come only from amount “deposited” • Can deposit (“load”) via online banking transfer, branches, ATMs, or direct deposit. Functionally the same thing. GPR Prepaid Card vs an Debit Card Only, Opt Out Checking Account

13. Segmentation on Use, Context and Experience Home Use Travel Use $1.99 ($1.53 per oz.) $4.99 ($.90 per oz.) For example, segmentation generates more revenue for the same product according to use.

14. Segmentation on Use, Context and Experience When only $.50 more, the large is seen as the best value. Free Popcorn to All Our Guests Revenue is also a function of “context” and “the experience.”

15. Segmentation on Use, Context and Experience Bank DDA Marketing: A Bank Account No Use, Context and Experience • Hear is another checking account with just a debit card. What’s different? • Now balance your account and don’t think your online balance is accurate to make sure you don’t overspend or overdraft. Balance my account on a cell phone? • Let me explain how you can “Opt out” under Regulation E to avoid overdraft fees. What is Reg. E ? • You need to manage risk with your full bank account information. My risk? • Be careful shopping online, or at risky merchants. Not shop online? • Don’t let others use your debit card. Not parent, child, brother, sister, baby sitter…? VS. Alternative DDA Marketing: A Companion Card: Use, Context and Experience Market “No overdraft fees ever.” Sell “Help manage your spending.” Manage risk and security. Protect your Online shopping. Have spending control while shopping. Have a card to hand to students, youth, the baby sitter, etc. that you control. “Load” with direct deposit, etc.

16. Segmentation on Use, Context and Experience

17. Segmentation on Use, Context and Experience GPR prepaid marketing use, context and experience is growing 30%+ a year and penetrating all segments, serving over 10% of households.The Amex/ Walmart Bluebird card reflects this mass market strategy. Source: The Wall Street Journal

18. Growth Drivers of Prepaid Card Services 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. “Community banks struggle to devise a 21st century business model that accounts for changing consumer behavior.”* * Analysis of GPR Branded Prepaid Cards, Bretton Woods, 2012

19. Growth Drivers of Prepaid Card Services Many specific uses are driving the explosive growth of prepaid use among checking account holders.

20. Growth Drivers of Prepaid Card Services Prepaid customers have a checking account.

21. Growth Drivers of Prepaid Card Services Overdrawing their account for liquidity services is the least attractive option for this customer segment. 1 2 3

22. Growth Drivers of Prepaid Card Services Banks and non bank competitors are offering prepaid card alternatives, with large banks underwriting their own card and smaller banks partnering with a vendor.

23. Source: National Community Investment Fund and Our Analysis, Card Revenue Only Growth Drivers of Prepaid Card Services Unlike prepaid card programs, a “Prepaid Checking” account allows the financial institution to keep all the account revenue and face no “prepaid” compliance concerns without partnering with a vendor.

24. Product Revenue and Financial Pro Forma These accounts will add between $100 and $200 in added revenue per account.

25. Product Revenue and Financial Pro Forma This generates valuable contribution over the direct variable costs of $58 with the largely fixed costs of retail checking delivery.

26. Product Expansion $13.95/mo. We would recommend expansion of “payment” services that could be added to any “account.”

27. Summary We bring the key skills for a successful and timely, turn-key implementation: Understanding the “Payments” revenue opportunity. Product strategy definition. (bill pay?, ACH?) Product financial contribution and budget. Product system set up definition. Product expansion for ChexSystems accounts. Marketing guidance and templates. Executive and branch team training. Sales and operations training, sales script and roll out.

28. Appendix: Walmart and Amex Bluebird

30. Walmart/Amex Bluebird Account The single most important competitors is now Amex/Walmart. Prepaid is now promoted as an alternative to checking accounts. Big retailer promotion and in-store availability is driving consumer interest.

31. Walmart/Amex Bluebird Account The competitive challenge is significant.

32. Walmart/Amex Bluebird Account Rich features include: direct deposit, online and mobile, checks, ATM access, sub-accounts.

33. Walmart/Amex Bluebird Account Bluebird

34. Walmart/Amex Bluebird Account Bluebird

35. Walmart/Amex Bluebird Account Bluebird

36. Walmart/Amex Bluebird Account Bluebird

37. Walmart/Amex Bluebird Account Bluebird

38. Walmart/Amex Bluebird Account Bluebird

39. Walmart/Amex Bluebird Account Bluebird Fees

40. Walmart/Amex Bluebird Account Bluebird “surcharge free” ATMs include our ATMs.