Draft Only - ICI White Paper & Pilot Analysis 2Nd Working Draft for Internal Review

Draft Only - ICI White Paper & Pilot Analysis – 2 nd Working Draft for Internal Review

Instant Issuance of Visa Check Cards

Untitled White Paper

Pilot Study Analysis

2nd Working Draft

Visa Internal Review

January 108, 2007

This document contains the confidential and proprietary information of Visa USA. It may not be duplicated, published, transmitted, or disclosed without Visa’s prior written permission.

Exhibit I: Data Organization Plan 1 4/3/2018, 1:51:48 AM Draft Only - ICI White Paper & Pilot Analysis – 2nd Working Draft for Internal Review

Contents

Introduction

BackgroundIntroduction  What is Instant Card Issuance?  Landscape of ICI: current situation, trends, etc.  # of Visa issuers/branches instantly issuing embossed cards  Branches v. campus programs  Barriers/challenges for larger issuers  Issuers looking to Visa for info on business case

Pilot Overview  Methodology  Objectives: Quantitative and qualitative. What, if any, effects does instant card issuance have on performance metrics? On cardholder perceptions about security and convenience?  Tactics: o Performance tracking for ICI v. control o Customer survey  Description of Pilot, e.g., card instantly issued for 6 months; activity tracked during those that time; tracking for ICI v. Control; Total for test branches v. Control; lifecycle approach for measurement What is Instant Card Issuance?

Pilot Results  Range of metric changes  Survey results  Factors that may affect metrics/customer service, e.g., instant activation, consistent cardholder education at acct opening, etc.

Key Considerations, i.e., “Roadmap” for issuers considering ICI  Visa Operating Regs (embossing requirements, etc.)  Visa Security Standards  Business case drivers  Equipment specs and suppliers– should we mention VARs by name?  Branch operations, e.g., Processor/DDA systems integration  Branch education on use of equipment AND key messages during acct opening process  Cardholder education at acct opening—“activation,” how to use card, etc.  Customer experience  New DDAs v. replacement cards  All or some branches?  Issuance of multiple plastics  Etc.

2 4/3/2018, 1:51:48 AM Draft Only - ICI White Paper & Pilot Analysis – 2nd Working Draft for Internal Review

Latest developments, e.g., new equipment, anything appropriate to share about ICI of unembossed cards, etc. flat graphics (digital photo and customized card graphics), and contactless chip cards (RFID).

Visa’s Instant Card Issuance (ICI) Pilot Study

What the ICI Pilot Demonstrated

How Does ICI Affect Card Activation Rates?

Can ICI Increase Card Usage and Sales?

Evaluating the Business Case

Technology Requirements

Branch Operations and Risk Management

The Future of Instant Issuance

Instant Card Issuance (ICI) Pilot Study Review

History and Background of Instant Card Issuance

Examples of Successful ICI Programs

Why Visa Launched the ICI Pilot

Key Issues Addressed in the ICI Pilot

Issuer Interest in ICI

How the ICI Pilot was Done

Formal Research Design

Branch Procedures

New Account Survey

ICI Pilot Sampling Procedures

How the Data was Analyzed

Special Notes for Interpreting Results

Results

Initial Card Activation

Activation by Transaction Type

Longer Term Cardholder Behavior

Cumulative Analysis

Transaction Profiles

Power Scores

Other Potential Interactions

New Account Survey Results

What the ICI Pilot Study Says About Instant Issuance

Limitations of the ICI Pilot

Suggestions for Further Research

Appendix

Background  The Instant Card Issuance Landscape  Branches Versus Campus Programs  Challenges for Larger Issuers  About this Study

The Instant Card Issuance Landscape An increasing number of mid-size-to-large banks are evaluating and implementing “instant” card issuance technology as a tool to put debit cards in customers’ hands more quickly. With instant issuance, a Visa Check Card (VCC) is personalized, embossed, encoded and foil tipped, on-the-spot, in the branch during account opening. Card security codes (CVV and CVV2) and customer selected PINs are also incorporated on the card during the card issuance process.

Instantly issuing a VCC when a new DDA account is opened is generally thought to offer many benefits and opportunities to the issuer, although very little quantitative or qualitative research has been published to date. Banks who utilize instant issuance generally feel that it offers a process improvement to mailing cards, thereby enabling the bank to serve customers better, providing employees with a faster, more customer- focused way of delivering financial cards, either during account opening or to replace

5 4/3/2018, 1:51:48 AM Draft Only - ICI White Paper & Pilot Analysis – 2nd Working Draft for Internal Review lost or stolen cards. Furthermore, instant issuance technology gives an issuer the flexibility to issue many different permanent card products in the branch, and/or in a back office environment including ATM and debit cards, gift cards or other prepaid debit products, credit cards, campus cards (with digital photo) and payroll cards.

Some of the key benefits of instant issuance include:

 Cardholders are able to use their VCCs immediately without having to wait for the cards to arrive in the mail, increasing customer satisfaction and accelerating card activation rates.

 Issuers gain competitive advantages in the form of increased interchange income and brand differentiation.

 Instant issuance can be combined with incentive programs and emerging technologies that are driven by increased consumer expectations.

The technology to personalize embossed cards in a branch setting has been available for several years and hundreds of credit unions and smaller banks have successfully implemented programs. More than 2,000 branches in the U.S. are instantly issuing embossed Visa or MasterCard products, and the number is increasing every month.

Branches versus Campus Programs -Example-

Instantly Issuing a Visa Check Card at a Branch in Wal-Mart

Desert Schools Credit Union in Phoenix instantly issues more than 9000 Visa Check cards each month at 54 branches including retail locations such as Wal-Mart.

 CSR’s are trained to issue personalized and embossed VCCs at the time an account is opened and to replace lost cards.  New cards are “instantly activated” for offline debit transactions through Visa DPS.  Visa security guidelines minimize fraud loss. A dual control system requires more than one person’s password to handle card stock.  Off-the-shelf instant issuance software is supplied by Dynamic Card Solutions.

Wachovia’s campus card program

Commerce Bank (NJ)

Challenges for Larger Issuers Instant issuance presents some challenges to issuers: 1. Risk of employee fraud or theft- The bank should carry adequate liability insurance in case of fraud, or theft of embossers or card stock. 2. Training and increased audit requirements- Significant audit and security controls are embedded in the embossing machine and in third party instant issuance software. The bank can mitigate operational risk by controlling employee access and maintaining an audit trail for all cards produced. Each branch should be regularly audited to ensure compliance with the bank’s instant card issuance guidelines. 3. EMPHASIZE Some internal systems development will be necessary- To fully automate the card ordering and card activation processes and eliminate manual data entry by a CSR and/or back office staff, some degree of systems development will be necessary. 4. A bank evaluating the business case for instant issuance should identify opportunities with its debit processor to systematically support “instant card activation”, thereby completing the streamlining of the card issuance process. With instant card activation, the debit card is automatically activated after the customer’s DDA account is opened and funded, and a Visa check card has been issued. Combined with instant card issuance, instant card activation removes all barriers to immediate card usage, increasing the likelihood that the customer will become an active cardholder. Visa DPS currently supports instant card activation of VCCs [insert hyperlink to DPS info or reference to appendix].

About this Study By mid-2005, an increasing number of national and regional debit card issuers were approaching Visa looking for assistance in evaluating the business case for instant issuance, specifically:

1. Does instant issuance improve activation and usage metrics? 2. Do the benefits outweigh the investment in hardware/software? 3. How does instant issuance affect the customer experience and branch operations? 4. What are the security implications?

Visa conducted the Instant Card Issuance (ICI) Pilot Study in 2006 to provide issuers with the quantitative and qualitative data to answer these questions.

MAY NOT NEED THIS NOW - KEEP IT FOR NOW Instant issuance is a method for issuing personalized -Example- financial cards in a bank branch or at another secure Instantly Issuing a Visa Check Card at a “remote” location. Branch in Wal-Mart

 A small, desktop system is used to emboss and Desert Schools Credit Union in Phoenix encode customer information on CR-80 card instantly issues more than 9000 Visa Check stock, including: cards each month at 54 branches including retail locations such as Wal-Mart.

 Cardholder name  CSR’s are trained to issue personalized  Expiration date and embossed VCCs at the time an account is opened and to replace lost  Digital photos. cards.  Customized graphics.  New cards are “instantly activated” for  Rear indent printing of CVV2 security data. offline debit transactions through Visa DPS.  Visa security guidelines minimize fraud  Card issuance typically takes about 60 seconds. loss. A dual control system requires more than one person’s password to handle card  The card issuance process is synchronized with stock. DDA account opening through software  Off-the-shelf instant issuance software is integration or via an alternative procedure for supplied by Dynamic Card Solutions. updating card record data on the issuer’s host database.

Introduction

Instantly issuing a Visa Check card (VCC) when a new DDA account is opened can increase customer satisfaction and card activation rates. Instant issuance offers many important benefits and opportunities.

 Cardholders are able to use a VCC immediately without having to wait for the card to arrive in the mail.

 Issuers gain competitive advantages in the form of increased interchange income and brand differentiation.

 Instant issuance can be combined with incentive programs and emerging technologies that are driven by increased consumer expectations.

What is Instant Card Issuance? - Example - Instant issuance is a method for issuing financial cards in a bank branch or at another secure “remote” Instantly Issuing a Visa Check Card at a Branch in Wal-Mart location. Desert Schools Credit Union in Phoenix  A small, desktop system is used to emboss and instantly issues more than 9000 Visa Check encode cardholder information on CR-80 card cards each month at 54 branches including stock, including: retail locations such as Wal-Mart.  CSR’s are trained to issue personalized  Digital ID photos. and embossed VCC’s at the time an account is opened and to replace lost  Customized graphics. cards.  New cards are “instantly activated” for offline debit transactions through Visa  Rear indent printing of CVV2 security data. DPS.  Visa security guidelines minimize fraud  Card issuance typically takes about 60 seconds. loss. A dual control system requires more than one person’s password to handle card stock.  The process is synchronized with DDA account  Off-the-shelf instant issuance software is opening through software integration or other supplied by Dynamic Card Solutions. procedure for updating card record data on a host database. Pilot Study Overview  Pilot Description  Objectives  Methodology  Tactics

Pilot Description

Objectives The Pilot Study had three broad objectives:

1. Quantify the basic effects of ICI on cardholder behavior from the time a new DDA account is opened using standard Visa performance metrics.

2. Identify the key operational and technical requirements for implementing ICI.

3. Evaluate the business case for ICI based upon the results of the pilot study and other qualitative considerations, including customer perceptions about security and convenience.

Methodology The project involved deploying ICI systems at multiple issuer locations and collecting data from new cardholders who were instantly issued VCCs at the time their DDAs were opened.  Runge & Company (www.rungeandcompany.com) provided consulting services for research design, project implementation, and analysis.  Three vendors, Dynamic Card Solutions, DemoTeller Systems Inc., and Magtek offered to provide discounted hardware and software for the project.  The opportunity to participate in the study was formally presented to numerous issuers.

The results of the ICI Pilot Study are based on the analysis of 4764 new checking accounts opened between May and October of 2006.

Tactics Formal Research Design The study and subsequent analyses reflected a 2 (banks) x 2 (control vs. test) X 6 (months) repeated measures design in which data was collected for multiple dependent variables including:  Penetration Rate  Days to First Offline Purchase Transaction  Days to First Online Purchase Transaction  Online and Offline Activation Rates  Online and Offline Transactions per Issued and per Active VCC  Online and Offline Sales Dollars (including Average Ticket) per Issued and per Active VCC  Offline / Online POS Transaction Mix

Branch Procedures  Managers at the test branches were given instructions to train Customer Service Representatives (CSRs) on how to instantly issue VCCs, and to proactively offer instantly issued VCCs to all new customers at the time of DDA opening.

. The CSRs were also instructed to educate new cardholders on the features and benefits of the VCC, in order to encourage signature-based debit behavior. . After the DDA was opened and the VCC card issued, each customer received a new account kit that included disclosure statements and marketing collateral.

New Account Survey New customers were asked to complete a brief New Account Survey, a sample of which is shown in Error: Reference source not found

Pilot Study Results  Performance Metrics (Decide on how to compare bank data- Michele likes the idea of a “range” of results  Survey Results  Influencing Factors

Performance Metrics  Instant issuance of Visa C heck C ards (VCCs) has emerged as an alternative to mailing a card to a customer after a new account is opened.

The technology to print and emboss cards in a branch setting has been available for several years and numerous credit unions and smaller banks have successfully implemented programs. Many tier-one banks and regional issuers are considering launching instant issuance on a large scale.

Visa’s Instant Card Issuance Pilot Study

Visa conducted the Instant Card Issuance (ICI) Pilot Study in 2006. The project involved deploying ICI systems at multiple issuer locations and collecting data from new cardholders who were instantly issued VCCs at the time a DDA account was opened. Runge & Company provided consulting services for research design, project implementation, and analysis. The goals of the program i ncluded three broad objectives:

Measure the basic effects of ICI on cardholder behavior from the time a new DDA account is opened using standard performance metrics.

Identify the key operational and technical requirements for implementing ICI.

Evaluate the business case for ICI based upon the results of the pilot study and other relevant considerations.

The results of the ICI Pilot are based on the analysis of 4764 new DDA accounts opened between May and October of 2006.

What the ICI Pilot Demonstrated

Instant issuance had positive effects on measures of customer satisfaction and on key cardholder performance metrics, particularly in the first few months of the new banking relationship:.

 70% of new cardholders surveyed felt that getting a VCC instantly issued at the branch was a safer and more convenient alternative than getting the card in the mail.

 ICI cardholders were more likely to use their cards.

 ICI produced higher card activation rates for up to 180 days after a DDA account was opened.

 The impact of ICI on early cardholder behavior was substantial. Results pertaining to first transaction date, activation rates, usage, and sales suggest that ICI that may create significant opportunities for an issuer in terms of developing a business case for instant issuance.

 The greatest challenges to implementing ICI are related to technical integration of ICI functionality with account opening processes and with training branch employees to produce cards and handle Visa-branded card stock under dual controlof customer service representatives.

 A survey of sixteen major Visa issuers indicated substantial interest in launching ICI programs in the near future.

How Does ICI Affect Card Activation Rates?

The ICI Pilot demonstrated that Instant issuance Average Days to First Transaction accelerates and increases card activation:. 30 g 25 n  On average, cardholders receiving a VCC in i 23

n 25 e the branch at the time of account opening p O 20

A 14 Instant

used their cards eleven days faster than D 15 12 D

t Mailed

those who got cards in the mail. s

o 10 P

y 5  Many new cardholders began using their a D instantly issued check cards within twenty- 0 Offline Online four hours. Type of Transaction

 More than a third of new cardholders began using their instantly issued VCCs before any any mailed cards were used for the first time.

 At the end of thirty days, 75% of the instantly issued cards had been activated while only 56% of mailed cards had been used for any offline transactions.

ICI Cards, N=1611 30-Day Offline Activation Curve Control Cards, N=2707

80% Day 30: Gap = 70% Day 15: Gap = 34% e 19% t 75% a R

n 62% o i t 50% a 56%

v Day 5: Gap = i t

c 40% A

e 37% n

i 30% l f

10% 0% 0% 0 2 4 6 8 10 12 14 16 18 20 22 24 26 28 30 Days Since DDA Open Date

 Instantly issued VCCs met or exceeded peer group norms and showed higher activation rates for offline and online transactions for the entire 180 days of the ICI Pilot in comparison to cards that were mailed.

180 Day Activation Rates (not corrected for normal account attrition)

80.0% 70.0%

60.0% % 50.0% Mailed Offline n o

i Mailed Online t

a 40.0% v

i Instant Offline t c 30.0% Instant Online A 20.0%

10.0% 0.0% '0 to 30 Var 31 to 60 Var 61 to 90 Var 91 to Var 121 to Var 151 to Var 120 150 180 Days Post DDA Opening

Can ICI Increase Card Usage and Sales? Yes. Instant issuance offers clear advantages over mailed cards in the first thirty days following account opening. The ICI Pilot indicates that instant issuance can significantly reduce the number of days needed to reach or exceed an issuer’s baseline debit portfolio performance for key VCC score card metrics. Usage 30 Days Post DDA Opening  ICI penetration rates approach 100%, while peer group averages for 20 mailed cards typically range from 65- s 15 n o

80%. i t

c Mailed a 10 s

n Instant a r

 All measures of VCC usage were T

substantially higher for ICI cards in 5 the first month after account 0 opening. The number of offline Online Offline Online/Offline transactions for instantly issued Type of Transaction cards was equivalent to a peer group norm of approximately twelve transactions per month. Total Purchases Per Active VCC 30 Days Post DDA  Total purchases were greater for ICI 400 in the first 30 days by a wide margin 350 300 for both online and offline $

e 250 s Mailed transactions. a

c Instant r 150 u  While ICI did not appear to have a P 100 50 direct affect on the average offline 0 sales ticket in the Pilot, the Online Offline combined effects of increased Transaction Mix penetration, activation, and transaction volume produced Power Scores well above both peer group averages and mailed cards in the Total Purchases Per Active VCC first three months after a DDA 30 Days Post DDA account was opened. 400 350 300  Three months after account opening, $

e 250 s Mailed ICI and mailed card metrics tended a

c Instant to converge with peer averages, r 150 u although instantly issued cards P 100 50 maintained a 5% to 10% advantage 0 in all measures of activation and in Online Offline cumulative levels of usage and total Transaction Mix sales.

 Note: The data obtained in the ICI Transaction Power Scores (Pene tration x Activation x Usage x Pilot Study might be considered to Ave rage Offline Sale) be of a “baseline” nature, given that it does not reflect the effects of 300 250 e r

o 200 Mailed c S Instant r 150

w 100 Peer 18 o 4/3/2018, 1:51:48 AM P 50 0 30 60 90 Days Post DDA Opening Draft Only - ICI White Paper & Pilot Analysis – 2nd Working Draft for Internal Review

either a rewards program or a coordinated marketing campaign.

 56% of mailed cards had been used for any offline transactions.

ICI Cards, N=1611 30-Day Offline Activation Curve Control Cards, N=2707

 80% Inst Day 30: Gap = Day 15: Gap = 34%

e 70% 19% t 75% antl a R 60% n 62%

o y i t

a 50% 56%

v Day 5: Gap = i t

c 40% A

i 30% l f

issued VCCs met or exeeded peer group norms and showed higher activation rates for offline and online transactions for the entire 180 days of the ICI Pilot in comparison to cards that were mailed.

Can ICI Increase Card Usage and Sales?

Usage 30 Days Post DDA Opening

s 15 n o i t

c Mailed a 10 s

n Instant a r T

0 Online Offline Online/Offline Type of Transaction

Total Purchases Per Active VCC 30 Days Post DDA

400 350 300 $

e 250 s Mailed a

c Instant r 150 u

P 100 50 0 Online Offline Transaction Mix

Transaction Power Scores (Pe netration x Activation x Usage x Average Offline Sale )

300 250 e r

o 200 Mailed c S Instant r 150 e

w 100 Peer o P 50 0 30 60 90 Days Post DDA Opening

Survey Results

Influencing Factors

Key Considerations  Visa Operating Regulations  Visa Security Standards  Branch Operations and Risk Management  Technology Requirements (Hardware and Software)  Cardholder Education  Card Types / New and Replacement Cards  Branch Selection  Business Case Drivers

Visa Operating Regulations Card embossing and encoding

Visa Security Standards Physical and logical security

Reporting requirements

Branch Operations and Risk Management A careful review of operational issues is essential to maximize the benefits of ICI and minimize the risks associated with remote issuance of VCCs. The operational considerations are not trivial and require managing card stock, securing the embossing equipment, and optimizing branch resources to support card production. The challenges include:

 Significant training of CSRs and other personnel that will result in confident operation of the ICI system.

 Open and fund new DDA accounts.

 Issue cards and activate them for immediate offline use.

 Motivate cardholder behavior as part of a customer relationship strategy.

 Visa has developed Instant Card Issuance Security Standards to ensure that issuer’s maintain and adequate level of security and audit control. These standards require an issuer to:

 Carry adequate liability insurance to cover any risk within or associated with their ICI program.

 Submit a complete Visa Instant Card Issuance Self-Audit form to Visa U.S.A. Risk Management annually for each remote location that has any product or component related to the instant issuance program.

 Members are advised to analyze their risk exposure in relation to potential revenue from offering instant card issuance.

Technology Requirements In order to issue Visa Check cards in a branch setting, it is necessary to install card embossing equipment, PIN pads, and instant issuance application software.

 An ICI system can be installed to operate in either a stand-alone mode or integrated with an issuer’s host DDA and card management system. An example of each configuration is shown below.

Stand-Alone System Integrated System

Insert graphic Insert Graphic

 Low cost solution that can be operational in  Designed for seamless operation with issuers less than two months. IT infrastructure.  Off-the-shelf software  Available third party software must be  Requires manual data entry of basic card customized, delaying deployment. data into the issuer’s host system.  Provides operational efficiency and ease of  Represents a first step in launching a use for branch personnel. program or determining feasibility  Development costs may be significant.

 Industry standard hardware is available that features embossing, magnetic stripe encoding, and color topping, with optional indent printing and smart card personalization capabilities.

 Card production is password protected as well as device access for replacing or removing card stock.

 A PIN pad attaches to the card embossing device to enable new cardholders to select their PINs.

 A non-resettable card counter is provided for audit-trail purposes.

 Equipment securely bolts to countertop to prevent theft.

 The basic software components necessary for an instant issuance system are shown below:

 Client/Server Design. Ability to support centralized management and audit reporting to manage system access and handling of card stock. Financial keys (PIN/CVV/CVC) can be stored securely at a data center and don’t require distribution to any hardware devices at the branch level. Embossing machines may be controlled from a central PC that can verify online status of the equipment.

 Management of Card Inventory. Access to card stock stored inside the embossing machine is regulated. Each card issuing location can be quickly audited to confirm operational compliance, specifically when and by whom each type of card was last balanced.

 Centralized Control of Security Settings. Users of the system may be easily added and existing access privileges modified. Card issuance capability may be restricted to specific card types, branches, or PC’s. For example, some employees may be able to produce cards, but not balance card stock or open the embossing machine.

 Customer Selected PINs. Customers can select PINs in the branch and the PIN offset can be encoded on the magstripe of the card. The host database can be updated in real-time with the customer selected PIN offset data.

 Flexibility in Card Production. Embossed cards can be ordered and produced in a single location, or card orders may be routed to an embossing machine located elsewhere. The card order can be printed immediately, or the order can sit in a “queue” until someone with security clearance prints the cards from the queue.

Cardholder Education

Card Types / New and Replacement Cards

Business Case Drivers Background Considerations Determining the financial benefits that may derive from an instant issuance program requires a complex analysis of a variety of business case drivers.

 Instance issuance can potentially impact the number of VCCs issued and it lowers the time it takes for new cardholders to start using their VCCS for debit purchases. ICI also provides a platform for issuing a variety of other card types.

 The ICI Pilot Study suggests that increased rates of penetration, activation, initial card usage and sales provide the basis for developing a business case.

 The advantages of enhanced customer satisfaction and innovative branding opportunities are difficult to quantify; however, new cardholders who received instantly issued cards during the ICI Pilot Study indicated very high levels of satisfaction from being able to get their cards instantly. An ICI program that is launched in “marketing isolation” could require years to obtain a return on investment.

 Every issuer will likely have unique criteria for projecting return on investment (ROI) and the possible economic justification for large scale implementation. Competitive pressures, marketing goals, and degree of emphasis on retail banking can all influence the decision to launch a program.

Estimating Major Investment Costs  The nature of the issuer’s investment can be quantified to a large extent by examining the technology costs and operational impacts of instant issuance.

 The hardware and software technical requirements could amount to as much as $10,000 to $13,000 per branch and depend on the degree of software development and integration.

 Software expense is an extremely crucial variable because the success of the ICI system will depend on the degree to which it is operationally integrated with existing DDA opening procedures.

 Operational and technical expense may be required to enable “instant activation” of a VCC to allow immediate use for offline debit transactions.

 Security and risk management requirements (such as branch wiring, installation of security cameras, and secure storage of card stock) should be taken into consideration.

 Technology costs will likely go down in the foreseeable future as new options become available for utilizing “flat cards” that feature customized graphics and simplify instant issuance of multiple card types.

Calculating Return on Investment (ROI)

The instant issuance business model depends on assumptions regarding key VCC performance metrics. The following variables are used in a baseline analysis of the potential financial benefits of an ICI program.

Quantifiable Drivers Example

 Total Visa Check cards issued. Basic per branch analysis – showing how ICI can increase interchange  Penetration rates. income to $6-7 per month based on increase activation and early benefits–  Offline and online activation rates. with costs of about $10,000 per branch – etc –  Offline transaction volumes. List assumptions made etc. Show  Interchange income per offline transaction. displaceable costs etc.

 Card issuance costs

 Consumables costs.

 Enhanced security costs for items such as cameras and storage of card stock.

 Soft costs of user training and branch staff labor.

Calculation Other Business Drivers

 Brand differentiation

 New customer acquisition as a result of convenience

 New customer acquisition as a result of perceived security

 Ability to shape cardholder behavior (faster time to first offline and online transaction)

 Customer retention, reduced account attrition (emergency replacement of lost/stolen cards)

Technology Requirements

In order to issue Visa Check cards in a branch setting, it is necessary to install card embossing equipment, PIN pads, and application software.

 An ICI system can be installed to operate in either a stand-alone mode or integrated with an issuer’s host DDA and card management system. An example of each configuration is shown below.

Stand-Alone System Integrated System

Insert graphic Insert Graphic

 Low cost solution that can be operational in  Designed for seamless operation with issuers less than two months. IT infrastructure.  Off-the-shelf sofware  Available third party software must be  Requires manual data entry of basic card customized, delaying deployment. data into the issuer’s host system.  Provides operational efficiency and ease of  Represents a first step in launching a use for branch personnel. program or determining feasibility  Development costs may be significant.

 Industry standard hardware is available that features embossing, magnetic stripe encoding, and color topping, with optional indent printing and smart card personalization capabilities.

 Card production is password protected as well as device access for replacing or removing card stock.

 A Pin pad attaches to the card card embossing device to enable new cardholders to select theirPINs.

 A non-resettable card counter is provided for audit-trail purposes.

 Equipment securely bolts to countertop to prevent theft.

 The basic software components necessary for an instant issuance system are shown below:

 Client/Server Design. Ability to support centralized management and audit reporting to manage system access and handling of card stock. Financial keys (PIN/CVV/CVC) can be stored securely at a data center and don’t require distribution to any hardware devices at the branch level. Embossing machines may be controlled from a central PC that can verify online status of the equipment.

 Management of Card Inventory. Access to card stock stored inside the embossing machine is regulated. Each card issuing location can be quickly audited to confirm operational compliance, specifically when and by whom each type of card was last balanced.

 Centralized Control of Security Settings. User’s of the system may be easily added and existing access priviledges modified. Card issuance capability may be restricted to specific card types, branches, or PC’s. For example, some employees may be able to produce cards, but not balance card stock or open the embossing machine.

 Customer Selected PINs. Customers can select PINs in the branch and the PIN offset can be encoded on the magstripe of the card. The host database can be updated in real-time with the customer selected PIN offset data.

 Flexibility in Card Production. Embossed cards can be ordered and produced in a single location, or card orders may be routed to an embossing machine located elsewhere. The card order can be printed immediately, or the order can sit in a “queue” until someone with security clearance prints the cards from the queue.  Branch Operations and Risk Management A careful review of operational issues is essential to maximize the benefits of ICI and minimize the risks associated with remote issuance of VCCs. The operational considerations are not trivial and require managing card stock, securing the embossing equipment, and optimizing branch resources to support card production. The challenges include:

 Significant training of CSRs and other personnel that will result in confident operation of the ICI system.

 Open and fund new DDA accounts.

 Issue cards and activate them for immediate offline use.

 Motivate cardholder behavior as part of a customer relationship strategy.

 Visa has developed Instant Card Issuance Security Standards to ensure that issuer’s maintain and adequate level of security and audit control. These standards require an issuer to:

 Carry adequate liablity insurance to cover any risk within or assoicated with their ICI program.

 Submit a complete Visa Instant Card Issuance Self-Audit form to Visa U.S.A. Risk Management annually for each remote location that has any product or component related to the instant issuance program.

 Member’s are advised to analyze their risk exposure in relation to potential revenue from offering instant card issuance.

Evaluating the Business Case for Instant Issuance

 Background Considerations

Determining the financial benefits that may derive from an instant issuance program requires a complex analysis of a variety of business case drivers.

 Instance issuance can potentially impact the number of VCCs issued and the way in which a card is used. ICI also provides a platform for issuing a variety of other card types.

 The ICI Pilot suggests that increased rates of penetration, activation, and initial card usage and sales provides a basis for developing a business case.

 The advantages of enhanced customer satisfaction and innovative branding opportunities are difficult to quantify. An ICI program that is launched in “marketing isolation” could require years to obtain a return on investment.

 Every issuer will likely have unique criteria for projecting return on investment (ROI) and the possible economic justification for large scale implementation. Competitive pressures, marketing goals, and degree of emphasis on retail banking can all influence the decision to launch a program.

 Estimating Major Investment Costs

 The nature of the issuer’s investment can be quantified to a large extent by examining the technology costs and operational impacts of instant issuance.

 The hardware and software technical requirements could amount to as much as $10,000 to $15,000 per branch and depend on the degree of software development and integration.

 Software expense is an extremely crucial variable because the success of the ICI system will depend on the degree to which it is operationally integrated with existing DDA opening procedures.

 Operational and technical expense may be required to enable “instant activation” of a VCC to allow immediate use for offline debit transactions.

 Security and risk management budgetary items such as …… are significant

 Technology costs will likely go down in the foreseeable future as new options become available for utilizing “flat cards” that feature customizable graphics and simplify instant issuance of multiple card types.

 Calculating Return on Investment (ROI)

The instant issuance business model depends on assumptions regarding key VCC performance metrics. The following variables are used in a baseline analysis of the potential financial benefits of an ICI program.

Quantifiable Drivers Example

 Total Visa Check cards issued. Basic per branch analysis – showing how ICI can increase interchange  Penetration rates. income to $6-7 per month based on increase activation and early benefits–  Offline and online activation rates. with costs of about $10,000 per branch – etc –  Offline transaction volumes. List assumptions made etc. Show  Interchange income per offline transaction. displaceable costs etc.

 Card issuance costs

 Consumables costs.

 Enhanced security costs for items such as cameras and storage of card stock.

 Soft costs of user training and branch staff labor.

Calculation Other Business Drivers

 Brand differentiation

 New customer acquisition as a result of convenience

 New customer acquisition as a result of perceived security

 Ability to shape cardholder behavior (faster time to first offline and online transaction)

 Customer retention, reduced account attrition (emergency replacement of lost/stolen cards)

Best Practices – NEW SECTION  Strategies and Tactics that help things go better o What groups in the bank should be involved in launching and supporting a program? o Branch incentives for CSRs to motivate them o Refresh training for branches 30-60 days after launch  Things to avoid o Manual data entry  Tools o Visa Security Standards o Runge & Company o VAR information?!?

Latest Developments in Instant Issuance (just some ideas below)  Preferred Vendor Partnerships  Magtek’s Newest Embosser  Non-embossed Flat Cards  RFID

The Future of Instant Issuance The payment industry is increasingly driven by offers of expediency, immediacy, and the value of delivering products instantly. Instant card issuance is more than a technology that replaces the mailing of VCCs. It represents a new business model for spawning innovative programs that capitalize on the industry’s emphasis on consumer-friendly retail banking. ICI is a foundation for supporting:

 “On-demand” customer relationship strategies that enhance the ability to capture digital transactions at the origin of the banking relationship.

 Marketing synergies with incentive programs such as Visa Extras, Instant Visa Rewards and other innovative programs that seek to motivate and shape cardholder behavior.

 Instant issuance of Visa branded campus cards, credit cards, and prepaid debit applications such as payroll cards that are funded at the network level and issued at a bank branch or an employer location.

 Convergence with other emerging technologies driven by increased customer expectations. Instant issuance is a model for future “on-site” personalization programs that might involve contactless cards, phones, or other wireless devices.

Visa’s Role

The decision to implement an instant issuance will depend on issuer goals. The business case for instant issuance requires quantitative assumptions, judgements about marketing strategies, and technical considerations.

 Visa is committed to providing guidance to promote secure instant issuance programs that minimize risk and fraud.

 Visa DPS offers innovative products and services that can significantly enhance an instant issuance program.

 Visa is prepared to conduct further research on the value of instant issuance applications.

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PILOT STUDY ANALYSIS

Instant Card Issuance (ICI) Pilot Study Review

History and Background of Instant Card Issuance

Why Visa Launched the ICI Pilot

How the ICI Pilot was Organized

Branch Procedures

New Account Survey

Special Notes for Interpreting Results

Results

Initial Card Activation

Activation by Transaction Type

Longer Term Cardholder Behavior

Cumulative Analysis

Transaction Profiles

Power Scores

Other Potential Interactions

What the ICI Pilot Study Says About Instant Issuance

Suggestions for Further Research Appendix

History and Background

Visa started providing formal security requirements for instant issuance in 1998 when several issuers began to technically develop ICI systems and distribute VCCs using in- branch hardware and software.

 While few large issuers have implemented instant issuance to any significant degree (e.g. at more than 100 branches), most tier-one banks are actively studying ICI and have requested that Visa provide information and guidance.

 ICI systems have been installed at hundreds of credit unions. Credit unions have had the most experience with ICI primarily because their IT infrastructure is far less complex than a large bank’s.

 Visa supports Instant issuance in specialized applications such as campus card programs where a VCCVCC functionality is added to an institutional identification card.

 ICI “smart card” applications have been reported in Europe and elsewhere.

 Desert Schools Credit Union- Instant Issuance VCC (Phoenix, AZ)

o Launched in 2003 by a $2.7 billion credit union at 30 branches in the greater Phoenix area. o The program has grown to over 54 branches and includes locations in retail establishments such as WalmartWal-Mart. Approximately 9,000 VCCs are issued each month. o More than 400 employees of Desert Schools FCU now are involved in instant issuance in some capacity. o At stand-alone branches, member service representatives issue the cards. At branches located in retail environments, MSRs/tellers have been trained to do this task.

o Dual controls—having more than one person's password required to issue cards and to take out the plastic stock in the morning—helps limit the potential for fraud. o The credit union uses an instant-issuance system called CardWizard® that is provided by Dynamic Card Solutions and each branch has a SuperCAT™ encoder and DataCard® 150i card embosser. o New cards are “instantly” activated for offline debit because the credit union processes with Visa DPS. o Desert Schools believes the main benefit is that the customers are pleased that they can use their new VCC immediately when they open an account.

 Wachovia Bank- Instant Issuance Campus Card (Chapel Hill, NC) o This Visa-branded, photo identification card is issued by the university card office on campus at UNC Chapel Hill. o Known as the “UNC One Card Plus,” it allows the cardholder to make purchases from a proprietary declining balance account, pay for printing and photo copies, and access campus facilities via magstripe-based card readers. o The card works at ATM machines and for online and offline point-of-sale transactions campus. o A cardholder can make “real-time” funds transfers via a VRU-based system from a Wachovia account (including checking, savings, line of credit or credit card) to the cardholder’s declining balance account, with immediate funds availability.

 Commerce Bank- Instant Issuance VCC (NJ, NY, DE, PA, VA) o The bank is using MagTek’s IntelliCAT® system to instantly issue Visa debit cards to both new and existing customers at over 300 branch locations. o This system consists of Windows®-based software, a MagTek IntelliPIN and a Datacard® 150i desktop embossing machine. o Customers are also able to select their own PINs when they get their cards.

Why Visa is Studying ICI

 There are no published reports raboutabout the benefits of instant issuance that are based upon empirical studies of cardholder behavior or systematic analysis of an issuer’s ICI program.

 A significant volume of anecdotal information exists which suggests that customers appreciate the convenience of obtaining a VCC at the time an account is opened and tend to start using their cards quickly.

 Other benefits that have been suggested include increased penetration, higher long terms activation rates, and increased usage for offline POS.

 The various business models that have been proposed to justify ICI are based upon developing and executing innovative customer relationship strategies in an increasingly “on-demand” world. ICI might offer the ability to promote such strategies and capture debit card transactions at the origin of the banking relationship.

 ICI business models are largely based on the supposed advantages of a faster, more customer-focused way of delivering cards.

 Instant issuance could enable a bank to make more memorable first impressions with new customers, or meet increased expectations of existing customers.

 Instant issuance could be vertically “integrated” with reward programs and other promotional initiatives and incentives to attract, retain, and motivate customers.

Some of the other potential benefits that have been suggested to justify ICI include:

 ICI differentiates the issuer in a “commoditized” retail banking marketplace.  Customer satisfaction and retention are enhanced when customers do not have to wait for new cards to arrive by mail, especially after a card has been de- magnetized or reported as lost or stolen.  ICI eliminates any potential “delay period” between when a customer service representative opens a checking account and when the VCC is actually ordered / mailed / delivered / activated by the cardholder.  The risk of fraud loss and identity theft is measurably lower for instantly issued VCCs, compared to cards sent by mail. Furthermore, customer “perception” is that they feel safer getting a card in person while in the branch.  A significant portion of card production costs related to mailed cards can be “displaced” by instant issuance. This includes the costs of card stock, embossing, encoding, and color tipping. Other costs are “avoidable”, such as the cost of producing customized card mailers (plus postage) and PIN mailers (plus postage), as well as the cost of producing temporary ATM cards in the branch for new customers.  ICI offers issuers the opportunity to increase participating in a debit rewards program by enrolling them immediately at the time of account opening.  Card-based online banking authentication could be supported via a biometric or another credential stored on a chip or magstripe, immediately after account opening.  The ICI “infrastructure” offers issuers the ability to “add” other instant issuance programs at a later date, such as photo cards, gift cards, credit cards, payroll cards, and contactless cards.

 Issuers will process fewer checks.

The ICI Pilot was designed to explore various issues related to both cardholder behavior and the potential benefits to the issuer. These issues included:

 The extent to which ICI accelerates actual card activation and use.

 The longer term, or sustained effects of ICI in terms of measurable advantages to the issuer using standard cardholder performance metrics.

 Cardholder satisfaction with ICI.

 Technical and operational challenges to launching an ICI program

 Evaluating the business case in terms of observable benefits, empirical data, and other relevant factors.

This section will be consolitdated and presented in a table.

The ICI Pilot investigated the interest of large Visa debit issuers in future implementation of instant issuance. A significant number of issuers indicated an interest in evaluating and/or implementing ICI systems, as summarized below:

1. Commerce Bank (Mo.) ICI pilot participant. Intends to purchase the instant issuance pilot systems “loaned” to the bank by their instant issuance vendor so that the bank can continue with instant issuance in 2007. Several of the participating pilot branches voiced strong support for continuing with instant issuance at the conclusion of the pilot term.

2. Wachovia Bank ICI Pilot participant. Two branches in Jacksonville, FL have been instantly issuing VCCs for several years. The bank also instantly issues Visa-branded campus cards at several North Carolina universities, including UNC Chapel Hill, UNC Greensboro, and NC A&T.

3. Bank of America The bank has piloted instant issuance of embossed cards in two metro markets since mid-2005, and plans to conduct a pilot study in Dallas in 2007 involving the instant issuance of VCC “flat” (non-embossed) cards at 20+ branches.

4. Wells Fargo Decided not to participate in the pilot due to anticipated systems development impacts and competing project priorities. The bank is currently evaluating instant

issuance of debit cards in combination with contactless capability, potentially in the form of a flat card.

5. U.S. Bank Decided not to participate in the pilot due to anticipated systems development impacts and competing project priorities. Preparing to deploy Visa-branded, instant issue campus card program.

6. TCF Bank Decided not to participate in the pilot due to competing project priorities.

7. SunTrust Bank Decided not to participate in the pilot due to competing project priorities.

8. BB & T Decided not to participate in the pilot due to competing project priorities, but is actively considering a small program in 2007.

9. PNC Decided not to participate in the pilot due to issues with DDA account opening process and delays with card record build at debit processor (FDR). Seeking funds in 2007 for instant issuance program.

10. TD Bank North Decided not to participate in the pilot, but has approved funds for 2007 to launch a flat card instant issuance program.

11. Sovereign Bank Decided not to participate in the pilot due to issues related to DDA opening process and challenges with integrating instant issuance software into existing process for card number assignment.

12. Compass Bank Decided not to participate in the pilot due to competing project priorities, but is actively considering launching a Visa-branded instant issue campus card program in 2007.

13. Webster Bank Decided not to participate in the pilot due to competing project priorities, but is actively considering a small program in 2007, possibly with flat cards.

14. First Citizens (NC) Bank Decided not to participate in the pilot due to competing project priorities and anticipated systems development impacts with their debit processor (FDR).

15. First Tennessee Bank Decided not to participate in the pilot.

How the ICI Pilot was OrganizedDone

This section to be developed further to describe in more detail the preliminary steps to launching the project

 Organization for the ICI Pilot Study began in March of 2005 in response to the interest expressed by several large issuers in evaluating the benefits of instant issuance.

 Visa engaged Runge & Company ( www. rungeandcompany.com), a consulting firm specializing in instant issuance, to assist in research design, project implementation, and analysis of the results

 Three vendors, Dynamic Card Solutions, DemoTeller Systems Inc., and Magtek offered to provide discounted hardware and software for the project.

 The opportunity to participate in the study was formally presented to numerous issuers.

 Because participation in the ICI Pilot involved extensive technical and operational commitments that had to occur outside of the normal “budget” planning process, Wachovia and Commerce were the only banks able to participate.

 Commerce Bancshares selected Dynamic Card Solutions to supply the necessary hardware and software for the project, which was offered at no charge for a 6-month term.

 Wachovia already was operating instant issuance systems at several branches in Florida using Magtek software, mainly for the purpose of providing replacement VCCs to customers.

The study and subsequent analyses reflected a 2 (banks) x 2 (control vs. test) X 6 (months) repeated measures design in which data was collected for multiple dependent variables including:  Penetration Rate  Days to First Offline Purchase Transaction  Days to First Online Purchase Transaction  Online and Offline Activation Rates  Online and Offline Transactions per Issued and per Active VCC  Online and Offline Sales Dollars (including Average Ticket) per Issued and per Active VCC  Offline / Online POS Transaction Mix

Branch Procedures

 Managers at the Wachovia and Commerce test branches were given instructions to train Customer Service Representatives (CSRs) on how to instantly issue VCCs, and to proactively offer encourage instantly issued VCCs to all new customers at the time of DDA opening.

 The CSRs were also instructed to educate new cardholders on the features and benefits of the VCC, in order to encourage signature-based debit behavior. The training strategy utilized for the ICI Pilot Study is illustrated in much greater detail in the following exhibits:

 Exhibit II: Pre-Pilot Questionnaire Given to Wachovia Test Branch Employees (page 68);

 Exhibit III: Pre-Pilot Sales Training Strategy for Wachovia Pilot Branches (page 71);

 Exhibit IV: Script for Wachovia Employees in Test Branches (page 73).

 After the DDA was opened and the VCC card issued, each customer received a new account kit that included disclosure statements and marketing collateral. The new account kits varied slightly by bank:

[Need to confirm new account materials and customer communications, get electronic copies] Wachovia . Check Card Register . Visa Extras Insert . Confirm IVR included with mailed cards

Commerce . Lay by card . Card presenter . Does not participate in Visa Extras . No IVR offered

New Account Survey

New customers were asked to complete a brief New Account Survey, a sample of which is shown in Error: Reference source not found.

The ICI Pilot Study audience sample was comprised of 5,325 customers from Wachovia Bank (FL) and Commerce Bank (MO) who opened new DDA accounts between May 1, 2006 and October 31, 2006.

 Data was collected for a period of 180 days from multiple branches at each bank.

 Each branch was classified as either a test branch or a control branch.

 At test branches, customers received instantly issued VCCs at the time they opened their new DDAs.

 Customers at control branches received VCCs via the mail according to each bank’s normal card issuance process.

 Wachovia provided four branches (two each for control and test) and Commerce provided twenty branches (ten each for control and test).

Wachovia Commerce Test Branches Control Branches Test Branches Control Branches (Qty 2)1 (Qty 2) (Qty 10) (Qty 10)

338 DDA Account 723 DDA Accounts 1611 DDA Accounts 3153 DDA Accounts ICI Mailed ICI Mailed 365 633 1611 2707

The data was analyzed using a “lifecycle” technique that offered the ability to investigate the effects of ICI upon cardholder behavior over time.

 The analysis looked at cardholder data from the time a DDA account was opened until November 30, 2006.

1 VCCs were sometimes mailed via the traditional method for test branches at both Wachovia and Commerce for various procedural reasons that included system downtime, workload, lack of adequate CSR training, or upon the request of the cardholder. Data for these cards was analyzed separately.

 Because the ICI Pilot involved continuous additions to the sample on a daily basis, the data was arranged in such a way that each subject had a common relative start date even though calendar start dates were different.

 Six groups of subjects were designated for analysis corresponding to 30, 60, 90, 120, 150, 180 days duration from the time of DDA opening

Wachovia Commerce Instant Control Instant Control 30 Day 338 723 1611 3153 60 Day 328 693 1559 3015 90 Day 276 557 1308 2561 120 Day 224 451 1051 2086 150 Day 157 334 733 1495 180 Day 108 207 473 943

 The lifecycle technique allowed the same groups of subjects to be tracked using a variety of measures that could be reviewed at various periods, and cumulatively.

 For example, data in the 120-day lifecycle group included those subjects who had DDA accounts which had been opened for at least 120 days.

 Data was analyzed using repeated measures on the same subjects within a lifecycle group, and comparisons could be made between the six different lifecycle groups.

 The 30 day group contained the most cardholders because it included six “first month’s” of data (May through October).

 The 180 day group contained the smallest number of cardholders because it included only those subjects who opened DDA accounts during May 2006 (the first month of the study) that were tracked for six months.

The data organization plan is presented in Exhibit I (page 68).

 Data from the two bank samples was analyzed separately.

 The sample sizes and the number of participating branches from the two banks were substantially different.

 ICI systems and procedures employed at each bank were not identical.

 Data obtained from the Commerce and Wachovia samples is presented below. The results include 180 days of data collected from cardholders who opened DDA accounts between May 1, 2006 and October 31, 2006. Branch-level summaries for each of the 20 Commerce branches are shown in the appendix.

0 - 30 31 - 60 61 - 90 91 - 120 121 - 150 151 - 180 Diff. from Diff. from Diff. from Diff. from Diff. from Diff. from Key Measures Day Day Day Day Day Day Control Control Control Control Control Control Activity Activity Activity Activity Activity Activity

New DDAs Opened 3,153 3,015 2,561 2,086 1,495 943 New VCCs Issued 2,707 2,586 2,179 1,753 1,275 812 Penetration Rate 85.9% 85.8% 85.1% 84.0% 85.3% 86.1% Offline Activation Rate 55.9% 64.4% 61.5% 58.9% 55.8% 53.3% Online Activation Rate 40.4% 49.0% 47.5% 46.0% 44.4% 43.2% Offline/Online Activation Rate 61.0% 68.6% 64.8% 61.7% 59.3% 56.5% s

H Avg Trans per Offline-Active CH 8.8 13.3 13.3 13.4 13.1 13.2 C

Avg Trans per Online-Active CH 5.1 8.0 8.3 8.2 8.1 8.8

h Avg Trans per Offline/Online-Active CH 11.4 18.2 18.7 18.9 18.4 19.2 c

n Avg $ per Offline-Active CH $274.83 $404.31 $376.70 $362.31 $355.07 $362.22 a

r Avg $ per Online-Active CH $167.04 $254.00 $259.57 $256.49 $270.09 $291.59 B

Avg $ per Offline/Online-Active CH $362.28 $560.70 $547.84 $537.36 $536.15 $564.68 l

o Avg Offline Ticket $31.31 $30.42 $28.25 $26.99 $27.14 $27.35 r t Avg Online Ticket $32.91 $31.62 $31.27 $31.42 $33.17 $33.05 n o

6 Avg Offline/Online Ticket $31.78 $30.80 $29.23 $28.42 $29.14 $29.35 C 0 % of Offline Transactions 70.5% 68.5% 67.6% 67.8% 66.9% 64.9% 0

2 % of Online Transactions 29.5% 31.5% 32.4% 32.2% 33.1% 35.1% r

e % of Offline-Active VCCs w/ 1-5 Offline Trans 48.1% 37.5% 36.3% 35.0% 36.0% 35.3% b % of Offline-Active VCCs w/ 6-15 Offline Trans 34.7% 30.9% 32.7% 34.3% 33.9% 32.6% o t % of Offline-Active VCCs w/ 16+ Offline Trans 17.3% 31.5% 31.0% 30.7% 30.1% 32.1% c O

New DDAs Opened 1,611 1,559 1,308 1,051 733 473

6 New VCCs Issued 1,611 1,559 1,308 1,051 733 473 0

0 Penetration Rate 100.0% 14.1% 100.0% 14.2% 100.0% 14.9% 100.0% 16.0% 100.0% 14.7% 100.0% 13.9% 2

s Offline Activation Rate 74.8% 18.9% 71.2% 6.8% 69.0% 7.5% 65.0% 6.1% 63.4% 7.7% 59.0% 5.7% y a H Online Activation Rate 63.9% 23.6% 63.7% 14.7% 60.1% 12.6% 55.2% 9.2% 52.8% 8.4% 48.6% 5.4% C M Offline/Online Activation Rate 79.1% 18.2% 76.8% 8.2% 73.5% 8.7% 69.7% 8.1% 67.0% 7.7% 62.6% 6.1% e

c Avg Trans per Offline-Active CH 12.0 3.2 13.4 0.1 13.2 -0.1 12.9 -0.5 13.1 0.1 14.0 0.8 n Avg Trans per Online-Active CH 7.9 2.8 8.2 0.2 8.1 -0.2 8.4 0.2 8.6 0.4 9.5 0.7 a

u Avg Trans per Offline/Online-Active CH 17.7 6.3 19.2 1.0 19.1 0.3 18.7 -0.2 19.2 0.8 20.6 1.4 s

s Avg $ per Offline-Active CH $379.95 $105.12 $391.85 -$12.46 $394.69 $17.98 $353.93 -$8.38 $360.08 $5.01 $377.51 $15.29 I Avg $ per Online-Active CH $282.28 $115.24 $288.60 $34.60 $277.91 $18.34 $292.79 $36.30 $300.08 $29.99 $361.03 $69.45 d r Avg $ per Offline/Online-Active CH $587.13 $224.85 $602.28 $41.58 $598.17 $50.32 $561.46 $24.10 $577.53 $41.39 $636.36 $71.68 a

C Avg Offline Ticket $31.69 $0.38 $29.27 -$1.15 $29.88 $1.63 $27.40 $0.41 $27.40 $0.26 $26.96 -$0.39

t Avg Online Ticket $35.71 $2.81 $35.01 $3.39 $34.11 $2.84 $34.93 $3.50 $35.05 $1.89 $37.88 $4.83 n

a Avg Offline/Online Ticket $33.14 $1.36 $31.31 $0.51 $31.36 $2.13 $30.07 $1.65 $30.09 $0.95 $30.88 $1.54 t

s % of Offline Transactions 64.0% -6.6% 64.5% -4.0% 65.1% -2.5% 64.5% -3.3% 64.8% -2.0% 64.1% -0.9% n I % of Online Transactions 36.0% 6.6% 35.5% 4.0% 34.9% 2.5% 35.5% 3.3% 35.2% 2.0% 35.9% 0.9% % of Offline-Active VCCs w/ 1-5 Offline Trans 38.8% -9.2% 34.4% -3.1% 34.2% -2.1% 34.8% -0.1% 34.0% -2.0% 32.6% -2.7% % of Offline-Active VCCs w/ 6-15 Offline Trans 34.1% -0.5% 34.2% 3.3% 33.7% 1.0% 33.8% -0.5% 32.0% -1.9% 34.4% 1.8% % of Offline-Active VCCs w/ 16+ Offline Trans 27.1% 9.8% 31.4% -0.2% 32.1% 1.1% 31.3% 0.6% 34.0% 3.9% 33.0% 0.9% Commerce Bank

Wachovia Bank

New DDAs Opened 723 693 557 451 334 207 New VCCs Issued 633 610 496 410 302 191 Penetration Rate 79.0% 79.4% 80.8% 81.8% 81.1% 82.1% Offline Activation Rate 63.7% 60.0% 59.3% 51.2% 48.0% 35.1% Online Activation Rate 56.2% 53.3% 51.6% 44.1% 40.1% 32.5% Offline/Online Activation Rate 69.0% 63.6% 62.5% 54.1% 50.3% 38.7% s

Avg Trans per Online-Active CH 6.7 9.0 8.4 8.8 8.8 7.3 h Avg Trans per Offline/Online-Active CH 13.6 19.1 18.1 18.0 17.4 15.4 c

l Avg $ per Offline/Online-Active CH $450.46 $665.92 $575.24 $539.20 $582.89 $468.38

o Avg Offline Ticket $32.87 $34.89 $31.45 $28.85 $30.93 $27.91 r t Avg Online Ticket $33.65 $34.95 $32.41 $31.47 $37.21 $34.25 n o

6 Avg Offline/Online Ticket $33.18 $34.92 $31.82 $29.89 $33.47 $30.43 C 0 % of Offline Transactions 59.8% 60.4% 61.6% 60.4% 59.6% 60.2% 0 2

% of Online Transactions 40.2% 39.6% 38.4% 39.6% 40.4% 39.8% r

e % of Offline-Active VCCs w/ 1-5 Offline Trans 47.1% 41.8% 37.4% 41.9% 40.7% 44.8% b % of Offline-Active VCCs w/ 6-15 Offline Trans 37.0% 30.3% 35.7% 30.5% 33.8% 32.8% o t % of Offline-Active VCCs w/ 16+ Offline Trans 15.9% 27.9% 26.9% 27.6% 25.5% 22.4% c O

New DDAs Opened 338 328 276 224 157 108 6 New VCCs Issued 365 355 297 242 171 117 0

0 Penetration Rate 100.0% 21.0% 100.0% 20.6% 100.0% 19.2% 100.0% 18.2% 100.0% 18.9% 100.0% 17.9% 2

s Offline Activation Rate 76.7% 13.0% 63.4% 3.4% 57.6% -1.7% 47.5% -3.7% 45.0% -3.0% 30.8% -4.3% y H a Online Activation Rate 65.8% 9.5% 55.8% 2.5% 48.8% -2.8% 38.4% -5.7% 35.1% -5.0% 25.6% -6.8% C M Offline/Online Activation Rate 81.4% 12.3% 67.9% 4.3% 60.3% -2.2% 49.6% -4.6% 46.2% -4.1% 34.2% -4.6% e

c Avg Trans per Offline-Active CH 11.2 2.4 11.5 -0.7 12.5 0.8 12.5 1.0 9.8 -1.1 8.6 -1.7 n Avg Trans per Online-Active CH 7.7 1.0 7.5 -1.6 8.9 0.5 9.7 0.9 8.6 -0.3 7.8 0.5 a

u Avg Trans per Offline/Online-Active CH 16.8 3.2 16.9 -2.2 19.2 1.1 19.5 1.5 16.1 -1.4 13.6 -1.8 s

s Avg $ per Offline-Active CH $452.88 $163.62 $404.51 -$21.24 $479.85 $110.83 $509.60 $177.40 $332.84 -$3.58 $308.12 $22.34 I Avg $ per Online-Active CH $325.13 $99.62 $270.24 -$45.32 $338.11 $65.32 $404.96 $129.04 $303.61 -$25.48 $293.98 $43.77 d r Avg $ per Offline/Online-Active CH $689.69 $239.23 $599.68 -$66.25 $732.29 $157.05 $802.21 $263.01 $555.00 -$27.89 $497.79 $29.42 a

C Avg Offline Ticket $40.46 $7.59 $35.03 $0.14 $38.33 $6.88 $40.64 $11.79 $34.03 $3.10 $35.90 $7.99

t Avg Online Ticket $42.11 $8.46 $36.18 $1.22 $37.98 $5.57 $41.80 $10.33 $35.37 -$1.84 $37.53 $3.28 n a

t Avg Offline/Online Ticket $41.07 $7.89 $35.45 $0.53 $38.19 $6.38 $41.09 $11.20 $34.58 $1.11 $36.60 $6.17

s % of Offline Transactions 62.8% 3.1% 63.7% 3.4% 62.4% 0.8% 61.5% 1.2% 59.4% -0.2% 56.8% -3.4% n I % of Online Transactions 37.2% -3.1% 36.3% -3.4% 37.6% -0.8% 38.5% -1.2% 40.6% 0.2% 43.2% 3.4% % of Offline-Active VCCs w/ 1-5 Offline Trans 40.4% -6.8% 40.9% -0.9% 37.4% 0.0% 47.8% 5.9% 42.9% 2.2% 58.3% 13.6% % of Offline-Active VCCs w/ 6-15 Offline Trans 34.6% -2.3% 33.8% 3.4% 32.2% -3.6% 20.0% -10.5% 36.4% 2.6% 25.0% -7.8% % of Offline-Active VCCs w/ 16+ Offline Trans 25.0% 9.1% 25.3% -2.5% 30.4% 3.5% 32.2% 4.6% 20.8% -4.7% 16.7% -5.7% Special Notes for Interpreting the Results

 More data is available for the first thirty days of card activity because new cardholders were continuously added until the end of October of 2006.

 There is less data available for cardholder activity at 180 days because only about 28% of the sample (only those cardholders who got cards in May, the first month of the study) participated for the entire length of the study.

 Some results are presented below in the form of cumulative comparisons over different periods of time.

 Cumulative results are particularly relevant to this study because of the importance of looking at the effect of ICI on cardholder behavior over time with respect to transactions and spending.

 Sample size within each lifecycle group remains the same for each time period because it is representative of the same cardholder’s behavior at the different intervals.

 Because difference in activation rates is a key focus of the study, activation rates per VCC issued are provided in the cumulative analyses.

 For purposes of investigating a potential business case for instant issuance, transactions and sales dollars per VCC issued are also presented in cumulative analyses.

Card Activation

 Initial Activation in the First Thirty Days Post DDA

 Average days to first transaction were significantly faster for ICI cards than mailed cards for both Commerce and Wachovia - for both offline and online transactions.

 Average Days to First Transaction Wachovia Average Days to First Transaction 30 g 25 n g i 25

n 25 i

e 20 n p e 20 18 p O 20

O A 14 Instant D 15 12 A 15 12 Instant D D 11

t Mailed D

s t 10 Mailed

o 10 s o P

y 5 s a y a D

0 D 0 Offline Online Offline Online Type of Transaction Type of Transaction

Commerce Wachovia

 Differences in activation (completing the first purchase transaction) is clearly revealed in comparing the frequency distribution data between the test and control groups for both Commerce and Wachovia

- Insert Commerce Frequency Distribution Here – - Wachovia

Off line Activation Frequency Count

0 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 29 30

Days since DDA Open

Control Cards ICI Cards

 The pattern of activation for both groups is skewed in the direction of the DDA opening date for both groups.  Both groups show a proportion of cardholders who delay activation for lengthy periods after obtaining their cards, tending to increase the average first transaction dates for both groups. The test group has a large number of cardholders who are very active immediately and take advantage of the opportunity to use their cards. Need median and mode statistics.

 The control group shows a high proportion of cardholders that begin using their cards quickly when they get them in the mail (approximately 10 days after DDA opening).

 Initial Offline Activation

 ICI was associated with rapid offline activation as more than one-third of the test group completed an offline transaction within five days of opening a DDA – and half of the test group completed an offline transaction within 10 days of opening a DDA.

 Control groups did not achieve 50% offline activation until nearly 24 days after DDA opening).

30-Day Offline Activation Curve ICI Cards, N=1611 Control Cards, N=2707

80% Day 30: Gap = 19% 70% Day 15: Gap = 34% e

t 75% a R

n 62% o i t 50% 56% a Day 5: Gap = v i t

c 40% 37% A

e 37% n

i 30% l

f 28% f

Commerce

Wachovia

ICI Cards, N=365 30-Day Offline Activation Curve Control Cards, N=633 90% Day 30: Gap = 13% 80% Day 15: Gap = 26% 77% 70% e t

R 60% 64%

n Day 5: Gap = 41% o i t 50% a v i t 42% c 40%

i 30% l f f O 20%

 Initial Online Activation

 The pattern for online activation in the first thirty days post DDA was similar to the offline results. Instant issuance produced advantages for both the Wachovia and Commerce samples, with Wachovia having slightly higher rates.

ICI Cards, N=1611 30-Day Online Activation Curve Control Cards, N=2707 90%

80% Day 30: Gap = 23% 70% e t Day 15: Gap = 37% a 60% 64 R

n % o i t 50% a 52% v i t

c 40% A

Day 5: Gap = 29% 40 e n

i % l 30% n 29% O 20% 15%

Commerce Wachovia

ICI Cards, N=365 30-Day Online Activation Curve Control Cards, N=633 90%

80% Day 15: Gap = 21% Day 30: Gap = 10% 70% e t 66 a

R 60% Day 5: Gap = 33% % n 58% o

i 56 t 50% a

v % i t c 40% A

i 34% 36%

l 30% n O 20%

 Longer Term (180 Day) Activation Trends

 In the first sixty days after DDA account opening, instantly issued cards had higher activation levels than mailed cards for both offline and online transactions for both banks. This trend continued for Commerce Bank for the duration of the study (180 days post DDA).

Commerce Activation Rates

60.0% % 50.0% Control Offline n o

i Control Online t

a 40.0% v

i Instant Offline t c 30.0% Instant Online A

0.0% '0 to 30 Var 31 to 60 Var 61 to 90 Var 91 to Var 121 to Var 151 to Var 120 150 180 Days Post DDA Opening

Commerce Wachovia

Wachovia Activation Rates

90.0% 80.0% 70.0% 60.0% 50.0%

% Control Offline

o 40.0% Control Online i t a

v Instant Offline

i 30.0% t c Instant Online A 20.0% 10.0% 0.0% -10.0% 0 to Var 31 to Var 61 to Var 91 to Var 121 Var 151 Var 30 60 90 120 to to -20.0% 150 180 Days Post DDA Opening

 After sixty day, activation rates for Wachovia began to diverge from those observed for Commerce and from established norms in unexplained patterns:

1. Control group cards for Wachovia began to show higher levels of activation than test cards 90 days post DDA. 2. In the Wachovia sample, activation rates for both control and test cards showed increasing decrements from 90 to 180 days post DDA and activation rates for all transactions for both groups dropped below 40%.

3. These results suggest either attrition problems or procedural errors that require investigation. Cumulative Activation Rates

 Cumulative activation rates show that over the first 90 days post DDA, instantly issued cards were more likely to be used than mailed cards for at least one transaction for both Commerce (85% vs. 74%) and Wachovia (85% vs. 79%).

ICI Cards, N=1308 90-Day Offline Activation Curve Control Cards, N=2179 100% Day 90: Gap = 11% 90% Day 45: Gap = 15% Day 60: Gap = 12% Day 75: Gap = 11% Day 30: Gap = 18% 80% 85% 82% 83%

e 79% t Day 15: Gap = 32% 74% a 70% 74% R 70% 72% n

o 60% 64% i

t 61% a v

i 50% 56% t c A 40% e n i l f

O 29% 20%

0% 0 5 10 15 20 25 30 35 40 45 50 55 60 65 70 75 80 85 90 Days Since DDA Open Date

Commerce Wachovia

ICI Cards, N=297 90-Day Offline Activation Curve Control Cards, N=496 100% Day 75: Gap = 7%Day 90: Gap = 6% 90% Day 45: Gap = 9% Day 60: Gap = 7% Day 30: Gap = 10% 85% 85% 80% 84% Day 15: Gap = 23% 81% 78% 79 e

t 77% a 70% 76% % R 67% 73% n 60% 67% o i t a v

i 50% t

c 44% A

e 40% n i l f f 30% O 20%

0% 0 5 10 15 20 25 30 35 40 45 50 55 60 65 70 75 80 85 90 Days Since DDA Open Date

Transaction Volumes  Transactions per active VCC indicated a strong effect of ICI in the first 30 days post-DDA.

Commerce Bank 180 Day Transaction Volume (Per Active VCC)

14.0 s

n 12.0 o i t

c 10.0 a Mailed Offline s n

a 8.0 Mailed Online r T

f 6.0 Instant Offline o

e Instant Online

b 4.0 m

u 2.0 N 0.0 '0 to Var 31 to Var 61 to Var 91 to Var 121 to Var 151 to Var -2.0 30 60 90 120 150 180 Days Post DDA

Wachovia Bank 180 Day Transaction Volume (Per Active VCC)

14.0 12.0 s

n 10.0 o i t

c 8.0 a Mailed Offline s n

a 6.0 Mailed Online r T

f 4.0 Instant Offline o

e Instant Online

b 2.0 m

u 0.0 N '0 to Var 31 to Var 61 to Var 91 to Var 121 Var 151 Var -2.0 30 60 90 120 to to -4.0 150 180 Days Post DDA

 Commerce test cardholders had slightly more transactions than Wachovia test cardholders in the first thirty day for both offline and online transactions.

 After thirty days, instant issuance did not appear to affect either volume or mix of offline and online transactions in any systematic way.

 Offline transactions exceed online volumes and Commerce tended to have a slightly higher overall transaction volume than Wachovia.

 Cumulative Transactions Per VCC Issue

 Test group VCCs were used for 2-3 offline transactions before the first Control group members started using their cards at all for both Commerce and Wachovia.

90 Day Avg. Cumulative Trans per VCC Issued ICI VCC Issued, N=1308 Control VCC Issued, N=2179 32 30

C 28 C Day 90: Gap = 5.5 V

26 d Day 75: Gap = 5 e 24 27.3 u

s 22.8 I

Day 60: Gap = 4.6 r 20

e 21.7 p

18 s Day 45: Gap = 4.3 n 16 18.1 17.7 a r

T 14 13.5 e 12 v 13.5 i Day 30: Gap = 3.8 t

a 10 l u 8 8.7 9.2 m Day 15: Gap = 3.1 u 6 C 4 g 4.9

A 2 0.9 0 0 5 10 15 20 25 30 35 40 45 50 55 60 65 70 75 80 85 90 Days Since DDA Opened

Commerce Wachovia

ICI VCC Issued, N=297 90 Day Avg. Cumulative Trans per VCC Issued Control VCC Issued, N=496

28 Day 90: Gap = 2.2 C 26 C Day 75: Gap = 2 V 24 d e

u 22 23.8 s s

I Day 60: Gap = 2 20 21.5 r 20.5 e p

s 18.4

n Day 45: Gap = 2

a 16 16.8 r T 14 e 14.8 v

i Day 30: Gap = 2.4 t 12 12.8 a l u 10 10.8 m u

C 8 8.7

g Day 15: Gap = 2.9

v 6 6.3 A 4 4.6 2 1.8 0 0 5 10 15 20 25 30 35 40 45 50 55 60 65 70 75 80 85 90 Days Since DDA Opened

 The gap between test and control was greater for Commerce than Wachovia over the first ninety days. In the Commerce sample the gap increased from 3.1 transactions at day 15 to 5.5 transactions at day 90. The cumulative Wachovia gap remained at about 2 offline transactions.

 The cumulative differences in transaction volume tends to highlight the magnitude and persistence of the initial effect of ICI on cardholder behavior.

Sales  Total sales for instantly issued cards were higher in the first thirty days for both Commerce Bank and Wachovia.

 For both banks, offline and online sales were over $100 greater per active VCC for test groups. The highest sales in the first thirty days was for Wachovia’s instant issue group ($453) which had a $163 advantage over mailed card.

Commerce Sales Volume 180 Days Post DDA

$450.00

$400.00

$350.00

$300.00

s $250.00 Mailed Offline e l

a Mailed Online

S $200.00

n Instant Offline i

$ $150.00 Instant Online

$100.00

$50.00

$0.00 '0 to Var 31 to Var 61 to Var 91 to Var 121 Var 151 Var -$50.00 30 60 90 120 to to 150 180 Days Post DDA

Wachovia Sales Volume 180 Days Post DDA

$600.00

$500.00

$400.00 Mailed Offline s e

l $300.00

a Mailed Online S

n Instant Offline i

$200.00 $ Instant Online $100.00

$0.00 '0 to Var 31 to Var 61 to Var 91 to Var 121 Var 151 Var -$100.00 30 60 90 120 to to 150 180 Days Post DDA

 The overall sales results over 180 days post DDA (per active VCC) presented a complex picture with few systematic patterns. Online sales for test cards at Commerce were consistently higher than control cards. Wachovia sales for both transaction types were higher than Commerce.

 Cumulative Sales Results Per Card Issued

 At the end of 30 days, the Commerce test group averaged $121 more in cumulative offline sales than the control group. Wachovia’s test group averaged $161 more than mailed cards

 The average test VCC accounted for about $100 in offline sales before the average control VCC completed a single offline purchase.

ICI VCC Issued, N=1308 90 Day Avg. Cumulative Sales $ per VCC Issued Control VCC Issued, N=2179 $1,100

$1,000

$900 C

C Day 90: Gap = $175 V

$800 d

e Day 75: Gap = $153 $825 u

s $700 s I

r Day 60: Gap = $135 $687 e $600

p $650

e $500 Day 45: Gap = $140 $553 $534 v i t a l

u $400 $422 Day 30: Gap = $121 $419 m u C

g $276 $282 v

A Day 15: Gap = $104 $200 $155 $100 $134 $29 $0 0 5 10 15 20 25 30 35 40 45 50 55 60 65 70 75 80 85 90 Days Since DDA Opened Commerce Wachovia

90 Day Avg. Cumulative Sales $ per VCC Issued ICI VCC Issued, N=297 Control VCC Issued, N=496

$1,200

$1,100 Day 90: Gap = $204 C

C $1,000 V

Day 75: Gap = $175 d $900 e u

s $923

s $800 I

r Day 60: Gap = $150 $799 e

p $700

$ Day 45: Gap = $719

e $600 $656 v $141 $624 i t a l u $500 $512 $506 m Day 30: Gap = u $400 C $161

g $372 Day 15: Gap = $139 v $300 $370 A

$200 $207 $209 $100 $68 $0 0 5 10 15 20 25 30 35 40 45 50 55 60 65 70 75 80 85 90 Days Since DDA Opened

 After thirty days, the gap in cumulative sales between the two groups for both banks slightly increased. At 90 days post DDA the gap was $175 for Commerce and $204 for Wachovia.

 Power Scores Pending

 Statistical Tests of Significance

 Statistical analysis of the study data (a 2 (Banks) X 2 (Test vs. Control) X 6 (Time Interval) factorial design with repeated measures) could be performed using multiple regression techniques if assumptions were made regarding total sample size, sampling inequality, and any necessary pooling of data.

The primary objective with the new account survey was to determine customer’ reactions to receiving their new Visa check cards at the bank, instantly, when opening a new checking account, versus receiving the card in the mail at home a few days later. Survey questions were developed to gauge customers’ perceptions about potential safety and convenience benefits of instant issuance.

 Among new checking account customers surveyed, most felt that getting a VCC instantly issued at the branch was safe and convenient; and, getting a VCC at the branch was considered safer and more convenient than getting it in the mail.

 Most (70%) of the new account customers indicated that receiving a card at the branch felt safer than receiving it in the mail at home; 46% of the total said getting it at the branch felt “a lot safer.” o 26% said both methods were equally safe, only 4% say that it was safer to get a card in the mail. o The reasons why it was safer to get a card at the branch included not only security/safety reasons but also, at a lower level, convenience reasons (e.g., fast, easy).  Among total customers surveyed, 78% said that receiving the card at the branch was more convenient overall, compared to receiving it in the mail. o 9% felt that it was more convenient to get a VCC in the mail.

Detailed descriptions of the survey results are found in the Appendix:  Exhibit VI: New Account Survey- Which Method Feels Safer (page 76);  Exhibit VII: New Account Survey- Extent of Feeling Safer When Receiving Card at Bank (page 77); and,  Exhibit VIII: New Account Survey- Which Method Feels More Convenient (page 78).

What the ICI Pilot Says About Instant Issuance

The ICI Pilot study was an exploratory investigation of the effect on cardholder behavior of instantly issuing a Visa Check Card at the time a DDA account was opened. The study provided useful data that relates to potential issuer benefits and the business case for implementing instant issuance programs (see Part IV Business Case Evaluation).

The ICI Pilot Study produced at least eight major findings that are of potential interest to VCC issuers that are contemplating instant issuance.

1. The magnitude of the positive effects of ICI on early cardholder behavior is substantial. Results pertaining to first transaction date, activation rate, usage, and sales suggest potential advantages of ICI that may create opportunities for an issuer.

2. ICI cardholders were more likely to use their cards. The ICI group’s higher activation levels tended to explain differences in usage and spend.

3. ICI produced no apparent advantages with respect to offline usage or spend except for incremental differences influenced by higher offline activation.

4. There appeared to be no sustained effect of ICI in the ICI Pilot Study beyond the primary advantages in activation, usage, and spend that were evident in the first 30 to 45 days after DDA opening. With the exception of a small but consistent advantage in activation rates, longer-term effects were not evident in the data.

5. The cumulative advantages of ICI tended to highlight the extent of ICI’s large initial effect on cardholder behavior. The early cardholder performance advantages resulting from ICI appeared to be quite substantial relative to the time it took for Control group cardholders to approach similar cumulative levels of performance (90 days or more after DDA opening).

6. The New Account Survey results indicated a high level of satisfaction with ICI, as evidenced by the fact that respondents felt it was safer and more convenient to receive VCCs in the branch versus in the mail.

7. The 15 large Visa debit issuers who formally considered participating in this study all indicated a high degree of interest in ICI. The major limiting factor in both study participation and eventual implementation appears to be related to technology integration of ICI functionality and existing account opening processes (see Parts II & III).

8. ICI technology is rapidly evolving and now supports multiple card types including embossed cards, non-embossed “flat” cards, and contactless cards, all with the potential for adding customized card graphics to each card in the branch during card issuance.

Interpreting the Results Using Potential ICI Models

The ICI Pilot results can be interpreted in terms of an empirical performance model and a customer relationship model:

 Empirical Performance Model

 ICI has the effect of “priming the pump” in that it establishes an immediate output of transaction activity.

 The opportunity ICI provides to some cardholders is evident on the day the DDA account is opened.

 Cardholders who receive VCCs in the mail never match instant issuance activation rates or the cumulative levels of transactions and sales

 While the dramatic effect of ICI in the first 30 days after opening a DDA account diminishes with regard to specific cardholder behavior, implementing an ICI program may produce gains in an issuer’s monthly transaction metrics that are worth long term evaluation

 Customer Relationship Model

 The New Account Survey data collected in the ICI Pilot Study clearly indicated that new customers got value from receiving their Visa Check Cards at the time they opened their DDAs.

 Cardholder expectations concerning convenience and security - plus the perception of a special opportunity - may have created a degree of enthusiasm that translated into early activation.

 Over time all cardholder behavior profiles resembled normal bank performance averages and the value of ICI was no longer salient to the cardholder, except for the suggestion of a modest, but enduring activation echo observed in the data.

 Potentially, early ICI cardholder behavior could be sustained and reinforced through incentive rewards programs or special instructions about using a VCC.

 While the ICI Pilot provided important baseline information about cardholder behavior, it did not attempt to evaluate the benefits of specific customer relationship strategies.

The ICI Pilot Study represented “in the field” research with unique methodological challenges and procedural issues that may have affected the results to an unknown degree. Some of these challenges included:

 Total sample sizes

 Unequal sample size

 National or regional demographics in bank participation:  Wachovia’s small number of FL branches on one metro market increased the potential impact from local demographics; e.g. seasonality, age of typical new customer (e.g. retirees versus college students).  Design limitations inherent in real world experiments (including lack of uniform instructional set, lack of CSR compliance, and risk of biased or selective sampling):  Even though every new DDA was supposed to receive a card instantly in the test branches, this was not the case. In fact, many branches barely instantly issuance 50% of their cards to new DDAs. Reasons for this may have included: o Branch employee turnover, typical in most retail bank branches, could have impacted who got cards instantly, and who got cards by mail. If the employees in test branches were not well trained or confident with the process for how to instantly issue a VCC, they likely defaulted to “mailing” cards instead. o It is likely that not all new customers in test branches were offered an instant VCC. Employees could have been biased in who they elected to produce an ICI card for- e.g. mailing a card to a “pushy” customer who was in a hurry, rather than taking the 60 seconds to make the card. o Because the process for issuing cards requires some manual effort, it is possible that employees made fewer instant cards to “keep the new accounts line moving.”  Wachovia participated in Visa Extras and offered IVRs (Instant Visa Rewards) in the VCC card mailers sent to customers from control branches [CONFIRM]. Commerce did not participate in Visa Extras, nor did they offer IVRs to any customers. This could have impacted card activation rates, and time to first use for each bank overall, or for test versus control.  Some new customers who would have normally requested and received an ATM-only card likely received a VCC instantly in the branch, because it was convenient and was being actively offered by the bank employee. This type of cardholder likely was not pre-disposed to using the card for offline debit, and might have been less likely to use the card for any type of debit transaction.  Commerce customers from both test and control branches with joint accounts share a card number.

 Technical problems

 Wachovia used older embossers with some history of mechanical problems and system reliability: o The embossers had a history of maintenance problems and were not under a maintenance contract during the term of the pilot. If the machines were not working, then cards were mailed to test branch customers. o Wachovia’s embossers were networked via a shared fax line, which, when in use, disabled the embosser, and resulting in a card being mailed.

 Technical differences in ICI systems could have impacted the customer experience:  Each bank had different systems and timing issues associating with ICI cards. Wachovia VCCs worked the same day for ATM and online debit; one business day delay for offline debit. Commerce VCCs worked the next business day for ATMs, online and offline debit. o Because the cards didn’t work for offline debit immediately after account opening, it was up to the branch employees to effectively communicate the “call to action” to the cardholder; e.g. Wachovia branch employees would have said “You can use your card today for PIN-based debit, but you need to wait until tomorrow to start using your card for signature-based debit.” Because this was a field study, it is impossibly to know how consistently and accurately the employees communicated this information. o Furthermore, it is likely that some ICI cardholders from both Wachovia and Commerce waited an extra day or two to start using their VCCs for offline debit because they didn’t want to risk being “embarrassed” at the point of sale when their cards didn’t work.

Suggestions for Future Research

The ICI Pilot Study is a foundation for evaluating the business case for instant issuance. Subsequent research might focus on (1) the specific role of customer relationship strategies - rewards or instructional set - on card use, and (2) the efficiency and benefits of instantly issuing non-embossed flat cards.

Appendix

Exhibit I: Data Organization Plan

Lifecycle N 30 60 90 120 150 180

Only May May in May in May in May in May in 180 Sample June July August Sept October

Only May May in May in May in …Plus Sample June plus July plus Aug plus 150 June in plus June in June in June in Oct New June July Aug Sept …Plus …Plus …Plus …Plus 120 July in July in July in New July Aug Sept Oct

…..Plus …Plus …Plus 90 New Aug in Aug in August Sept Oct

…Plus …Plus 60 Sept in New Sept Oct

…Plus 30 New Oct

Exhibit II: Pre-Pilot Questionnaire Given to Wachovia Test Branch Employees

Q1: Describe the basic facts about how a instantly embossed card works  Customers receive instantly embossed card after opening a DDA  Instantly embossed card is immediately activated  Customers CAN NOT use the card as a debit card for the first day  Customers can use the card as an ATM Card; however, on the first day, customers can only withdraw funds up to $100  Customers may use the instantly embossed card as a debit card after the first day they receive it

Q2: How do customers know about the instant card issuance service? Do employees promote this service?  The service is not promoted in any way  Most customers do not know about this service  Most customers who know about this service are informed by other Wachovia centers  If a customer is knowledgeable about the service and wants an instantly embossed card, branch employees will thoroughly screen the customers before issuing them an instant card  The screening process is used to determine if the customer really needs the Check Card (emergency purposes) or if a customer has a notable relationship with the bank  A customer who wants to deposits a substantial amount of money in his or her new DDA has a higher chance of being introduced to the instantly embossed card service

Q3: What percentage of Check Cards is actually instantly embossed? What percentage of instantly embossed cards is issued because of a referral from another Wachovia center?  20 Instantly embossed cards are produced weekly (highest average)  Branch employees rarely suggest instant issuance services to the customers  Customers are screened before being offered the service (As mentioned above)  Currently, instant card issuance does not drive traffic into the branch because customers are unaware of this service  Employees believe that if customers knew about the service, the amount of customers in the branch would drastically increase  Almost all of the cards that are instantly embossed are because of referrals from other Wachovia centers

Q4: What percentage of your employees is trained to use the equipment? How long does it take for new employees to get up to speed on using the equipment? How long does it take to instantly emboss a card?  All employees are trained to use the equipment in the Jacksonville Beach Office  The machine is very easy to operate; therefore, it requires only a few minutes of training to use it  It takes about 5 minutes to create an instantly embossed card

Q5: What do employees like about the instant issue process? What would employees change about the process?  Employees like the satisfaction it gives the customer  Employees would like to produce the customer’s picture on the instantly embossed card

Q6: How often are employees NOT able to issue cards due to machine malfunction or employee unavailability?  Instant embossing machines have been serviced 3 times in the last 4 years

Q7: How do customers react when they get a check card onsite in the branch?  Customers are ecstatic and enjoy the convenience of this service  Customers are completely satisfied because they do not have to wait the normal 7-10 days to receive their check card

Conclusion The employees of the Jacksonville Beach Office do not use the Instant Card Issuance service to attain more customers. Instead, they use this service to cater to our higher-profiled customers with strong relationships, and for customer emergencies. Employees do not want new customers (those that have already decided to bank with Wachovia) to choose their branch because they can create an instantly embossed card. In my opinion, employees do not promote this service because they do not want to attract customers from other Wachovia centers.

Exhibit III: Pre-Pilot Sales Training Strategy for Wachovia Pilot Branches 1) Sell-in Presentation (high-level, to help the branches “buy-in” to the pilot) A) Background- Visa is receiving a growing number of inquiries from Issuers about instant issuance of Visa check cards, e.g., Does it improve activation and usage metrics? Do the benefits outweigh the investment in hardware/software? How does instant issuance affect the customer experience? The Pilot will provide Issuers with the objective data needed to evaluate the business case for instant issuance. Three regional banks have designated a limited number of branches for instant issuance (the “test” sites) and an equal number of comparable branches for a control group. B) Timing- We plan to start the pilot on May 1 and track instantly issued cards for 6-9 months. We would like to have the opportunity to perform some very limited training in the four branches participating in the pilot, sometime in mid-late April. C) Performance tracking- Quantitative metrics will be tracked and analyzed for both the test and control branches including: 1) Penetration 2) Activation 3) Usage 4) Time to first offline POS transaction 5) Offline/online POS transaction mix D) Some qualitative research in the branches will be performed: e.g. a brief customer survey about the overall instant issuance experience E) Remind them about the incentive plan for Visa check cards

2) Script for Employees in Test Branches A) We will provide a “script” that describes the entire process, beginning-to-end, from the FSR perspective (e.g. making a card, funding the account, sign back of card, complete survey, hand customer take one and card register) 1) FSR makes instant issue card and makes account opening deposit at teller line  Test branches should issue an Instant Embossed Check Card to every DDA except: (Crown Banking, Crown Classic Banking, Crown Select Banking)  All cardholders should be strongly encouraged to choose their PIN 2) Review process for issuing an instantly embossed Check Card

Process for Opening a Check Card for a New Customer Does the customer qualify for a personal Check Card? Yes: Go to the next step Using Pegasis…. 1. Access the Customer Notebook 2. Click New Acct on the right tool bar 3. Click ATM/Debit Card Result: The ATM/Debit Card New screen displays Key the ATM/DBC product type for each customer in the Prod column next to the applicable customer record and press enter Result: The ATM/DBC Card New screen displays Complete all other applicable fields on the ATM New/DBC New screen and press enter Result: The appropriate relationship is established and the RL Change screen displays Review the linked accounts and nicknames, make any necessary changes, and press F3 Was the default Command/DDA account opened with less than $50 and a Check Card requested? Yes: Advise the customer the Check Card cannot be processed and mailed until the account is funded with a least $50 If the default Command/DDA account is not funded within 45 days, the Check Card account is closed. Using CAPS to Instantly Emboss a Check Card CAPS Terminal Message Input Required Enter Transaction Press 1. Issue New Card Press Enter. Enter Authorized Agent Number Key AA#. Press Enter. Enter Authorized Agent Password Key AA password. Press Enter. Key card number 16 digit number (from ATMI screen). Press Enter Card Number Enter. Insert Card Insert card into terminal (Card may already be inserted). Enter Your PIN Ask customer to enter their 4-digit PIN. Press Enter. Note: The current PIN must be used for a replacement card. Please Repeat Your PIN Ask customer to repeat their 4-digit PIN. Press Enter. Please wait, Processing, Updating, Complete Present instant embossed Check Card to customer

Exhibit II: Pre-Pilot Questionnaire Given to Wachovia Test Branch Employees 71 4/3/2018, 1:51:50 AM Draft Only - ICI White Paper & Pilot Analysis – 2nd Working Draft for Internal Review

B) FSR gets account opening kit, walks customer through summary of services; FSR writes available balance and date in check card register [is the debit card agreement part of the kit?] C) We will provide some “sales” tips for FSRs to help them talk to customers about instant issuance including: a) Conversation points for FSRs to encourage sig-based card usage, faster card usage etc. b) Include some guidelines for funds availability, so they know what to tell customers for “when” the card will work (how do we want to address ATM, online and offline debit functionality?). c) Reinforce a few basic Visa check card features/benefits (zero liability, etc) D) FSR hands card to customer; customer signs back of card E) FSR has customer complete exit survey F) FSR gives take-one to customer, reminds them to: 1) Enroll in Visa Extras 2) Sign for purchases to accrue points G) New Account Survey (at both Test and Control branches for a period of appx 2 months) 1) Customer takes exit survey while sitting at FSR desk. It should take about a minute to complete the survey. 2) FSR takes completed survey, puts it in interoffice envelope. Each branch will mail one envelope weekly to Jerry Oates at mail code NC0974.

3) Script for Employees in Control Branches: Goal = provide new customers with “comparable” instruction compared to Test branches 1) “Sales” tips for FSRs to help them talk to customers including: A) Conversation points for FSRs to encourage sig-based card usage, faster card activation etc. (comparable to what we’re saying in Test branches) B) Customer will need to activate their card once they receive it in the mail. C) Sign up for Visa Extras and start signing for all your purchases D) Reinforce a few basic Visa check card features/benefits (zero liability etc). 2) Describe the entire process, beginning-to-end, from the FSR perspective A) Account opening- just like today B) Order a card- just like today C) FSR asks customer to complete the New Account Exit Survey 1) Customer takes exit question survey while sitting at FSR desk. It should take under a minute to complete the survey. 2) FSR takes completed survey, puts it in interoffice envelope. Each branch will mail one envelope weekly to Jerry Oates at mail code NC0974.

Exhibit II: Pre-Pilot Questionnaire Given to Wachovia Test Branch Employees 72 4/3/2018, 1:51:50 AM Draft Only - ICI White Paper & Pilot Analysis – 2nd Working Draft for Internal Review

Exhibit IV: Script for Wachovia Employees in Test Branches 1. Does the customer qualify for an instant embossed Check Card? If yes, go to step 2. Qualifications: A customer who would normally receive a Classic Check Card qualifies for an instant embossed Check Card; for example, Customer A opens a Free Checking account and Customer B opens a Crown Banking account – only Customer A should receive an instant embossed Check Card 2. Issue an instant embossed Check Card and make account opening deposit at teller line Customers should be encouraged to choose their own PINs 3. Give the customer their new instant embossed Check Card and describe its benefits:  Check Cards are convenient, easy to use, and rewarding  With Wachovia’s Zero Liability policy, you are protected from loss for unauthorized purchases if your Check Card is ever lost or stolen 4. Present the Account Opening Kit to the customer and review the following information:  Summary of Services  Funds Availability: Write available balance and date in the Check Card Register  Debit Card Agreement and Disclosure for Personal Accounts 5. Introduce the customer to Visa Extras and hand them the Take One  Make sure customers understand they must enroll if they want to participate in Visa Extras  Encourage the customer to sign for purchases  Remind the customer that PIN based purchases do not earn Visa Extras points 6. Cordially ask the customer to complete the New Account Exit Survey (June 1-July 31)  Position the survey as a means to effectively serve customers by getting their feedback about “Instant” issuance of Visa Check Cards  Every Friday, the branch should interoffice completed surveys to Jerry Oates at mail code NC0974

Exhibit III: Pre-Pilot Sales Training Strategy for Wachovia Pilot Branches 73 4/3/2018, 1:51:50 AM Draft Only - ICI White Paper & Pilot Analysis – 2nd Working Draft for Internal Review

Exhibit V: October 2006 Key Measures by Branch (Commerce)

OCT 06 ISSUED

Branch Key Measures MAILED

DDAs Opened 80 , e Y t New VCCs Issued 70 t T I o l

r Penetration Rate 87.5% C

a S h Offline Activation Rate 17.1% A C

Avg Trans per Offline-Active CH 5.1 S &

N Avg $ per Offline-Active CH $116.74 h A t 2

K Avg Ticket per Offline-Active CH $22.96 1

DDAs Opened 77

, New VCCs Issued 66 S g E n i Penetration Rate 85.7% L s s R Offline Activation Rate 28.8% o A r H C Avg Trans per Offline-Active CH 5.1

t Avg $ per Offline-Active CH $181.94 T 4 S 9 Avg Ticket per Offline-Active CH $35.64

DDAs Opened 83 ,

n New VCCs Issued 73 r A e I Penetration Rate 88.0% B B

M Offline Activation Rate 21.9% i

b U Avg Trans per Offline-Active CH 3.8 L m u O

l Avg $ per Offline-Active CH $117.68 C o

C Avg Ticket per Offline-Active CH $30.87

DDAs Opened 55 New VCCs Issued 46 E , L Penetration Rate 83.6% e L l l I i Offline Activation Rate 32.6% V v s S i I l Avg Trans per Offline-Active CH 7.2 l L E L Avg $ per Offline-Active CH $195.54 E Avg Ticket per Offline-Active CH $27.16

DDAs Opened 116

D New VCCs Issued 107 , L e

E Penetration Rate 92.2% I n o F

t Offline Activation Rate 21.5% s G h n

N Avg Trans per Offline-Active CH 4.1 I c e l R n Avg $ per Offline-Active CH $91.78 G P a r S Avg Ticket per Offline-Active CH $22.22 B

o DDAs Opened 47 r t

n New VCCs Issued 40 , W o w E Penetration Rate 85.1% I C e i V

v Offline Activation Rate 32.5% D d n N Avg Trans per Offline-Active CH 7.2 a A r

R Avg $ per Offline-Active CH $202.21 G G Avg Ticket per Offline-Active CH $27.97

DDAs Opened 40 , Y New VCCs Issued 38 y T t I n Penetration Rate 95.0% C u

S Offline Activation Rate 23.7% C A Avg Trans per Offline-Active CH 1.8 e S t t N

a Avg $ per Offline-Active CH $39.77 l A P

K Avg Ticket per Offline-Active CH $22.37

DDAs Opened 46

, New VCCs Issued 42 D d a L o

E Penetration Rate 91.3% I R F Offline Activation Rate 42.9% c i G l b N Avg Trans per Offline-Active CH 6.6 I u R p Avg $ per Offline-Active CH $299.89 e P S R Avg Ticket per Offline-Active CH $45.36

, DDAs Opened 40 s t

h New VCCs Issued 29 g D i S N e Penetration Rate 72.5% T H O

H Offline Activation Rate 34.5% d M G n I

H Avg Trans per Offline-Active CH 7.1 o E C I

m H Avg $ per Offline-Active CH $166.22 R h

c Avg Ticket per Offline-Active CH $23.41 i R DDAs Opened 64

N New VCCs Issued 51 , N

n Penetration Rate 79.7% A n

Offline Activation Rate 35.3% . N t I

S Avg Trans per Offline-Active CH 8.2 A

S Avg $ per Offline-Active CH $360.21 Avg Ticket per Offline-Active CH $44.11 Exhibit IV: Script for Wachovia Employees in Test Branches 74 4/3/2018, 1:51:50 AM Draft Only - ICI White Paper & Pilot Analysis – 2nd Working Draft for Internal Review

OCT 06 ISSUED Branch Key Measures MAILED INSTANT Branch Total DDAs Opened 42 10 52 New VCCs Issued 35 10 45 Y T ,

I % VCCs Issued 77.8% 22.2%

e C d

i Penetration Rate 83.3% 100.0% 86.5% s S k

A Offline Activation Rate 25.7% 90.0% 40.0% o S o

r Avg Trans per Offline-Active CH 2.7 10.7 6.7 N B  A Avg $ per Offline-Active CH $99.87 $295.05 $197.46 K Avg Ticket per Offline-Active CH $37.45 $27.66 $29.62

DDAs Opened 32 14 46  New VCCs Issued 21 14 35 % VCCs Issued 60.0% 40.0% N , n O Penetration Rate 65.6% 100.0% 76.1% o T t y Y Offline Activation Rate 9.5% 50.0% 25.7%

a A l L

C Avg Trans per Offline-Active CH 1.5 13.7 11.0 C Avg $ per Offline-Active CH $359.67 $359.32 $359.40  Avg Ticket per Offline-Active CH $239.78 $26.20 $32.67

, DDAs Opened 55 30 85 e

g New VCCs Issued 48 30 78 d i r A

b % VCCs Issued 61.5% 38.5% I

k B c Penetration Rate 87.3% 100.0% 91.8% o M R

U Offline Activation Rate 16.7% 80.0% 41.0%

L a i Avg Trans per Offline-Active CH 7.1 6.8 6.9 O b C m Avg $ per Offline-Active CH $150.68 $190.19 $180.31 u l Avg Ticket per Offline-Active CH $21.15 $28.00 $26.23 o C DDAs Opened 27 46 73 , g

n New VCCs Issued 19 46 65 i s

s % VCCs Issued 29.2% 70.8% N o r O Penetration Rate 70.4% 100.0% 89.0% C L

L k Offline Activation Rate 26.3% 43.5% 38.5% e A

e F r ' Avg Trans per Offline-Active CH 6.6 6.9 6.8 C O

r Avg $ per Offline-Active CH $177.84 $309.22 $282.95 e

e Avg Ticket per Offline-Active CH $26.95 $44.81 $41.37 D s  e

h DDAs Opened 13 54 67 c New VCCs Issued 1 54 55 n E a , % VCCs Issued 1.8% 98.2% N r e n O B  Penetration Rate 7.7% 100.0% 82.1%

o T t t

s S Offline Activation Rate 0.0% 59.3% 58.2% s d D e a

l Avg Trans per Offline-Active CH 0.0 7.2 7.2 A T

L G t Avg $ per Offline-Active CH $0.00 $342.60 $342.60 G a  Avg Ticket per Offline-Active CH $0.00 $47.46 $47.46 e c n DDAs Opened 67 55 122 a , y u

a New VCCs Issued 54 55 109 s  D w s s I

L % VCCs Issued 49.5% 50.5%

s E I e d

r Penetration Rate 80.6% 100.0% 89.3% r F p a G x Offline Activation Rate 31.5% 61.8% 46.8% C E N

I t s Avg Trans per Offline-Active CH 6.5 8.9 8.1 R a n P s

a Avg $ per Offline-Active CH $110.89 $254.73 $206.78 S n t a s Avg Ticket per Offline-Active CH $16.98 $28.58 $25.47 K n I  DDAs Opened 33 24 57 New VCCs Issued 23 24 47 D

, % VCCs Issued 48.9% 51.1% d O

o Penetration Rate 69.7% 100.0% 82.5% O

o W w Offline Activation Rate 13.0% 41.7% 27.7% k K r

i Avg Trans per Offline-Active CH 9.7 3.4 4.8 R I K

K Avg $ per Offline-Active CH $305.30 $69.60 $123.99  Avg Ticket per Offline-Active CH $31.58 $20.47 $25.59

DDAs Opened 13 44 57 New VCCs Issued 2 44 46 R , r  E % VCCs Issued 4.3% 95.7% e T t S s Penetration Rate 15.4% 100.0% 80.7% e E h

H Offline Activation Rate 0.0% 50.0% 47.8% c C n Avg Trans per Offline-Active CH 0.0 8.5 8.5 a  N A M Avg $ per Offline-Active CH $0.00 $511.83 $511.83 M Avg Ticket per Offline-Active CH $0.00 $59.89 $59.89

 DDAs Opened 52 42 94 New VCCs Issued 46 42 88 , Y y T I b % VCCs Issued 52.3% 47.7% b C

o Penetration Rate 88.5% 100.0% 93.6% L S

 t Offline Activation Rate 30.4% 57.1% 43.2% A u S n

l Avg Trans per Offline-Active CH 3.4 7.9 6.3 N a

A Avg $ per Offline-Active CH $124.35 $238.68 $196.56 W  K Avg Ticket per Offline-Active CH $36.27 $30.15 $31.38 DDAs Opened 46 4 50 , l T

I New VCCs Issued 32 4 36 e p M % VCCs Issued 88.9% 11.1% a M h

U Penetration Rate 69.6% 100.0% 72.0% C

s Offline Activation Rate 21.9% 100.0% 30.6% d S ' o E

o Avg Trans per Offline-Active CH 6.9 6.0 6.5 E

W L Avg $ per Offline-Active CH $160.95 $237.46 $188.77 Avg Ticket per Offline-Active CH $23.47 $39.58 $28.84 Exhibit V: October 2006 Key Measures by Branch (Commerce) 75 4/3/2018, 1:51:50 AM Draft Only - ICI White Paper & Pilot Analysis – 2nd Working Draft for Internal Review

Exhibit VI: New Account Survey- Which Method Feels Safer

Which Method Feels Safer

• In total, most (70%) of the new checking account customers surveyed indicate that receiving their card at the bank feels safer than receiving the card in the mail at home; 26% say both methods are equally safe, and only 4% say getting it in the mail is safer – The reasons why it’s safer to get it at the bank include not only safety/security reasons but also, at a lower level, because it is fast and easy Why Receiving Card at Bank Feels Safer

– The few who say receiving the card in the mail Base: Total new checking account customers (130)

feels safer tend to give convenience reasons, Security (net) 42% not security reasons Won’t be lost 14% Safer 12% Ensured receipt/no one else would get it 12% Won’t be stolen 9% Security 2% Receiving the card here at Immediate peace of mind 1% the bank feels safer Can witness entire process 1% 70% Feels more private 1% Convenience (net) 19% Faster/quicker 6% Receiving the card in the No waiting 5% mail at home feels safer Easier 5% Convenience 4% 4% No mail delays/disruptions 2% Personal service 2% Both ways feel equally safe 26% It’s immediate, no worry of it being misplaced 1% Do not like the Post Office 1%

Why Receiving Card in Mail Feels Safer Base: New Checking Account Customers (n=130) Base: Total new checking account customers (130) Convenience 2% May not be able to get to branch right away 1% Q1 – Which method of receiving your Visa check card feels safer to you overall? Because I won’t be living in the area 1%

Q2 – [IF YOU ANSWERED A OR B TO QUESTION 1] Why? (Open-end)

Exhibit VII: New Account Survey- Extent of Feeling Safer When Receiving Card at Bank

Extent of Feeling Safer When Receiving Card at Bank

• Among the total new checking account customers surveyed, nearly half feel that receiving their Visa check card at the bank is “a lot safer”

How Much Safer is Receiving Card at Bank Receiving the card here at the Base: New checking account customers (130) bank feels safer A lot safer 46% 70% Somewhat safer 9% A little safer 15% Receiving the card in the mail at home feels safer 4%

26% Both ways feel equally safe

Base: New Checking Account Customers (n=130)

Q1 – Which method of receiving your Visa check card feels safer to you overall? Q3 – [IF YOU ANSWERED A TO QUESTION 1] Does receiving your Visa check card here at the bank feel. . . . (3-point scale)

Exhibit VI: New Account Survey- Which Method Feels Safer 77 4/3/2018, 1:51:51 AM Draft Only - ICI White Paper & Pilot Analysis – 2nd Working Draft for Internal Review

Exhibit VIII: New Account Survey- Which Method Feels More Convenient

Which Method Feels More Convenient

• In total, 78% of the new checking account customers surveyed say that receiving the card at the bank is more convenient overall, compared to receiving it in the mail – 9% feel that getting the card in the mail is more convenient

Receiving the card here at the bank feels more convenient 78%

Receiving the card in the mail at home feels more convenient 9% Both ways feel equally 13% convenient Base: New Checking Account Customers (n=130)

Q4 – Which method of receiving your Visa check card feels more convenient to you overall?

Exhibit VII: New Account Survey- Extent of Feeling Safer When Receiving Card at Bank 78 4/3/2018, 1:51:51 AM Draft Only - ICI White Paper & Pilot Analysis – 2nd Working Draft for Internal Review

New DDAs Opened 3,153 3,015 2,561 2,086 1,495 943 New VCCs Issued 2,707 2,586 2,179 1,753 1,275 812 Penetration Rate 85.9% 85.8% 85.1% 84.0% 85.3% 86.1% Offline Activation Rate 55.9% 64.4% 61.5% 58.9% 55.8% 53.3% Online Activation Rate 40.4% 49.0% 47.5% 46.0% 44.4% 43.2% Offline/Online Activation Rate 61.0% 68.6% 64.8% 61.7% 59.3% 56.5% s

o Avg Offline Ticket $31.31 $30.42 $28.25 $26.99 $27.14 $27.35 r t Avg Online Ticket $32.91 $31.62 $31.27 $31.42 $33.17 $33.05 n

o Avg Offline/Online Ticket $31.78 $30.80 $29.23 $28.42 $29.14 $29.35 6 C 0 % of Offline Transactions 70.5% 68.5% 67.6% 67.8% 66.9% 64.9% 0

2 % of Online Transactions 29.5% 31.5% 32.4% 32.2% 33.1% 35.1% r % of Offline-Active VCCs w/ 1-5 Offline Trans 48.1% 37.5% 36.3% 35.0% 36.0% 35.3% e b % of Offline-Active VCCs w/ 6-15 Offline Trans 34.7% 30.9% 32.7% 34.3% 33.9% 32.6% o t % of Offline-Active VCCs w/ 16+ Offline Trans 17.3% 31.5% 31.0% 30.7% 30.1% 32.1% c O

New DDAs Opened 1,611 1,559 1,308 1,051 733 473

6 New VCCs Issued 1,611 1,559 1,308 1,051 733 473 0

0 Penetration Rate 100.0% 14.1% 100.0% 14.2% 100.0% 14.9% 100.0% 16.0% 100.0% 14.7% 100.0% 13.9% 2 Offline Activation Rate 74.8% 18.9% 71.2% 6.8% 69.0% 7.5% 65.0% 6.1% 63.4% 7.7% 59.0% 5.7% s y a H Online Activation Rate 63.9% 23.6% 63.7% 14.7% 60.1% 12.6% 55.2% 9.2% 52.8% 8.4% 48.6% 5.4% C M Offline/Online Activation Rate 79.1% 18.2% 76.8% 8.2% 73.5% 8.7% 69.7% 8.1% 67.0% 7.7% 62.6% 6.1% e

c Avg Trans per Offline-Active CH 12.0 3.2 13.4 0.1 13.2 -0.1 12.9 -0.5 13.1 0.1 14.0 0.8

n Avg Trans per Online-Active CH 7.9 2.8 8.2 0.2 8.1 -0.2 8.4 0.2 8.6 0.4 9.5 0.7 a

u Avg Trans per Offline/Online-Active CH 17.7 6.3 19.2 1.0 19.1 0.3 18.7 -0.2 19.2 0.8 20.6 1.4 s

s Avg $ per Offline-Active CH $379.95 $105.12 $391.85 -$12.46 $394.69 $17.98 $353.93 -$8.38 $360.08 $5.01 $377.51 $15.29 I Avg $ per Online-Active CH $282.28 $115.24 $288.60 $34.60 $277.91 $18.34 $292.79 $36.30 $300.08 $29.99 $361.03 $69.45 d r Avg $ per Offline/Online-Active CH $587.13 $224.85 $602.28 $41.58 $598.17 $50.32 $561.46 $24.10 $577.53 $41.39 $636.36 $71.68 a

C Avg Offline Ticket $31.69 $0.38 $29.27 -$1.15 $29.88 $1.63 $27.40 $0.41 $27.40 $0.26 $26.96 -$0.39

t Avg Online Ticket $35.71 $2.81 $35.01 $3.39 $34.11 $2.84 $34.93 $3.50 $35.05 $1.89 $37.88 $4.83 n a

s % of Offline Transactions 64.0% -6.6% 64.5% -4.0% 65.1% -2.5% 64.5% -3.3% 64.8% -2.0% 64.1% -0.9% n I % of Online Transactions 36.0% 6.6% 35.5% 4.0% 34.9% 2.5% 35.5% 3.3% 35.2% 2.0% 35.9% 0.9% % of Offline-Active VCCs w/ 1-5 Offline Trans 38.8% -9.2% 34.4% -3.1% 34.2% -2.1% 34.8% -0.1% 34.0% -2.0% 32.6% -2.7% % of Offline-Active VCCs w/ 6-15 Offline Trans 34.1% -0.5% 34.2% 3.3% 33.7% 1.0% 33.8% -0.5% 32.0% -1.9% 34.4% 1.8% % of Offline-Active VCCs w/ 16+ Offline Trans 27.1% 9.8% 31.4% -0.2% 32.1% 1.1% 31.3% 0.6% 34.0% 3.9% 33.0% 0.9%

Exhibit VII: New Account Survey- Extent of Feeling Safer When Receiving Card at Bank 79 4/3/2018, 1:51:51 AM Draft Only - ICI White Paper & Pilot Analysis – 2nd Working Draft for Internal Review

New DDAs Opened 723 693 557 451 334 207 New VCCs Issued 633 610 496 410 302 191 Penetration Rate 79.0% 79.4% 80.8% 81.8% 81.1% 82.1% Offline Activation Rate 63.7% 60.0% 59.3% 51.2% 48.0% 35.1% Online Activation Rate 56.2% 53.3% 51.6% 44.1% 40.1% 32.5% Offline/Online Activation Rate 69.0% 63.6% 62.5% 54.1% 50.3% 38.7% s

o Avg Offline Ticket $32.87 $34.89 $31.45 $28.85 $30.93 $27.91 r t Avg Online Ticket $33.65 $34.95 $32.41 $31.47 $37.21 $34.25 n

o Avg Offline/Online Ticket $33.18 $34.92 $31.82 $29.89 $33.47 $30.43 6 C 0 % of Offline Transactions 59.8% 60.4% 61.6% 60.4% 59.6% 60.2% 0

2 % of Online Transactions 40.2% 39.6% 38.4% 39.6% 40.4% 39.8% r % of Offline-Active VCCs w/ 1-5 Offline Trans 47.1% 41.8% 37.4% 41.9% 40.7% 44.8% e b % of Offline-Active VCCs w/ 6-15 Offline Trans 37.0% 30.3% 35.7% 30.5% 33.8% 32.8% o t % of Offline-Active VCCs w/ 16+ Offline Trans 15.9% 27.9% 26.9% 27.6% 25.5% 22.4% c O

New DDAs Opened 338 328 276 224 157 108

6 New VCCs Issued 365 355 297 242 171 117 0

0 Penetration Rate 100.0% 21.0% 100.0% 20.6% 100.0% 19.2% 100.0% 18.2% 100.0% 18.9% 100.0% 17.9% 2 Offline Activation Rate 76.7% 13.0% 63.4% 3.4% 57.6% -1.7% 47.5% -3.7% 45.0% -3.0% 30.8% -4.3% s y a H Online Activation Rate 65.8% 9.5% 55.8% 2.5% 48.8% -2.8% 38.4% -5.7% 35.1% -5.0% 25.6% -6.8% C M

Offline/Online Activation Rate 81.4% 12.3% 67.9% 4.3% 60.3% -2.2% 49.6% -4.6% 46.2% -4.1% 34.2% -4.6% e

c Avg Trans per Offline-Active CH 11.2 2.4 11.5 -0.7 12.5 0.8 12.5 1.0 9.8 -1.1 8.6 -1.7

n Avg Trans per Online-Active CH 7.7 1.0 7.5 -1.6 8.9 0.5 9.7 0.9 8.6 -0.3 7.8 0.5 a

u Avg Trans per Offline/Online-Active CH 16.8 3.2 16.9 -2.2 19.2 1.1 19.5 1.5 16.1 -1.4 13.6 -1.8 s

s Avg $ per Offline-Active CH $452.88 $163.62 $404.51 -$21.24 $479.85 $110.83 $509.60 $177.40 $332.84 -$3.58 $308.12 $22.34 I Avg $ per Online-Active CH $325.13 $99.62 $270.24 -$45.32 $338.11 $65.32 $404.96 $129.04 $303.61 -$25.48 $293.98 $43.77 d r Avg $ per Offline/Online-Active CH $689.69 $239.23 $599.68 -$66.25 $732.29 $157.05 $802.21 $263.01 $555.00 -$27.89 $497.79 $29.42 a

C Avg Offline Ticket $40.46 $7.59 $35.03 $0.14 $38.33 $6.88 $40.64 $11.79 $34.03 $3.10 $35.90 $7.99

t Avg Online Ticket $42.11 $8.46 $36.18 $1.22 $37.98 $5.57 $41.80 $10.33 $35.37 -$1.84 $37.53 $3.28 n a

s % of Offline Transactions 62.8% 3.1% 63.7% 3.4% 62.4% 0.8% 61.5% 1.2% 59.4% -0.2% 56.8% -3.4% n I % of Online Transactions 37.2% -3.1% 36.3% -3.4% 37.6% -0.8% 38.5% -1.2% 40.6% 0.2% 43.2% 3.4% % of Offline-Active VCCs w/ 1-5 Offline Trans 40.4% -6.8% 40.9% -0.9% 37.4% 0.0% 47.8% 5.9% 42.9% 2.2% 58.3% 13.6% % of Offline-Active VCCs w/ 6-15 Offline Trans 34.6% -2.3% 33.8% 3.4% 32.2% -3.6% 20.0% -10.5% 36.4% 2.6% 25.0% -7.8% % of Offline-Active VCCs w/ 16+ Offline Trans 25.0% 9.1% 25.3% -2.5% 30.4% 3.5% 32.2% 4.6% 20.8% -4.7% 16.7% -5.7%

Exhibit VIII: New Account Survey- Which Method Feels More Convenient 80 4/3/2018, 1:51:51 AM