ICUL Service Corporation and INTECH Evolutionary Partners for EFT Services September 17, 2009 Topics of Discussion Evolution of Debit How Consumers are Utilizing Debit PIN. –vs.- Signature (ONLINE vs OFFLINE) Consumers Driving Usage Debit Issuer Trends Today’s Debit Options for your Credit Union The Evolution of Debit Early Days Early ‘90s Mid ‘90s Future No real time Terminalization Mass advertising Usage fuels authorization Processor Lower processing growth, not cards Slow capabilities costs Checks and cash settlement Fee revenue Increased continue to decline Limited focus functionality Growth in bill acceptance Universal retail Mass “upgrades” payment, Quasi-Credit acceptance eCommerce, and Critical mass of product small ticket Elimination of cards warning bulletins PINless and other PIN pads migrate forms of payments PIN pads grow in to other segments emerge supermarkets 1980's 1990 1996 2005 Future Personal Consumption Expenditure PCE By Payment Type Estimated Brand (%) Share of GPC Debit Credit 27% Interlink 14% Checks Debit MC 24% Visa Check 17% GPC Debit Card 15% 47% Shared Networks Cash 22% 20% Other 11% 2% Proprietary Prepaid and EBT Cards 2007 Purchase PCE = $7.6 trillion 2007 GPC Debit = $1.2 trillion Source: Nilson #915 Source: Nilson #902, 906 PIN POS Share Evolution Share of Transactions Share of Transactions Accel (March 2003) (March 2008) 3.2% Others 15.8M 5.6% 27.7M Pulse 10.7% 108.1M NYCE 10.1% Accel Pulse 4.6% 9.6% 102.0M 46.5M 47.5M Star 30.0% Others NYCE 303.0M 4.8% 10.0% Star 48.5M 49.5M 56.1% 277.9M Interlink Interlink 15.5% 39.8% 76.8M 402.0M 495.3 Million In-Network 1,010 Million In-Network Transactions Transactions Source: ATM & Debit News EFT Data Book, Sept. 2009 and Sept. 2004 Online POS in-network transactions excludes gateway and on-us transactions. Industry Debit Volume Growth Growth in Offline and Online Volumes continue to converge Offline vs. Online Volume at the POS Trillions Debit YOY Growth 15% 18% Online 23% Growth 20% 22% 24% 25% Offline 36% 38% Growth 42% Source: The Nilson Report issues #879 & 902 and Visa estimate for 07 Online debit industry Includes consumer and small business. Sources of Growth for Debit Cards Most debit card growth came from increases in spending by debit card users; however, 37% of the growth came from shifting from other payment types of which over 50% was from checks and nearly 26% from cash Total Growth 2006 to 2007 Shifting to/from Debit Cards 37.0% 63.0% Rewards Credit READ: Of debit cards’ growth from shifting, 52 percentage points of this growth occurred because people shifted payments from checks to debit cards, but was offset by -24% because Source: Visa Payment Panel Study, all panelists available, 2006 people shifted from debit cards to rewards credit cards. to 2007. Ref: Appendix C VCC Geographic Performance* (3 Months Ending June 2009) In 2Q09, States in Blue have growth above the system normalized average of -1.5%, and states in Gold are below -2.5% -4.9% -6.6% 2.2% -0.1% -5.5% -2.0% -1.5% -6.3% 4.0% -6.6% -4.5% 3.0% 4.9% 2.4% -0.2% -1.9% 2.3% 0.9% -2.5% -9.1% -2.0% -3.2% -5.5% 6.1% 0.4% -1.5% 1.1% -5.3% -4.1% -4.9% 0.9% 1.0% -5.1% -5.6% 0.8% Top States by Volume: • California – 9% 0.7% • Texas – 8% • Florida – 6% • New York – 4% • Virginia – 4% Note: International Volume was 1.0% Source: VisaNet Base II excluding Prepaid, Cards issued in US and acquired in states shown of volume and growth was -6.7% Visa system growth rates normalized to exclude effects of major issuer brand conversions *Card Present transactions only Offline Debit – Industry Growth Estimate MCC Growth Summary as of June 2009 In comparison to prior quarter, Retail (held up by Supermarkets and Drug Stores) and Healthcare & Services remained flat; Bill Pay and QSRs growth slowed; and Gas growth, although negative, appears to have picked up after hitting the bottom Share of Growth Growth Growth Growth Segment Volume 3Q2008 4Q2008 1Q2009 2Q2009 Retail Face-to-Face 32.8% 3.4% 0.7% 2.6% 2.5% Bill Pay 13.8% 15.7% 15.0% 15.2% 12.6% Restaurants 10.9% 8.2% 5.6% 7.1% 6.6% Gas 10.4% 25.4% -20.3% -34.7% -29.9% Healthcare & Services 6.6% 15.6% 16.7% 15.7% 15.1% Emerging Segments 5.9% 13.2% 10.8% 12.5% 13.1% T&E 6.7% 5.3% 3.2% 5.6% 6.7% QSRs (Fast Food) 5.9% 20.8% 19.9% 18.0% 16.5% Retail CNP 4.6% 18.8% 14.9% 14.9% 12.0% Direct Marketing 2.3% -4.3% -4.6% -3.5% -3.3% Offline Debit (excl. 100% 11.1% 3.1% 2.5% 1.9% Prepaid) Check Card Sales Volume Growth (3 Months Ending June 2009) Non-discretionary segments (Supermarkets, Bill Pay, QSRs) and Healthcare showed strong growth this quarter, while Gas continued to drag down overall growth Share of Sales Volume: Share by Merchant Group Segment Growth Total VCC Growth * Retail - Face to 2.5% 12.5% Face Supermarkets 9.6% N/A Bill Pay 12.6% 24.5% Restaurants 6.6% 10.7% Gas -29.9% N/A T&E 6.7% 6.7% Healthcare & 15.1% 13.7% Services Emerging 13.1% 10.9% Segments QSRs (Fast Food) 16.5% 13.2% Retail - CNP 12.0% 7.9% Direct Marketing -3.3% N/A TOTAL 1.9% 100.0% DEBIT Issuer Trends • Improvements in activation and usage now fueling debit growth – Large issuer penetration rates averaging in high 80’s • New acceptance creating usage opportunities (e.g., small ticket, bill pay, emerging segments) • Rewards programs are proliferating with varying objectives: – Higher usage – Signature preference – DDA growth – Enterprise-wide loyalty/cross-sell • Cardholder segmentation strategies increasingly utilized and refined for marketing effectiveness and efficiency : Prepaid and Traditional Debit join forces • Portfolio performance - benchmarking and data analysis important in competitive market Today’s Debit for Credit Unions Largest payment method – Annually Debit transactions continue to grow over all other payment types. Debit Card programs are the CORE Relationship product. Consumers (Merchants) driving both Signature and P.I.N. CU ‘s need one card and one platform CU’s need ONLINE REAL TIME ACCESS Prepaid is out growing Traditional Debit Usage CU’s need to compliment Traditional Debit with PREPAID Members and Credit Union providers looking for Added Benefits Surcharge Free access Rewards ICUL Service Corporation’s INTEGRATED EFT TOTAL SOLUTION IT’S FOR YOU!! What is IT’S ? Combined ATM and Debit Platform Integrated Databases for Authorizations and Card Production Cost Effective Online Authorization Options for ALL size CU’s Newest Technology for ATM Driving: VPN, Internet, wireless Complete Fraud Monitoring and Loss Prevention Tools ICUL Network Package and Suite of Products and Services ICUL and IT’S Network Packages ICUL Suite of Networks: CU has option to join VISA, MasterCard and Discover and up to 5 ATM National ATM Networks of their CHOICE: PULSE, STAR, CIRRUS, Plus, Interlink, ETC… all Include for 1 fixed priced! ICUL SUITE OF SURCHARGE FREE NETWORKS: CO-OP, All point, Alliance One, Money Pass ICUL DEBIT PRODUCTS: Traditional Debit ONLINE – INTECH USERS Batch Prepaid Products – CUSTOM and AGENT Gift Cards Travel MONEY Cards General Purpose Cards Payroll Cards Family Cards* 2010 ICUL’S Integrated EFT Total Solution IT’S ATM Processing Services IT’S Comprehensive ATM Driving Solution 7X24 Monitoring Card System Management Welcome to IT’S ATM Authorization Reports Services Welcome Pin Settlement & Processing Reconciliation Cash Deposits Adjustment Processing IT’S ATM Features and Functions • Bilingual screens • Packaged graphics • Card Activation • PIN Change Capability • Customized screens • Remote Key • Fast cash options Distribution • Four denomination dispense • Stamps/coupon • Multiple surcharging options dispensing • Overdraft to DDA • Touch screen support • Optional receipt • Multiple account access • Voice Guidance - ADA IT’S ATM Monitoring • ATM’s monitored 24/7/365 • Voice Response Unit used for automated dispatching and follow - up for first and second line maintenance • Client Profile Database – Contact Data – Hours of Operations and Holidays – Service Providers by Device • Comprehensive reports including quality tracking • Contacts customer with equipment and supply problems IT’S Back Office Support IT’S Back-Office Support 24/7/365 Lost Stolen Servicing Client Relations Consumer Servicing Dispute Processing Education Services IT’S Got it ALL! Fraud Services Plastics Design and Production Product Development Rewards Program Settlement: Single Point Various Telecom Options Training Marketing Support Ongoing Product and Regulatory Updates IT’S Plastic Services • Visa/MasterCard certified • Complete card service design • Best Volume Discounts • Top quality Cards • Design Consultants • Litho, Laser, Custom Cards • Designs for Credit, Debit, ATM, Prepaid, Government, etc • Regional Logo Printing • Cost Effective Generic – “STANDARD” Cards Available • Cards Comply with ALL Standards and Network Compliance Rules IT’S Card Issuance • Certified Visa/MasterCard Production Center Shipping Via • Plastics can be customized both front and back utilizing thermal printing with a rainbow of tipping and logo colors to choose from. • Generic, Custom and Photo Card production available • Over 12 million custom and Generic plastic cards in vault • Built-in Quality Monitoring • Custom Activation Labels, Inserting, Carriers, etc # 1 Option for Intech Credit Unions– Authorize and Post All Transactions Online Authorize and Post ATM transactions online Authorize Signature ONLINE and Post ONLINE DP used by FI to reconcile with transactions posted from your online posting journal IT’S Settlement Options • Funds Movement - next day settlement using a single net settlement amount through the Automated Clearing House (ACH) and/or US Central to include fees where applicable • Single Point Settlement - FI establishes end of business day for settlement (prior to 6pm eastern standard time) and IT’S provides consolidated totals and settlement for CU • Auto-Reconciliation – IT’S reconciles with individual Regional/National Networks directly and manages adjustment reconciliation on behalf of FI • Reporting – IT’S provides Cardholder and Terminal Settlement Reporting and Visa/MC Quarterly Reporting as a service or a report for an FI doing their own reporting to the associations • Transaction History - 180 days of online transaction history IT’S Risk Management IT’S Risk Management Authorization Risk Controls Other Risk Management o Account Status Verification o Account Verification 3D Secure: VbV & MasterCard o Address Verification Service (AVS) SecureCode o Authorization Name Matching* Accounts Blocked Real-time o Check Digit Calculation o CVV/CVC Validation (PIN and Sig) Best Practices o CVV2/CVC2 Validation Recommendations o Excessive Use Parameters Card Activation Options o Expiration Date Verification 1st PIN o PIN Verification ANI (Phone number identifier) VRU Neural Network Operator Assisted o Falcon Cardholder Select PIN Risk Blocking by Country Code, MCC, etc. IT’S Risk Management Fraud Solutions Lost & Stolen Card Processing Fraud Detection Fraud Analysis & Challenge Chargeback Processing Affidavit Processing Secure Debit Program NOW Available too! Fraud Consulting Identity Theft Detection and Protection Service IT’S Comprehensive Reporting Daily Monthly Settlement Cardholder Transaction Detail (by Interchange Income terminals, cards, etc...) Completion Summary Interchange Income Billing Card Management ATM Monitoring Disputes/chargebacks Card Association First Time Used Visa Off-line Debit Usage MasterCard ATM Monitoring DISCOVER IT’S- Integrated EFT Total Solution One Relationship that Integrates: The BEST Processing Platforms optimizing CU Data Processor and ONLINE Technology The BEST Network Relationships The BEST Practices and Fraud Detection and Monitoring The BEST Customer Service and Training Options The BEST Marketing Support The BEST COMBINED NETWORK Pricing Solutions All at the BEST from a Partner Committed to your Credit Unions’ success!! ICUL’S Integrated EFT Total Solution for INTECH User’s Truly has it ALL!!!