Confidential R. C. Giltner Services February 11, Companion Card Strategy to Serve Customer Security and Transaction Needs

Confidential R. C. Giltner Services Contents Introduction Market Drivers of the Consumer Need for a Companion Card Companion Card Branding and Features Sales Approach Payoff and Next Steps 2

Confidential R. C. Giltner Services 3 Community and regional banks can serve a growing market through a companion card, added to the current debit card, to enhance transaction security and functionality. Introduction

Confidential R. C. Giltner Services The Companion Card is simply a checking account with a opt out debit card linked in online banking. 4 PaySound SM Companion Card –Checking account set up. –Debit card only. –No bill pay or ACH debits. –No NSF/OD fees; mandatory opt out. –$1.00 fee per check if written. –Fee for ACH; checks Introduction

Confidential R. C. Giltner Services Key market drivers for consumer demand for a companion card are: a)New capability to transact with alternatives that settle to a bank account. b)Concerns about security and compromised cards with shopping risk. c)Growth of mainstream prepaid for specialized use. d)Growth of online shopping. 5 Introduction

Confidential R. C. Giltner Services We are losing revenue from our customers using alternative payment methods that settle to our accounts. 6 FI Checking Acct Revenue Relationship Risk Regulatory Compliance (ID) Aggregators (BillFloat, PinPoint, Mint, BillMyParents, Banno) Billers and Services (Online/Phone Payment; Manilla, Doxo, Volly) Payment Networks: (PayPal, Google, Dwolla) Merchants (Walmart, Target, Home Depot) Telephone (Isis, Boku, Verizon, AT&T (de- coupled debit) $ $ $ $ $ Acct Contextual Value a) New Payment Capabilities

Confidential R. C. Giltner Services Banks need to think of providing payment methods for specific transaction types. 7 In-store payments are PayPals to lose… Don Kingsborough, PayPal 3. Payment Context Drives Revenue

Confidential R. C. Giltner Services 8 The alternatives are growing for settlement, creating a leaky account. Today we tell our customers, as do others, where to not use their debit card, the primary transaction device we provide. Checkings Leaky Account Source: Our Analysis, Industry and NACHA Data Remember, losing a debit transaction costs more than just interchange: Interchange loss (net, exempt banks)$.26 NSF/OD fee (2% of transactions)$.60 Total$.86 a) New Payment Capabilities

Confidential R. C. Giltner Services 9

Confidential R. C. Giltner Services Use of alternative payment methods, such as prepaid or PayPal, are already used as a companion to checking. 10 Prepaid Card User Survey a) New Payment Capabilities

Confidential R. C. Giltner Services 68% of consumers are concerned by card use compromised by fraud and identity theft. 11 Source: Unisys Corp. b) Concerns About Security and Shopping Risk

Confidential R. C. Giltner Services 12 GPR prepaid use is growing 30%+ a year and penetrating all segments, serving over 10% of households. Source: The Wall Street Journal c) Growth in Mainstream Prepaid for Specialized Use

Confidential R. C. Giltner Services Prepaid Cards 13 c) Growth in Mainstream Prepaid for Specialized Use

Confidential R. C. Giltner Services 14 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. * Analysis of GPR Branded Prepaid Cards, Bretton Woods, 2012 c) Growth in Mainstream Prepaid for Specialized Use

Confidential R. C. Giltner Services Online retail sales are growing rapidly. 15 d) Growth in Online Purchases

Confidential R. C. Giltner Services Consumers need a second or companion card for specialized transactions. 16 Consumer Needs Online Shopping Transaction Segments Shopping/ Travel Control Youth Spending Partition Funds for Target Payment Protection if card stolen Spending control Avoid Overdraft fees Protection if card stolen Spending/charge control Avoid Overdraft fees Card for youth Avoid Overdraft fees Separate account Payment Methods Credit Card PayPal, Alt. Prepaid The Need for A Companion Card

Confidential R. C. Giltner Services 17 The Companion Card with payments branding serves customer needs or a small business payroll card for $5.95 per month. Companion Card Branding and Features

Confidential R. C. Giltner Services Payments branding should be employed rather than checking branding. 18 Payments Services Checking Accounts Companion Card Branding and Features

Confidential R. C. Giltner Services A premium companion card for $14.95/ mo. includes: Multiple companion cards. Higher spending limits. Lifelock identity theft protection (see their program at lifelock-to-protect-customers-and-attract-new-ones/) lifelock-to-protect-customers-and-attract-new-ones/ 19 Companion Card Branding and Features

Confidential R. C. Giltner Services 20 The bottom line Protect yourself for less. Monitor your financial statements and credit reports for suspicious activity that can lead to identity theft. At $120 a year, it's just not worth it Companion Card Branding and Features FIs should be aware that some authorities doubt the benefit of LifeLock and others.

Confidential R. C. Giltner Services A better approach may be to provide the Companion Card so the customer can protect their main account, and access to credit information and management. 21 Companion Card Branding and Features

Confidential R. C. Giltner Services The sales approach fits with your current approach by adding a question: Would you like to customize your account with a companion card that allows you to: Shop without concern that your card information could be stolen. Shop online. Use for travel, for youth or to hand to your domestic service providers. No overdraft fees ever. A card to load and unload quickly and easily from online banking. 22 Companion Card Branding and Features

Confidential R. C. Giltner Services The revenue model shows growth in service charge revenue of 9%. 23 Companion Card Fee Revenue Increase Payoff: 9% Service Charge Growth