1. SMU Dedman School of Law October 8, 2007 Glenn Wheeler – Chief Executive Officer

2. Agenda Topics Who is NCHA/PRO Who Are The Other Players Payments Overview What is Happening in Each Channel Success Stories and Challenges Conclusions

3. Who is NCHA/PRO Non-profit 501 c 6 association of member financial institutions Consortium of financial institutions that come together to address common industry needs Key Products and Services: Check Exchange, Education, Risk Management

4. Who is NCHA/PRO Approximately 800 member financial institutions (Holding Companies) 30 Employed staff with offices in Dallas (headquarters) and Phoenix Outsource Relationships Corporate Board of Directors (from membership) Growing number of partners – vendors, non- financial institutions

5. Who is NCHA/PRO Large Banks Credit Unions Aggregators Mid-size/Small Banks Credit Unions Large Banks Collecting BanksPaying Banks Electronic and Physical Routing/Distribution/ Settlement Providers ~35% Mid-size/Small Banks ~80% ~20% Aggregators ~25% ~40% Check Exchange and Settlement

6. Who is NCHA/PRO Settlement For Over 20% of All Checks Written in the Unites States 6 billion checks 6 trillion dollars 40% are exchanged electronically Less than 10% electronic a year ago Check Exchange and Settlement

7. Who is NCHA/PRO Broadens presentment warranties that otherwise exists in UCC 4.208 1.No forged endorsements 2.No alterations 3.No knowledge of any unauthorized signatures –CHANGES #3 to: No unauthorized signatures and is not counterfeit Future – Revisions to UCC Similar to Rule 8 Risk Management – Rule 9

8. Who is NCHA/PRO Image Survivable Check Security Features Payment Fraud Information Tools Training Education Payments Approach to Fraud – Breaking Down Existing Silos Risk Management

9. Who is NCHA/PRO Payments Support For Questions Around Payments Training and Education – Certification Classes Taught Via Web and In Person Industry Advocacy –National Automated Clearing House Association (NACHA) –Electronic Check Clearing House Organization (ECCHO) Training and Education

10. Who Are The Other Players? Large Banks Credit Unions Aggregators Mid-size/Small Banks Credit Unions Large Banks Collecting BanksPaying Banks Electronic and Physical Routing/Distribution/ Settlement Providers ~35% Mid-size/Small Banks ~80% ~20% Aggregators ~25% ~40% Check Exchange and Settlement

11. Who Are The Other Players? Federal Reserve Financial Institutions and Aggregators Service Providers (Image Exchange, Check and ACH Processing, Card Transactions) Regional Payment Association Local and Regional Check Clearing Houses The Clearing House NACHA and ECCHO

12. Payments Overview (# of Items processed) Sources: 2004 Electronic Payments Summary; Federal Reserve * Depository Institutions Payments Study; Federal Reserve -4.3% 7.3% 24.9% 2% 13.4% Note: Does not include cash payments 21% 4.4% CAGR Checks* Credit - General Purpose Offline Debit ATM** - withdrawals ACH* Online Debit Credit - Private Label Fedwire / CHIPS (not shown) 2000 0.17 billion 2003 0.19 billion CAGR3.8% Total 79.8 Total 88.8 ** Dove Consulting Group, 2004 + FEDWIRE Annual statistics ++ CHIPS Annual statistics 3.6% Electronic payments ~ 11.2% CAGR Will continue to displace cash and checks Debit card payments are the fastest growing product ~ 25% CAGR Credit card payments ~ 3-5% CAGR Check payments ~ -5%CADR Expected to level-off to ~ 18-20 billion items / year B2B checks (currently ~70% of B2B transactions) will be slower to erode Observations Electronic

13. What Is Happening in Each Channel? Checks –Continual Decline But 33% of All Non Cash Payments –Less Reliance on the Physical Paper Check –NCHA Volume = 40% Electronic Conversion –Improved Collection Times –Fraud Prevention –Information Rich –Estimated to Level Off at 18-20 billion per year

14. What Is Happening in Each Channel? Automated Clearing House (ACH) –Continued Growth –Checks That Are Not Images – Likely to Covert to ACH Transactions –New Fraud and Risk Considerations –Attractive Payment Tool for Some Merchants and Businesses

15. What Is Happening in Each Channel? Debit Card –Strong Growth –Reducing Smaller Value Cash Transactions –Resulting in Some Reduction in Check and Credit Card Credit Card –Moderate Growth –Acceptance in Online Transactions –Security and Information Protection

16. What Is Happening in Each Channel? ATM –Moderate Growth –Reduced Needs for Cash –Acceptance of Envelope Free Deposits (Imaging) –Service Customers With Less Overhead Cash –Diminishing Need –Constant Battle With Forgery –High Risk For Consumers (Lose It and It Is Gone)

17. Success Stories and Challenges Success Stories –Unprecedented Industry Transition of Check to Imaging and Electronics –Check Collection Becoming More Efficient –Debit Cards Have Made Certain Payments Easier and More Convenient –Technology Continues to Create New Opportunities to Attack Fraud –Payment System – Multiple Options All Efficient

18. Success Stories and Challenges Challenges –Litigation Continues Over Patent Infringement Relates to New Technology –Significant Number of Checks Are Turned Back Into Paper at the Receiving Institution –Payment Systems Are Often in Silos –Significant Fragmentation in Industry –Fraud Remains A Big Problem

19. Conclusions Payments are a Big Deal: Banks, Merchants, Consumers, the Nation, Global Technology is Creating New Opportunities to Improve the Efficiency of the Payment System Significant Growth Opportunities: Online, Mobile, Check Conversion to Electronics Consistent With Society – Movement to ECommerce