A Whitman’s Sampler of Current Electronic Payment Initiatives Hampton Roads AFP Chapter Oct 8, 2013 Norman Robinson, AAP, CTP President & CEO EastPay

Whitman’s Sampler Topics for Today General Payment Trends ACH Growth by Payment Type International ACH Payments Healthcare Payments Same Day ACH

EASTPAY Not-for-profit Regional Payments Association Co-owner of the ACH Rules Educational Programs Member benefits – Voice & Representation in National Rule Making and Regulatory Process – Toll free operational assistance – Professional Services (ACH Audit, Risk, Wire, RDC) 9 Accredited ACH Professionals (AAP) on staff © 2013 EastPay. All Rights Reserved 4

General Payment Trends Federal Reserve’s 4 th triennial study of non- cash payment – 2000 – 2003 – 2006 – 2009 – 2012 – to be released soon 5 © 2013 EastPay. All Rights Reserved

6 Distribution of Non-Cash Payments Source: 2004 Federal Reserve Payments Study, Global Concepts

7 Distribution of Non-Cash Payments Source: 2007 Federal Reserve Payments Study, Global Concepts

8 In 2009, nearly 80% of noncash payments were electronic; the most used instrument was debit card, eclipsing check 1 Prepaid includes EBT. SOURCE: Federal Reserve Payments Study Distribution of noncash payments in 2006 and 2009

9 Cards were used for 60% of noncash transactions but only 5% by value; ACH and check were the dominant instruments by dollar value 1 Prepaid includes EBT. SOURCE: Federal Reserve Payments Study Distribution of noncash payments in 2009

ACH Growth by Payment Type 2012 Total ACH Grew to more than 21 Billion Transactions Volume Increase of 4.19 % from 2011 Total of $36.9 Trillion dollars transferred Dollar Increase of 8.76% over 2011 Three factors driving this growth: 1.Increase in Native Electronic Payments 2.Expanding use of ACH Credit payments by businesses and consumers 3.Rise in Online payments © 2013 EastPay. All Rights Reserved

1. Increase in Native Electronic Payments What are Native Electronic Payments? Those payments that start out as an electronic payment i.e. non-check conversion applications Conversely, transactions initiated by paper check decreased ARC, BOC, POP and RCK Decreased by 6.75% in 2012 © 2013 EastPay. All Rights Reserved

2. Expanding use of ACH Credit Payments Both Consumers and Business increasingly used credit payments A.Consumer-Initiated Entries (CIE) Bill Payments grew 7.6% in 2012 B.B2B Transactions CTX and CCD transactions (with addenda records) grew 13.8% and 5.4% respectively Use of Addenda records also grew significantly; 11.2% for CTX and 11.3% for CCD Healthcare Payments just began Sept 20, 2013 using CCD + C.Direct Deposit via ACH (PPD) Major force driving increase in ACH Credit payments 5.1 Billion Direct Deposits in % growth over 2011 A big reason was U.S. Treasury’s all-electronic initiative – required that all federal benefit recipients switch from paper checks to Direct Deposit by March 1, 2013 © 2013 EastPay. All Rights Reserved

3. Rise in Online Payments WEB Transactions Those made when the authorization to debit and account is given via the Internet Increased 10.2% over 2011 Accounted for 17.6% of the total ACH Network volume! Recently the ACH Rules were modified to allow P2P (person to person) payments using the WEB format This should add to the increasing growth of WEB transactions going forward Most P2P payments through ACH have been CIE (customer initiated entries), typically used for consumer Bill Payments. © 2013 EastPay. All Rights Reserved

Average Dollar Value of Transactions ARC$ BOC$ CCD Debits$ 12, CCD Credits$ 7, CIE$ CTX$ 39, IAT$ 1, POP$ PPD Debits$ PPD Credits$ 1, RCK$ TEL$ WEB$ © 2013 EastPay. All Rights Reserved

Dripping with Good News Network Quality is UP! Even with volume increasing, the rate of Returned Transactions continues to fall Overall ACH Network Return Rate was 9.7%, down from 9.8% Unauthorized Returns Declined as well Below 3% for the first time ever to % 10 consecutive years of decline © 2013 EastPay. All Rights Reserved

Who are the Top Users? The Top 50 Originating Depository Financial Institutions (ODFIs) Accounted for 96.5% of the Originated Volume The Top 50 Receiving Depository Financial Institutions (RDFIs) Accounted for 55.6% of the Received Volume © 2013 EastPay. All Rights Reserved

The NACHA TOP 50 Originating FIs for 2012 Debits Credits Total Change 1 Wells Fargo 2,220,893,150 1,255,452,239 3,476,345, % 2 J.P. Morgan Chase & Co2,478,265, ,191,980 3,356,457, % 3 Bank of America1,187,111, ,104,122 2,119,216, % 4 Citigroup, Inc 591,714, ,072, ,787, % 5 PNC 366,149, ,431, ,581, % 6 U.S. Bancorp 321,261, ,132, ,393, % 7 Bank of New York Mellon 367,740, ,215, ,955, % 8 Capital One 324,772,821 30,114, ,886, % 9 HSBC Bank USA 222,468, ,552, ,021, % 10 BMO Harris Bank 168,862,473 86,743, ,605, % 11 First National of Nebraska 97,339,895 81,437, ,777, % 17 SunTrust Banks 33,229,344 68,054, ,284, % 31 BB&T Corporation 21,019,148 26,790,631 47,809, % 50 First Citizens Bancshares 6,031,422 6,519,207 12,550, % © 2013 EastPay. All Rights Reserved

The NACHA TOP 50 Receiving FIs for 2012 Debits Credits Total Change 1 Bank of America 899,922, ,196,050 1,656,119, % 2 Wells Fargo 772,266, ,997,759 1,330,264, % 3 J.P. Morgan Chase 551,484, ,343,730 1,117,827, % 4 PNC 329,334, ,353, ,687, % 5 U.S. Bancorp282,788, ,866, ,654, % 6 SunTrust Banks181,123, ,354, ,477, % 7 Regions Bank 163,675, ,365, ,040, % 8 TD Bank148,224, ,930, ,155, % 9 RBS Citizens154,602,502 87,432, ,034, % 10 BB&T 150,155,059 88,379, ,534, % 14 Capital One 121,352,639 72,826, ,179, % 24 State Employees CU 43,280,288 26,772,134 70,052, % 41 First Citizens Bank 21,664,657 9,988,886 31,653, % © 2013 EastPay. All Rights Reserved

International ACH Payments Allows for the identification and facilitation of international ACH transactions Fundamental change to the definition of international payments Enables easier compliance with OFAC & BSA obligations regarding international transactions Implemented in September 2009 © 2013 EastPay. All Rights Reserved

“Travel Rule” Information Specific data elements are defined in the Bank Secrecy Act’s “Travel Rule” so that all parties have necessary information to comply with US law: – Name and physical address of the originator – Name and physical address of the beneficiary – Originating bank name, identification number, branch country code – Intermediary bank name, identification number, branch country code – Receiving bank name, identification number, branch country code © 2013 EastPay. All Rights Reserved

© 2010 NACHA — The Electronic Payments Association®. All rights reserved. IAT Transaction Batch Header Fx Codes Company Information Country Information IAT Entry Detail Fx Codes Company Info Country Info RDFI Acct # Amount OFAC Screening Indicator 1 Addenda Tran Code Fx Amount Foreign Trace Receiver 2 Addenda Originator Name and Address 3 Addenda Originator City State and Country Code 4 Addenda ODFI Name and Identification and Country Code 5 Addenda RDFI Name and Identification and Country Code 6 Addenda Receiver Identification and Address 7 Addenda Receiver City State and Country Code 8 Addenda Correspondent Information 7 Mandatory Lines of Addenda

International Reach FedGlobal ACH – 35 countries (FRB’s goal is 200) – Canada, Mexico, Panama, Latin America, South America, Europe (SEPA) – Account-to-Account – Account-to-Receiver (Mexico & South America) – Compliant with new international remittance rules 22 © 2013 EastPay. All Rights Reserved

So What’s New? Dodd-Frank section 1073– International Consumer Remittances, Consumer Financial Protection Board (CFPB) – Must provide consumer with pre-payment (& a post- payment) disclosure that includes: Transfer amount in currency use to fund request Fees and charges you impose Transfer amount in currency received by recipient Exchange Rate All other fees and charges and taxes (if available) – For all payments >$15, FIs exempt if < 100 transfers 23 © 2013 EastPay. All Rights Reserved

Healthcare Payments CCD+ A CCD with an addenda record Mandatory addenda record – TRN (Trace Re-association Number) Effective – September 20, © 2013 EastPay. All Rights Reserved

Healthcare ACH Payments Unique Identification of Health Care EFTs – “HCCLAIMPMT” in Company Entry Description field of the CCD Addition of new EDI data segment terminator – The tilde (“~”) is now accepted as a second data terminator to any data segment carried in the addenda record of the CCD Entry 5200MEDICAID CCDHCCLAIMPMT © 2013 EastPay. All Rights Reserved

Healthcare ACH Payments Formatting Requirements for Health Care EFTs – Company Name field of CCD Entry will contain the name of the health plan as known by the healthcare provider – Addenda Record will have TRN Data Segment (Reassociation Trace Number) in Payment Related Information field 26© 2013 EastPay. All Rights Reserved

Delivery of Payment Related Information RDFIs must provide or make available no later than opening of business on RDFI’s second Banking Day following Settlement date of Entry This is already required for IAT, CIE, CCD and CTX when requested – SUBSECTION © 2013 EastPay. All Rights Reserved

Delivery of Payment Related Information RDFIs required to provide or make available, either automatically (if such a service is established by RDFI) or upon request of Receiver (health care provider) all information in Payment Related Information field Via a secure electronic means – 128 bit RC4 encryption FedPayments Reporter service – Formerly FedEDI 28 © 2013 EastPay. All Rights Reserved

TRN Reassociation Trace Number* *ASC X12N vs TR3 Report © 2013 EastPay. All Rights Reserved

Delivery of Payment Related Information (Reassociation Number) RDFIs must provide or make available no later than opening of business on RDFI’s second Banking Day following Settlement date of Entry 2 Day Delivery Effective September 20, © 2013 EastPay. All Rights Reserved 2 Day Delivery

The FedACH SameDay Service For FedACH customers only Opt-In Basis (may change status monthly) Originating or Receiving Fin Institutions Previously only for Check conversion (debits only) April 1 open to all transactions except (IAT, TRC, TRX) Open to Credits and Debits 31 © 2013 EastPay. All Rights Reserved

The FedACH SameDay Service Processing Schedule (all times Eastern) Forward items may be sent between 2:15 a.m. and 2:00 p.m. Items received by 2:00 p.m. will settle at 5:00 p.m. Returns of forward items may be sent between 2:00 p.m. and 4:30 p.m. Items received by 4:30 p.m. will settle at 5:30 p.m. 32 © 2013 EastPay. All Rights Reserved

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