The Ever Changing Landscape of Electronic Bill Payment WPTA Annual Conference April 12 – 14, 2017 Disclaimer

This document is designed to provide general information only and is not comprehensive nor is it legal advice. In providing this information, neither KeyBank nor its affiliates are acting as your agent, broker, advisor, or fiduciary, or is offering any tax, accounting, or legal advice regarding these instruments or transactions. If legal advice or other expert assistance is required, the services of a competent professional should be sought. KeyBank does not make any warranties regarding the results obtained from the use of this information.

1 1 Presenter Information

David Ptasznik Sr. Product Manager Enterprise Commercial Payments group

• Based in Cleveland, Ohio. • Over 20 years of payments experience with the past 14 years at KeyBank in various roles. • Certified Treasury Professional (CTP) and was the past president of the Northern Ohio AFP chapter. • Undergraduate degree from John Carroll University and MBA from Baldwin Wallace University.

2 2 Agenda and Objectives

Agenda Objectives

• Overview Discuss the trends, needs and • C2B Trends challenges of billers and payers in • Industry Update the bill payment space, and • Benefits to Payers and Billers current and future solutions in the • Current and Future Trends future • Discussion • Takeaways

3 3 4 4 Overview

Technological advances over the past five to ten years have increased the number of electronic bill payment options for billers and consumer/business payers.

We will examine the trends of the bill payment landscape, needs of billers and payers, ways to increase paper to electronic adoption, current solutions available and emerging functionality/technologies in 2017 and beyond.

5 5 U.S Consumer Bill Payment Trends

In 2016, U.S consumers paid, Over 50% bills, spending 14.7 Billion $3.9 Trillion of those bills were for Payments 10 Billion 4.7 Billion are one-time are recurring Credit Cards TV / Cable & Internet

6.8+ Billion 2.5 Billion Cell Phones made via ACH made via Check Generation Trends of millennials use 2.2 Billion 2.2 Billion 44% biller websites, Debit Card Credit Card compared to Payments Payments 19% of Seniors

Source: Q3 2016 Aite Group survey 6 6 Millennial Payers

Millennials will become the payers of tomorrow 1981-2005 Birth years of millennial generation

80 million Population of U.S. millennials

34 Age of oldest millennial in 2015

7 7 Millennial Payers

Millennials heavy reliance on mobile devices

89% 55%

of 18-24 year olds check of students reported strong their mobile phones within negative feelings when 15 minutes of waking separated from their mobile for 8 24 hours 8 9 9 Mobile Payments

Source: Eighth Annual Billing Household Survey, Fiserv, 2016 10 10 The Bill Payment Industry – Surveys

2016 U.S. Bill Payment Volume

One-Time Payment Volume by Channel Payment Volume by Method

Biller's website 3,567.2 ACH 6,801.3

Mail 2,407.7 Check 2,538.7

In person 1,417.5 Debit card 2,246.8

Bank's website 1,267.5 Credit card 2,223.1

Direct debit 734.4 Cash 523.7

Phone 583.5 Money order 276.6

Third-party website 39.1 Prepaid debit card 126.3

Numbers of bills in millions; n=188,653 bills Numbers of bills in millions; n=285,382 bills

Percentage of Online Bill Volume by Type of Site

0% 2% 0.5%

27% 30% 38% Third-party website Bank website Biller website

62% 69% 73%

2010 (n=225,310 bills) 2013 (n=3,566 bill types) 2016 (n=162,265 bills) 11 11 Source: Aite Group surveys of 2,429 U.S. consumers in Q3 2016, 1,107 consumers in Q2 2013, and 4,696 consumers in Q3 2010 Survey Results – Property Tax Payments

One-Time Payments

Payment Source Breakdown Biller’s Website Payment Methods 3% 6% 1% 7% Mail 26% In Person ACH 43% Biller's website 16% 47% Credit Card Bank's website Debit Card Phone Other Other 26% 25%

Source: Aite Group survey of 2,429 U.S. consumers, 1,885 one-time bills for property taxes, Q3 2016

Recurring Payments

Payment Source Breakdown Biller’s Website Payment Methods

4% 24% 11% Biller's website ACH 43% Bank's website 16% Credit Card Mail or Phone Debit Card Other 69% Prepaid Debit 30% Card

12 12 Source: Aite Group survey of 2,429 U.S. consumers, 946 recurring bills for property taxes, Q3 2016 Survey Results – Water/Sewer Payments

One-Time Payments

Payment Source Breakdown Biller’s Website Payment Methods

5% 6% 28% Biller's website 1% 13% Mail 33% ACH In Person 40% Credit Card Bank's website Debit Card Direct Debit 20% Other Phone 28% 26%

Source: Aite Group survey of 2,429 U.S. consumers, 11,749 one-time bills for water/sewer, Q3 2016

Recurring Payments

Payment Source Breakdown Biller’s Website Payment Methods 2%

20% 10% 1% Biller's website ACH Mail or Phone 19% 48% Credit Card Bank's website Debit Card Other 70% 30% Prepaid Debit Card

13 13 Source: Aite Group survey of 2,429 U.S. consumers, 4,178 recurring bills for water/sewer, Q3 2016 Discussion

If not, what are some factors that may result in different numbers? How has the changing demographics of your Are the survey results constituents changed consistent with your the mix of payment receivables activity? types and methods?

14 14 Receivables Industry Landscape

Paper to Electronic

Trend Issues Shifting away from paper Barriers to entry into the invoices, remittances or electronic payment space payments will contain cost continue due to resource and promote efficiency within constraints and the order-to-cash cycle. electronification of check payments .

15 15 A Biller’s Viewpoint

Consumer Bill Payments Biller Benefits to Online Payment A Biller’s Perspective Channels • Reduce Costs o All channels integrated o Lower cost of billing Aggregators Web o Lower cost per transaction • Flexibility & Control o Gain control of payment operations Agent Bank Bill Pay • Improve Operational Efficiency Biller o Reduce time spent on payment research o Eliminate manual posting of payments ° Real-time fraud/risk management Checks Mobile • Enhance Customer Service o Deliver consistent experience to customers across all channels IVR Walk In • Marketing o Improve customer retention o Increase customer adoption of online payments o Cross sell new products and services o Drive customers to lower cost channels 16 16 Online Payment Options – How will they impact bill payments?

Convenient Mobile E-Commerce Options

Real Time and Same Day Payments

Blockchain

Chatbot Online Payment Channel Integration

17 17 Discussion – Current Landscape and Trends

If accepting online payments now, are all of your needs and challenges being met and addressed? Is the consumer viewpoint consistent The ways with your view of consumers pay is payment channels evolving, are you and options to pay? evolving?

18 18 Key Takeaways

• Consumer payments continues to evolve and will continue as the demographics change

• Review your metrics. How do the survey results stack up to your collection mix?

• Internally, are all stakeholders on-board with the collection process and future strategies to meet customer demand for emerging payment options

• Although trendy, does it make sense to pursue the latest and greatest payment options

19 19 Questions

Contact Info David Ptasznik KeyBank Enterprise Commercial Payments Sr. Product Manager 216-689-4885 [email protected] 20 20