PULSE PAY® Express Expansion Makes PULSE an Option for All Debit Transactions

4Q 2014

pulsationsSM The Debit News Magazine PULSE PAY® Express Expansion Makes PULSE an Option for All Debit Transactions

ULSE is committed to helping our network participants to include full support for all dollar amounts and merchant cat- respond to changes in the debit landscape. PULSE PAY Express egories (including e-commerce), as well as signature, no-signature Pis one example of this effort. PULSE PAY Express was originally and no cardholder verification method (CVM) transactions in both launched in 2013 on a limited basis for PINless point-of-sale (POS) single and dual message environments. This expansion makes transactions of $50 or less with no cash back option. In October PULSE an option for all debit transactions. 2014, as part of the 14.2 Release, PULSE PAY Express was expanded (continued on page 10)

Voice of the Customer Participants Give PULSE Valuable Feedback ULSE is committed to providing outstanding service to its participants. This includes giving issuers and processors a voice in the network through the Issuer Advisory Council, Operations Committee and Payments Security Council. This year, we expanded Pparticipant input by introducing an annual Voice of the Customer survey. PULSE hired research firm Analytica, Inc. to conduct an anonymous survey of a subset of our financial institution and processor participants. The survey focused on participants’ satisfaction with PULSE’s network services and their relationship manager. (continued on page 9)

ABA Endorses PULSE Launches PULSE Token Discover® Debit Consulting Service – Support Service: Page 5 PULSE InSights Enabling the Latest Page 6 Mobile Payments Page 8 VIEW FROM THE TOP

Dear PULSE Participant,

he more you engage with customers, the clearer things become and the easier “ it is to determine what you should be doing,” said John Russell, former President T of Harley-Davidson. While PULSE isn’t in the business of building motorcycles, we are just as firmly committed to engaging with our participants as Harley-Davidson. Listening to our participants is critical to fully understanding your priorities and the continued challenges you face. That understanding helps guide PULSE in developing innovative solutions that maximize the value of debit for issuers, merchants and processors, as well as the consumers they serve. Dave Schneider Earlier this year, PULSE commissioned a Voice of the Customer survey to better understand the issues and concerns of financial institutions and processors, and our effectiveness in responding to those matters (see article, page 1). The feedback we received is invaluable. And while it’s beneficial to know our strengths, it is even more “The feedback we important to identify opportunities for improvement. We appreciate the candid feedback and suggestions. received is invaluable. In addition to the Voice of the Customer survey, we commissioned our ninth annual Debit Issuer Study earlier this year. The study provides key insights into what matters And while it’s beneficial most to debit card issuers. Fraud, for example, has always been high on the list of concerns. This year was no to know our strengths, exception, especially following several high-profile data breaches. The study revealed that many financial institutions are reacting to those data breaches it is even more by ramping up plans to issue EMV cards – something that previously seemed stuck in neutral (see article, page 4). For financial institutions planning to reissue debit cards with important to identify chip technology, you may also want to consider changing your signature debit brand. Discover® Debit is a signature debit program that gives issuers more control and choice, opportunities for along with superior economics. The feedback we receive from our Voice of the Customer survey and the Debit Issuer improvement.” Study helps guide our strategy. For example, PULSE is committed to helping issuers transition to chip cards quickly and easily, offering information and resources to assist with the reissue process. To support efforts to increase issuer profitability and reduce merchant costs, we also have expanded our PINless point-of-sale transaction, PULSE PAY Express, to include a signature debit routing alternative that does not require card reissuance. PULSE PAY Express is a key part of our strategy to be the preferred network option for all debit transactions. For further details, see the lead article in this issue. While we don’t have a crystal ball, we do have a great team of debit experts at PULSE working on your behalf to help you respond to changes in the payments industry. We hope you will continue to let us know how we can better serve you and your customers. As always, thank you for your continued support of PULSE.

Sincerely,

Dave Schneider President

All debit all the timeSM 2 PROFESSIONAL DEVELOPMENT

DebitProtect® Fraud Trends Report Offered as Webinar Series

ULSE continues to explore ways to collaborate with our The Fraud Trends Report includes transaction authentication participants to try to stay a step ahead of fraudsters, including method, transaction segment, merchant terminal geography and Padding valuable enhancements to our DebitProtect® fraud merchant category. The report also shows how the interactions detection and risk mitigation service. between each of those variables help identify a particular fraud One of the tools developed over the past year is the trend. DebitProtect Fraud Trends Report, an in-depth view into recent During webinars, participants are given an overview, then a fraud trends experienced by issuers on the PULSE network. Report more comprehensive look into the latest report. The session also results are now offered as a quarterly webinar to all DebitProtect provides an opportunity for participants to ask questions and learn participants. more about fraud mitigation strategies, and available tools and The webinar series provides detailed information about current technologies. fraud trends that give issuers statistical data about compromised If you would like to attend an upcoming webinar, please cards, raises awareness of emerging fraud trends and educates contact Melissa Voelkner at [email protected] participants about emerging patterns seen across the network. for registration information.

Percent of surveyed nancial institutions that reissued exposed 2014 Debit Issuer Study cards in response to Target breach. Typically only 29% of issuers automatically reissue all compromised By the numbers cards in response to breaches.

2012 2013

2013 PIN debit fraud losses in 2Number0 of transactions.1 basis points, compared to per active debit card, 5.7 bps for signature debit per month

Annual spend per active consumer debit card, $ 142 increased from $8,753 8,875 Annual spend per active business debit card, $ increased from $14,585 MillionDebit cards represented in the 2014 study, representing 15,989 Percent of surveyed nancial approximately 45% of U.S. debit transactions institutions that plan to begin issuing EMV cards by year end 2015 Average PIN ticket size; ATM withdrawals per active Percent of issuers average card per month, the lowest that oer a signature ticket level in the study’s history rewards program, size was $35 up from 32% in 2012. Rewards have regained Percentage of large th their luster due % banks that expect the 9 40 Million to shift to more October 2015 date for Annual Debit Number of debit and credit cards impacted cost-eective 80 the liability shift to hold Issuer Study report by the Target breach merchant oers. The 2014 Debit Issuer Study, commissioned by PULSE, was conducted by Oliver Wyman.

3 p u l s e n e t w o r k . c o m Debit Issuer Study reveals renewed focus on fraud prevention, chip card issuance

he 2014 Debit Issuer Study, commis- Rewards programs drive growth sioned by PULSE, found sustained Outside of the challenges caused T growth in both consumer and by data breaches, debit continued its business debit in 2013. Financial institutions growth trajectory in 2013. To foster weathered the Target data breach and are continued debit growth, issuers looking for solutions to enhance security, are focused on making their debit with many issuers planning to implement offerings more attractive. Rewards EMV debit cards. programs have rebounded from their decline following Regulation II Key findings include: implementation. • Consumers continue to shift to elec- Because traditional debit rewards tronic payments, with transactions per programs have unsustainable eco- active debit card increasing to 20.1 per nomics in the post-Reg II environment month from 19.4 a year earlier. for regulated issuers, many financial • 79 percent of financial institutions institutions – both regulated and exempt stated that they plan to begin issuing issuers – have moved to merchant offers. EMV cards by the end of 2015, a signifi- To help issuers navigate this arena, PULSE cant increase from 50 percent in 2012. commissioned a white paper, Merchant Offers: The Future of Debit Rewards. The The Target breach impacted every report reviews the structure of several financial institution that participated in the rewards programs and provides key study, causing fraud loss rates to increase considerations when evaluating potential last year. Overall, 14 percent of all debit partners and designing a merchant offers cards were exposed in data breaches in program. 2013, compared to 5 percent in 2012. Many Go to the Debit Resource Center on financial institutions were initially hesitant www.pulsenetwork.com (login required) to commit to EMV because of uncertainty to read an executive summary of the around retailer adoption of chip card point- 2014 Debit Issuer Study or the white paper, of-sale terminals, questions about the Merchant Offers: The Future of Debit viability of the business case for migrating Rewards. to chip cards, as well as issues related to For more information about PULSE’s regulation and support for merchant debit rewards and loyalty program, contact routing choice. In many ways, the your Account Executive or visit the Buzz Target breach served as a catalyst for Points™ page in the Payments section on the resolution of these issues. www.pulsenetwork.com.

Seventy-nine percent of financial institutions stated that they plan to begin issuing EMV cards by the end of 2015, a significant increase from 50 percent in 2012.

All debit all the timeSM 4 ABA Endorses Discover® Debit he American Bankers Association (ABA), the largest banking association T in the U.S., announced in September that it has endorsed Discover Debit as its signature debit choice. Under the agree- ment, ABA – through its subsidiary, the Corporation for American Banking – will exclusively endorse Discover Debit for signature debit for its member banks. “Our members are fast realizing that Discover Debit delivers comparable acceptance as the other networks at a much lower cost to the issuer,” said William Kroll, ABA Executive Vice President. “The program’s straightforward billing, ease of use and lower network fees make this a significant alternative for ABA members and is good for the banking industry as a whole.” The Discover Debit program provides financial institutions with an uncompli- cated approach to signature debit supported by an experienced team that works behind the scenes to ensure a seamless implementation and reissue “The rollout of the new Cadence Bank process. The program provides a boost Debit Card has been a very positive “Discover is proud to have to bank income with highly competitive experience for us,” said Debbie Innes, the American Bankers interchange, significantly lower network Executive Vice President of retail and fees and greater reporting clarity. treasury management services for Cadence Association endorse “Discover is proud to have the Bank. “Switching our signature debit American Bankers Association endorse program to Discover Debit has meant that Discover Debit as its Discover Debit as its signature debit net- our clients receive valuable cardholder work of choice, opening the door for benefits through the Discover relationship. signature debit network more financial institutions to benefit from And our bank benefits from a streamlined this compelling signature debit network revenue model. We also have the flexibility of choice, opening the alternative,” said David Nelms, Discover to position the Cadence brand at the Chairman and CEO. “We believe ABA center of the program. Overall, Discover door for more financial members deserve a better debit program. Debit has been a better debit solution for Discover Debit puts issuers’ needs first, our cardholders while delivering superior institutions to benefit offering a program with simple rules, low value to Cadence Bank.” costs and the ability to elevate their brand.” The ABA’s endorsement of Discover from this compelling Over the past few years, many financial Debit is a significant opportunity to institutions have felt the pressure of increase awareness and grow PULSE’s client signature debit network reduced profitability, increased regulatory base for Discover Debit, ultimately leading requirements and rapidly changing tech- to a stronger and more robust product for alternative.” nology in their payments business. all participating financial institutions. David Nelms Discover Debit provides a debit solution Please contact your PULSE Account that helps banks improve their bottom Executive or call 877-247-8573 to learn Discover Chairman and CEO lines and allows institutions to keep their more about the many advantages Discover brand front and center. Debit offers. For more information about ABA and Discover Debit, call 1-800-BANKERS or visit www.aba.com/ DiscoverDebit.

5 p u l s e n e t w o r k . c o m PULSE Launches Consulting Service PULSE InSightsSM

he challenges faced by financial institutions can seem overwhelming. T The constant push of technology and regulations, increasing demands for higher levels of customer service and the ongoing shift in transactions to digital channels and non-bank competitors make it hard just to keep up, let alone confidently strategize and prioritize. With more than 30 years of experience helping financial institutions succeed, PULSE is in a position to help. PULSE InSights is a new consulting service designed to help participating financial institutions seize marketing opportunities. Working with best-in-class strategic partners, PULSE InSights can help participants increase revenue, expand cross-sales, increase customer satisfaction and strengthen overall account holder relationships in a cost-effective manner. “A decade ago, improving profitability was primarily focused on slashing costs. But now we are looking at reallocating Marketing Services – Delivers end-to-end “At Old Second, we always look for resources and ensuring all activities support in developing and executing ways to enhance our customer relation- enhance the customer experience and data-driven marketing campaigns. ships,” said Keith Gottschalk, Executive Vice drive increased revenue,” said Brian President and Chief Operating Officer of Slepian, Senior Manager with West Retail Branch Maximization – Identifies Illinois-based Old Second National Bank. Monroe Partners, one of the PULSE and addresses the financial institution’s “PULSE’s advisors helped us assess our InSights partners. key issues that affect efficiency, customer debit rewards program and find additional PULSE InSights offers five business- experience and overall profitability. ways to align it with the needs and wants building components, which can be of our customers while increasing the implemented as a comprehensive Customer Experience – Examines factors programs value to our bank.” integrated program or independently. such as channels, technology, operations Intense pressures come from all angles These include: and personnel that affect the overall and leading financial institutions are account holder experience. focused on performance improvement, Card Portfolio Performance – Provides explained Annette Harris, PULSE Director portfolio insights and best practices after Contact Center Optimization – Evaluates of Marketing. analyzing a financial institution’s mix of the efficiency and effectiveness of the “Through PULSE InSights, we examine products and examining account holders’ financial institution’s contact center, all aspects of operational infrastructure and behaviors. using industry benchmarks to identify delivery strategies to ensure every process opportunities. enhances the customer experience and delivers added value,” said Harris. Interested in PULSE InSights? “PULSE’s advisors helped us assess our debit Contact your Account Executive for a complimentary debit portfolio scorecard rewards program and find additional ways with industry benchmarks. Visit pulsenetwork.com/insights for more to align it with the needs and wants of our details. customers while increasing the programs value to our bank.” Keith Gottschalk, Executive Vice President and Chief Operating Officer Old Second National Bank

All debit all the timeSM 6 EMV Liability Shift Deadline Looms inancial institutions are facing a sea of change next (AID) that determines October. Beginning October 1, 2015, liability shifts from the network routing. Fmajor U.S. payment networks take effect, which shift fraud Discover Debit’s liability at point-of-sale terminals (excluding fuel pumps) to common AID (D-PAS) the party that is not EMV-compliant. provides issuers These liability shifts are creating considerable financial with a configuration incentives for both issuers and merchants. The majority of that is compliant issuers are working to distribute chip cards to their debit with Regulation II, cardholders by October 1, 2015. Many merchants – especially which requires the large national chains – are in the process of converting to ability to route chip-enabled terminals by that date. transactions over at least two unaffiliated Other liability shift deadlines will follow: networks. • October 1, 2016 – MasterCard and PULSE co-branded For more cards at ATMs information about • October 1, 2017 – Visa and PULSE co-branded cards at Discover Debit, or how PULSE can support your chip card program, ATMs; all fuel pumps contact your Account Executive. Connect with Us Evaluate Your Overall Debit Program PULSE Account Executive As your financial institution is evaluating the issuance of 800-420-2122/877-247-8573 new debit cards with chips, this also presents an opportunity to look more holistically at your debit portfolio. One option to consider is Discover® Debit for your signature debit program. Discover Debit offers full EMV support to ease the transition for institutions grappling with the details of converting to chip cards. Every chip card has a common application identifier

Follow Industry Developments with the PULSE OnDebit Blog

ith the payments industry Some recent topics include: OnDebit also has explored topics such undergoing unprecedented as debit marketing, the future of debit • EMV’s Great Tipping Point – Key find- change, keeping up with the rewards programs, educating cardholders W ings from PULSE’s 2014 Debit Issuer latest developments in debit is more and a range of other issues affecting Study on issuers’ expedited timetables important than ever. participants. for chip card conversion. To help make sense of a rapidly The blog is an interactive resource evolving industry, PULSE is committed to • Fighting Debit Fraud Harnessing and readers are encouraged to share their providing timely insight and analysis that Cutting-Edge Data – PULSE’s fraud comments and suggestions. will help participants shape their debit experts discuss how advanced data strategies. One way we do this is through analytics can spot new fraud schemes Connect with Us PULSE’s OnDebit blog. Our blog explores and flag – or even prevent – suspi- http://blog.pulsenetwork.com the emerging trends, products and cious transactions. services impacting debit programs. • Plan Ahead for Fraud Incident There is no shortage of payments Response – PULSE shares the six news and commentary, but OnDebit is a essential elements for a financial insti- resource you can trust because it leverages tution’s fraud incident response plan. PULSE’s unique expertise in debit and builds on our historic commitment to serve THE OFFICIAL PULSE BLOG as an advocate for participants’ interests.

57 PULSE Token Support Service: Enabling the Latest Mobile Payments

pple created a stir in September Tokenization also is effective in securing when it announced its new iPhones e-commerce transactions where the card- Aand Apple PayTM mobile wallet. holder stores card data with a frequently Apple Pay uses near field communication used online merchant. (NFC) – also known as contactless or Another benefit of tokenization, “tap-and-go” payments – to facilitate whether it is used on a mobile device or in-store transactions. for online payments, is that financial institu- The Apple Pay mobile wallet utilizes tions do not have to reissue cards in the Payment Token Standard technology, event token data is compromised. Tokens which stores tokenized payment creden- can be remotely suspended or revoked at tials within the secure element of the the discretion of the institution. Its usage phone. Tokenization replaces the personal also is invisible to cardholders, who won’t account number (PAN) with a surrogate notice any difference in their purchase PAN or “token” to provide protection experience. against counterfeiting, account misuse “Tokenization represents the next wave and other forms of fraud. of security in our industry bringing PULSE is introducing a Token Support enhanced fraud protection to mobile NFC Service to enable payments that utilize and certain e-commerce payments,” said tokenized PANs, including Apple Pay trans- Bryan Manka, PULSE Product Manager, that enable the financial institution to actions. The PULSE Token Support Service Emerging Payments. “It is a natural comple- brand its own wallet. will provide financial institutions that issue ment to the introduction on EMV technol- If you have questions about how Visa and MasterCard debit cards a second ogy for card-based payments. Both help PULSE can support your mobile payments unaffiliated network routing option for minimize the risk of data compromise.” strategy, please contact your Account tokenized transactions. The service will Executive or call 877-247-8573. interface with Visa and MasterCard as A Mobile Future Token Service Providers (TSPs) to convert The introduction of Apple Pay is an tokens to PANs before sending the transac- important step in the progress toward tion to the issuer for authorization. increased consumer adoption of Implementation of PULSE Token mobile payments, and tokenization Support is currently planned for late first strengthens security for both mobile quarter 2015. and online payments. As mobile payments become more Security Benefits of Tokenization widely adopted, PULSE expects there In mobile transactions, tokenization to be multiple mobile wallets in the is particularly helpful in the fight against marketplace, and will continue to fraud because the tokenized PAN stored collaborate with major providers, on the device prevents real cardholder including Apple, Softcard (formerly ISIS), data from being compromised. The token Paydiant and Google. PULSE’s goal is to is unique to the mobile device and has offer issuers opportunities to partici- dynamic elements of security enabled by pate in mobile wallets that are right for the phone that are more powerful than a them, including those such as Paydiant transaction using a card with a magnetic stripe.

“Tokenization represents the next wave of security in our industry bringing enhanced fraud protection to mobile NFC and certain e-commerce payments.” Bryan Manka PULSE Product Manager, Emerging Payments

All debit all the timeSM 8 Voice of the Customer (continued from page 1)

“We have conducted participant surveys from time to time over the years, but our approach this year sought to measure PULSE’s performance as a service provider in a more quantitative way,” said Anne Uwabor, Senior Manager of Communications and Participant Engagement. Among the areas participants cited as PULSE’s strengths were customer service, transaction processing and switching, fraud protection and communication. PULSE also received high marks for its knowledge of the debit business. “[PULSE has] an extensive knowledge of the business and the various needs and requirements of the stakeholders within the industry,” said one financial institution representative. In general, participants are pleased with the improvements PULSE has made in its switching platform and fraud mitigation services. “The [fraud] system…has performed above our expectations, and the people who work in that department have gone above and beyond to help us understand how to better utilize it and help us realize what it’s actually doing for us,” said another survey participant. Several individuals who took part in “We thank all of the participants who the survey expressed their appreciation took the time to share their thoughts with Among the areas for the investment PULSE made in the us,” said Uwabor. “The information they PULSE Debit Dashboard®, which provides provided will help us bolster our strengths participants cited as data financial institutions can use in and address our weaknesses.” managing their debit businesses. To this end, PULSE has developed an In terms of areas for improvement, PULSE’s strengths action plan based on the survey results participants cited customer service, new that addresses four key areas: products and services, and communication were customer – both formal network communications • Responsiveness to participant calls, and personal communication from inquiries and issues service, transaction Account Executives and Relationship • Staff knowledge and problem-solving Managers. ability processing and Financial institutions gave PULSE an overall satisfaction rating of 8.4 out of 10, • Frequency of personal contact and and a score of 8.7 for how likely they are network communications switching, fraud to recommend PULSE. Processors rated • Awareness of PULSE products and PULSE 7.9 in overall satisfaction and 7.7 services protection and in likelihood of recommending us. The goal of the action plan is to drive improvement in these key areas that can communication. be measured in next year’s Voice of the Customer Survey.

PULSE welcomes participants’ feedback year-round. To let us know how we’re doing, email [email protected].

8 9 p u l s e n e t w o r k . c o m PULSE PAY® Express Expansion Makes PULSE an Option for All Debit Transactions (continued from page 1)

Dual Message

Merchant Issuer Issuer Processor Processor

Single or Dual Message

PAY® Express

“Our objective is to be the best processing,” said Nick Holland, Senior PULSE PAY Express does not require network option for all debit transactions – Analyst, Payments, at Javelin Strategy & financial institutions to reissue cards. PIN, PINless and signature,” said Judith Research. “The ongoing fusion of signature Additionally, PULSE PAY Express is backed McGuire, PULSE Executive Vice President, and PIN requires the industry to think by DebitProtect®, PULSE’s comprehensive, Product Management. “With competitive differently about how it handles these network-level fraud detection service that interchange and lower network fees, transactions.” includes optional real-time authorization PULSE PAY Express delivers superior net blocking. economics for both issuers and merchants. Factors impacting the debit market Since PINless and signature transac- By including support for PINless and no include: tions already are routing to issuers via CVM debit transactions, merchants and traditional signature networks, PULSE PAY cardholders also benefit from faster Merchant and Cardholder Preferences – Express transactions do not pose an checkout times at the POS.” Many merchants and cardholders want incremental fraud risk. With the latest Through a series of briefings, PULSE PAY faster transactions at the point of sale. expansion, PULSE PAY Express transactions Express also received high marks from over $50 may require signature verification. industry analysts. Regulation II – Issuers are required to These transactions have a dispute “PULSE PAY Express is a great product enable at least two unaffiliated networks on (continued next page) that offers issuers low fees and competitive debit cards, merchants control the interchange,” said Madeline K. Aufseeser, routing of transactions, and interchange Senior Analyst with Aite Group. “It is an revenue on debit transactions is capped for opportunity for PULSE to introduce large financial institutions. competition for PINless and signature debit routing. Additionally, anything that Network Business Practices – Actions by “PULSE PAY Express is a demonstrates to merchants that networks traditional signature networks that restrict are looking at ways to pass back value to competition and impose mandates have great product that offers them is an absolute plus.” negatively impacted card issuers and merchants. issuers low fees and Debit is Changing More debit transactions are now being Benefits for Issuers and Merchants competitive interchange. completed without a PIN or signature. When it launched in 2013, PULSE PAY Considering that signature networks are Express was limited to PINless transactions It is an opportunity for now processing transactions with PINs, of $50 or less and available only at select traditional signature and PIN networks no merchants. In April 2014, it was expanded to PULSE to introduce longer compete for distinct segments of allow merchants such as restaurants to send the market as they once did. PINless debit transactions of $50 or less, plus competition for PINless “The market is moving toward more gratuity, to PULSE issuers. The October 2014 convenience, removing friction from expansion opened PULSE PAY Express to all and signature debit the transactions where possible, so merchant categories and includes full PULSE PAY Express is part of a trend signature support for all dollar amounts. routing.” toward no-verification transactions and Transactions that include cash back will a convergence of PIN and signature continue to require a PIN. Madeline K. Aufseeser Senior Analyst, Aite Group

All debit all the timeSM 10

DNMDEBIT NEWS MINUTE

New Debit Revenue Models Needed, Study Says Mercator Advisory Group With downward pressure on debit profits in the post-Regulation II landscape, financial institutions may explore alternative strategies such as optional fee-based services, according to a recent Mercator Advisory Group study. In Debit Profits Under Pressure: Alternative Revenue Models Needed, many issuers responded to Reg II by raising account and card fees, but that approach has had little success in recover- ing lost debit revenue. Instead, the study suggests increasing debit revenue by incenting debit card usage and developing optional fee-based services tied to checking and debit accounts – such as rewards, travel and insurance services. resolution process that mirrors the process the degree of analytics that have been New market research indicates cardholders currently used for signature debit transac- effective at catching fraud at a fairly low are interested in and willing to pay for tions with other networks. level,” added Holland. such services. “From our perspective, fraud is not a For more information about PULSE PAY great cause for concern, considering the Express, contact your PULSE Account More Consumers Embracing move to chip cards that is under way and Executive or call 877-247-8573. Mobile Banking American Bankers Association While the Internet remains America’s most popular banking method, mobile banking Tips to Help You Think Differently has steadily gained momentum and is now preferred by 10 percent of consumers – up About Debit from eight percent in 2013 – according to Traditional distinctions between signature and PIN networks are blurring. Additionally, a recent survey by the American Bankers transactions that do not require PINs or signatures are increasingly common. With Association. Thirty-one percent conduct transactions like PULSE PAY Express and other no-CVM transactions, merchants and their banking business using the Internet, financial institutions can no longer simply assume that all PULSE transactions are PIN down from 39 percent last year. The sec- verified and all signature network transactions are signature verified. ond most popular way to bank, visiting a As a result, issuers need to make informed decisions about the handling of debit branch, increased to 21 percent, while transactions to ensure the best cardholder experience. Here are some factors that warrant those preferring to use ATMs rose to 14 your attention: percent.

Customer Experience Financial Institutions Close • Transactions should be handled based on the actual cardholder verification method More Branches used, not the network source. Wall Street Journal The number of financial institution Rewards branches dropped for the fifth consecutive • To prevent cardholder confusion, consider making PINless and signature transactions year, according to a Wall Street Journal received from PULSE eligible for the same debit rewards that apply to similar analysis of FDIC data. In the past year, the transactions from other networks. number of branches dropped 1.7 percent, Fraud Detection or 1,614 branches, as financial institutions • Consider applying the same fraud detection methods to PINless and signature seek efficiencies and focus more on mobile transactions from PULSE that you use for similar transactions from other networks. and online banking channels. One compo- Debit Transaction Fees nent of this new strategy is increased • The vast majority of issuers do not charge their cardholders a fee for PIN POS debit self-service offerings at remaining branches transactions. Those that do should re-evaluate the practice, because PIN POS debit with some financial institutions deploying transactions are more profitable than signature debit for most issuers. ATMs featuring video tellers, bulk check deposit and bill payment capabilities. • Basing cardholder fees for debit transactions on the network source, rather than the transaction type, could be confusing for cardholders and inconsistent with disclosures or network agreements.

11 p u l s e n e t w o r k . c o m PRESORTED FIRST CLASS U.S. POSTAGE 1301 McKinney, Suite 2500 PAID Houston, TX 77010 HOUSTON, TX PERMIT NO. 173 RETURN SERVICE REQUESTED

PULSATIONS is produced by PULSE. Please send information for the newsletter to: PULSATIONS Editor PULSE 1301 McKinney, Suite 2500 Houston, TX 77010 [email protected] PULSATIONS can be viewed on the PULSE website at www.pulsenetwork.com/pulsations.

Seconds with... Karen Gardstein Executive Vice President, Finance

A few years ago, PULSE began its adoption of Lean – a manage- Some mistakenly think Lean is a cost-reduction program. ment approach that uses proven problem-solving tools to Minimizing waste and improving efficiency are the result of improve efficiency and enhance our participants’ experience. embracing a different way of thinking. But Lean is more – it’s also I was tasked with leading the steering committee to ensure Lean a fundamental shift from thinking one dimensionally about a is properly promoted throughout PULSE. single department or a technology solution, to thinking more What I like most about the adoption of Lean is that the process broadly about the entire organization. prompts us to think about the value we are creating for our clients. This holistic mindset encourages breaking down silos so value Each and every step in a work process deserves scrutiny. streams can flow horizontally throughout the organization. This Removing unnecessary steps that sap value is a win for everyone. makes it easier for PULSE to fully leverage the knowledge and It not only increases internal efficiencies, but it also helps us experience of our staff, along with our technologies and assets, improve the client experience. to benefit all participants. I think in terms of purpose, process and people. Purpose is I am realistic that fully incorporating Lean is a work in progress. rooted in the client problems or challenges we’re solving; process It is not a short-term activity, and we still have a lot of opportunity examines how each step links back to client needs; and people to improve behaviors and processes. With perseverance, I am refers to appointing someone responsible for continually evaluat- confident Lean will be embedded in our company culture and ing and improving. Everything loops back to client value and participants will reap the rewards of this client-centric approach. continuous improvement again and again.

IN CLOSING

Discover Success in Schools For the sixth consecutive year, PULSE employees volunteered at PULSE’s adopted school in Houston, to distribute backpacks and school supplies to students. Twenty-four PULSE volunteers participated in Blackshear Elementary’s Open House and Ice Cream Social to welcome students back to school and help kick off the 2014-15 school year. Houston Food Bank As part of Discover Cares Month, 17 PULSE employees volunteered at the Houston Food Bank in September. Volunteers packaged 5,760 bags of pinto beans, or 34,560 servings.

All debit all the timeSM 12