1. Current Payment Trends – CMTA
A focus on working capital and expense reduction

2. If only it were this easy…
Working Capital
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3. Agenda Common A/R pain points Cost and prevalence of payment types
Paper checks
ACH Debit
Website collections
CC and E-Check
OBP
Cash
Integration with accounting system
Migration to electronic payments
Parting thoughts
© 2009 Wells Fargo Bank, N.A. All rights reserved. Member FDIC.

4. Common A/R Pain Points Inefficient paper posting process
Tedious re-keying of data in multiple places
Need to increase throughput without adding staff
Pressure to lower transaction costs
Lack of visibility and control
Need for better auditing and reporting
A/R follow-up when collection issues occur
© 2009 Wells Fargo Bank, N.A. All rights reserved. Member FDIC.

5. Checks Still Dominate for Bill Payment
ACH Debits
12%
Other
14%
Checks
66%
E-Check 2%
Credit Card 6%
Checks continue to dominate C2B landscape for utility type services
Easy to receive
Setup not technical
Universally accepted
Issues with checks
Per item costs are high
Availability delays
Method of payment received from “Major Business Customers” Source: 2007 AFP Electronic Payments Survey
© 2009 Wells Fargo Bank, N.A. All rights reserved. Member FDIC.

6. Payment Methods More Company Control Less Expensive More Expensive
ACH Debit
Credit Card Debit
OTC Check
Less Expensive
More Expensive
E-Check
Online Bill Payment
Credit Card
Average ticket is 100 and ACH Debit is $0.25 cents the cost is Credit card cost on 100 at 2% is $1 and $2 bucks
Check by Mail/Drop
Less Company Control
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7. Internal or External Lockbox
Internal Lockbox
Remote Deposit
Scanned by provider
Remittance data scanned and/or keyed from invoice/coupon
Electronic posting file available from bank
Eliminates keying from images
Scanning
Keyed Data
Posting File
Scanned at company site
Remittance data scanned and/or keyed from invoice/coupon
Posting available at scanning point
Eliminates keying from most images
Scanned at company site
Discretionary data can be keyed with each check or scanned from coupon
Electronic posting file available, combined with other payment types
Information is input a part from the deposit process
© 2009 Wells Fargo Bank, N.A. All rights reserved. Member FDIC.

8. Key considerations for item processing
Internal factors
Equipment upgrades
Staffing
BCP and continuity plans
Audit control
Process customization
Customer contact
Centralized
Decentralized
External factors
Declining number of checks
Environmental forces
Check 21
ARC BOC
Bank fees
Location of provider
Some banks starting to shed assets
Few banks maintain large retail shops
Bank Fees lower now than they will ever be again – cost are climbing
© 2009 Wells Fargo Bank, N.A. All rights reserved. Member FDIC.

9. Decentralized Deposits
Courier or Drop-Off
Pros
Effortless for company
Customer contact and convenience
Cons
Availability of funds subject to delivery method
Armored carrier forces early cut-off
Desktop Deposit
Pros
Can be deposited immediately
Setup is universal
Cons
Multiple steps for staff
Entry cost can be a barrier
Courier may still be needed for cash
Security of check items being deposited
© 2009 Wells Fargo Bank, N.A. All rights reserved. Member FDIC.

10. Recurring ACH Debits The silver bullet? Not quite
Most control for biller
Least expensive method
Internal processing
Bank fees
Most companies report a plateau
Returns, NOCs, and NSF still remain
Environmental changes
Internationally consumer protection laws are tightening
Some Co-ops are offering no deposit if customer signs up for DD
Site Canadian and UK rules
© 2009 Wells Fargo Bank, N.A. All rights reserved. Member FDIC.

11. Company Maintained Website
Payment collection methods
Credit Card
Client entered
Voice entered
E-Check – One-time debit
Multi-functional tool
Company information
Service bulletins
Payment function is usually provided by third-party
Credit Card and E-Check options are expensive
Strict regulations on data
Cumbersome for consumers
Usually for one-time payments
63.1 mln US households are paying their bills online rather than writing paper checks, according to Fiserv. 13% of respondents cited online security as the top reason for not using the online bill payment service, down from 17% in the 2007 survey. Overall, online security ranked third among barriers to online bill payment adoption 2008, compared to its number-one ranking in The primary barrier (15%) in the new study was “I don’t know enough about how it works.” 31 mln households are using online banking websites to pay bills, 47.9 mln households are using biller websites and 16 mln are using both online banking and biller sites to receive and pay bills mln of Internet-using households pay at least one bill online in an average month, up from 61 mln in the 2007 survey. These households collectively paid 934 mln bills in a typical month, according to the survey results. Online bill payments made at both bank and biller websites rose to 42% of the total volume of household bill payments made each month, up from 39% in the 2007 survey. Online bill payment adoption has significantly grown since the 2002 survey, when only 14% reported paying their bills online.
Internet-using households pay an average of 11 bills per month. Consumers use an average of three different ways to pay bills, with online, check, automatic debit and in-person topping the list of popular bill payment methods. Online bill payments at bank and biller websites comprised 42% of total monthly payments, followed by 31% of bills paid by check. 51% of survey respondents cited the environment as a reason why they chose to view and pay bills online. Of these, 72% identified paper and clutter reduction as chief benefits, followed by tree conservation (19%) and reduction in gas consumption (16%). Saving time and gaining control over their finances were major online bill payment benefits cited by 44% of respondents.
© 2009 Wells Fargo Bank, N.A. All rights reserved. Member FDIC.

12. Credit Card Payments Cons Pros
Different state laws and statutes affect strategy
Regulated vs. Non-Regulated
Comparatively expensive on an average ticket basis vs. other methods
Very tight rules around protecting consumer data
Complicated pricing structure
Chargebacks can be a problem
Good funds model
Less risk of returns
Widely used and accepted
© 2009 Wells Fargo Bank, N.A. All rights reserved. Member FDIC.

13. Payment Processing Center Check
© 2009 Wells Fargo Bank, N.A. All rights reserved. Member FDIC.

14. Online Consumer Preferences
Source: 2007Javelin Strategy & Research
52% of consumers prefer to pay bills at their bank’s site
Benefits cited by consumers:
Flexibility & control
Easy set-up of automatic payment Protection
Streamlined process
Fraud/Identity Theft
© 2009 Wells Fargo Bank, N.A. All rights reserved. Member FDIC.

15. Online Bill Payment Usage
© 2009 Wells Fargo Bank, N.A. All rights reserved. Member FDIC.

16. Electronify Your Online Bill Payments!
Number of US online households that pay bills online by generation
60M
Actual
Forecast
50M
Gen Yers (b )
40M
Gen Xers (b )
30M
20M
Boomers (b )
10M
Seniors
(b ) 0M
Source: Forrester’s Consumer Technographics® North American Benchmark Studies, Forrester’s North American Consumer Technology Adoption Study 2006 Benchmark Survey, and US Census Bureau
© 2009 Wells Fargo Bank, N.A. All rights reserved. Member FDIC.

17. Online Bill Payment Projection
Bank online channel growth 30% faster than overall online bill payment growth
Banks will achieve nearly twice the five-year growth rate of biller sites by 2011
Source: Forrester Research, 2007
© 2009 Wells Fargo Bank, N.A. All rights reserved. Member FDIC.

18. Online Bill Payment Projection
Gen Y EBPP adoption will increase by 157%
Gen Y will represent only 26% of US households, yet they will make up 36% of EBPP users
By 2011, Gen X and Gen Y will constitute 65% of EBPP users
Source: Forrester Research, 2007
© 2009 Wells Fargo Bank, N.A. All rights reserved. Member FDIC.

19. How do you handle cash?
Expedited payments made by consumers at in-person or walk-in agent locations.
In person payments provide an alternative for your customers who do not have bank accounts and can’t mail a check or pay by credit/debit card.
Service validates and processes payments in real-time or in a periodic batch mode. Your customers receive a confirmation number and real time posting credit.
Reduces the expenses of late payment processing as well as cutting off and reinstating services
Data transmissions improve the accuracy and efficiency of A/R postings
© 2009 Wells Fargo Bank, N.A. All rights reserved. Member FDIC.

20. Online Bill Payment Trends
In Summary
Online bill payment growth expected to continue surging
Faster growth expected in bank-hosted channel
Not a “bank vs. biller” battle
Large billers need a strategy for handling increased volumes of online banking payments and the challenges created by electronic exceptions
May require a mindset shift around billing/payments practices
Paper remittances can be expected to continue declining
Further impetus to outsource paper remittance processing
Marketing campaigns
© 2009 Wells Fargo Bank, N.A. All rights reserved. Member FDIC.

21. Working Capital Value Proposition
Increased number of electronic payments
Reduced DSO
Reduced Account Analysis fees
Reduced time spent reconciling account
Reduced number of rejected payments
Reduced number of inbound data transmissions
Compressed month end reconciliation
© 2009 Wells Fargo Bank, N.A. All rights reserved. Member FDIC.

22. How to Streamline Receipt and Posting?
Automate
Integrate
Electronify
Automate the receivables process
Receive a data file for both paper and electronic receivables
Standardize the use of remittance data across payment type
Integrate automated file to your accounting system
Import file into system and initiate automated posting
Only work the exceptions that do not meet matching rules
Convert as many payments as possible
Encourage trading partners to pay via ACH and OBP
Use electronic methods to receive data for paper payments
Maximize your online bill payments
© 2009 Wells Fargo Bank, N.A. All rights reserved. Member FDIC.

23. Automating Your A/R Process
ACH Credits/Debits
Incoming Wires
Data files sent to Receivables Hub for each payment type
Hub creates standardized file per requested time and format
File transmitted to Acct system at requested time
File is imported and used for auto-posting
Data files
Card Payments
Accounting System / ERP
Online Bill Payments
Consolidated
Data File
Data files
Bank Receivables Hub
Mail/OTC Payments
Remote Deposit
Data files
© 2009 Wells Fargo Bank, N.A. All rights reserved. Member FDIC.

24. Accounting System / ERP
Integration Defined
Automated file received from bank
File uploaded into accounting system
Data used to identify customer and apply receipt
Receipts applied automatically by system
Leverages matching logic to minimize exceptions
Only exceptions need to be worked
Reconciliation can also be automated .
Accounting System / ERP
Consolidated
Data File
© 2009 Wells Fargo Bank, N.A. All rights reserved. Member FDIC.

25. Key Considerations Business case is straightforward
Automate
Integrate
Electronify
Business case is straightforward
Banking partner can be consultative partner on this
Benefits can quickly offset initial investment
Need to consider future staffing needs
Smaller companies starting to automate/integrate
Software providers more focused on bank integration for payables and receivables
Less demand on IT Resources required
Time to benefit doesn’t have to be measured in “months”
© 2009 Wells Fargo Bank, N.A. All rights reserved. Member FDIC.

26. Glossary ARC – Accounts Receivables Conversion
BCP – Business Continuity Plan
BOC – Back Office Conversion
BSP – Banking Service Provider
EBPP – Electronic Bill Payment and Presentment
NOC – Notification of Change
NSF – Non Sufficient Funds
OBP – Online Bill Payment
OTC – Over the Counter
© 2009 Wells Fargo Bank, N.A. All rights reserved. Member FDIC.

27. Pathway to Electronic Receivables
ACH Direct Debit 1
OBP 2 3
ACH Credit
Payment via your website 4
Image Based Deposit 6
Lockbox with Conversion 5
© 2009 Wells Fargo Bank, N.A. All rights reserved. Member FDIC.

28. Distribution of How Consumers Pay Bills
Source: Javelin Strategy and Research – 2009 Online Banking and Bill Payment Forecast
© 2009 Wells Fargo Bank, N.A. All rights reserved. Member FDIC.