How New Rewards Programs Will Usher in a New Era of Debit Card Growth for Fis

How New Rewards Programs Will Usher In a New Era of Debit Card Growth for FIs

Presented by:

Sandy Dennler Senior Product Manager Core Debit Processing Elan Financial Services

Ron Mazursky Director, Debit Advisory Services Mercator Advisory Group

Brian Conroy Director of Strategic Relationships Augeo Marketing Debit Rewards & Loyalty

Presented by:

Ron Mazursky Director, Debit Advisory Services Mercator Advisory Group Presentation Overview

• Declining DDA Account Ownership • Debit Card Household Ownership/Usage is Declining • Debit card Usage Falling Among Young Adults • The Need for the Debit Rewards Value-Add • Regulatory impact on U.S. debit card business • Durbin Amendment Impact on Rewards at Financial Institutions © • Growth in Interest in Merchant Funded Discount Networks – Issuer Marketing Channels • Processor Support of Rewards and MFDNs • Debit Rewards Trends – Programs at Larger Financial Institutions • Debit Rewards Trends – Fees and MFDNs at Larger Financial Institutions • Debit Rewards Trends – Smaller Financial Institutions • Summary

Account Ownership is Declining

Survey Question: Which of the following types of accounts do you have at banks or credit unions? (Base = All respondents)

89% Checking Account Holders 93% Checking* 95% Age: 97% of seniors, 90% of 35–64 year olds, 94% 84% of 25–34, but 76% of 18–24 have checking 71% accounts 77% Savings* 79% Race: 92% of Whites, 80% of Asians and 77% 2013 Hispanics, 78% of Blacks have checking accounts 59% © 61% 2012 Income: 94% of $100K+ earners, 92% of $50K– Credit card 77% 99K earners, 85% of <$50K earners 72% 2011 29% 2010 40% Mortgage* 45% 44% 13% 11% Other 19% 17% 7% 5% None of these* 3% 4% Source: Mercator Advisory Group CustomerMonitor Survey Series 2013 *Statistically significant difference 2012–2013 at the 95% level.

Household Payment Type in Current Use 74% (Base = All Respondents) 68% 66% 64% 63% 62% 60% 63% 2009 2010 2011 2012 2013 60% 59%

42% 41% 39% 33%34% 34% 30% ©

11% 12% 9%11% 10% 11% 9% 10% 7% 7%6% 6% 6% 8% 3%4% 4% 5% 4% 5% 0% N/A N/A GP credit card Debit card PL revolving GP monthly GP reloadableATM only card PayPal in PayPal None of the store card* charge card prepaid* store previous cards

Household Card Ownership

*Statistically significant difference 2012–2013 at 95% level. Source: Mercator Advisory Group CustomerMonitor Survey Series 2013

Have or Use Debit Card, All vs. Young Adults Have or Use Debit Card, All vs. Earns <$50K, $50-75K (Base = All respondents) (Base = All respondents)

58% 63% 2013 2013 60% 59% 59%

71% 68% 2012 2012 66% 62% 62% Young adults (18- Earns $50-75K 34 yrs) © Earns <$50K 75% All 73% 2011 2011 68% 68% All 68%

72% 65% 2010 2010 67% 66% 66%

67% 67% 2009 2009 63% 59% 63%

Source: Mercator Advisory Group CustomerMonitor Survey Series 2013

© 2014 6 The Need for the Debit Rewards Value-Add Several Drivers are Causing Consumers and Financial Institutions to Invest in Debit Rewards – Decline in DDA accounts and Debit Cards – Attraction to Prepaid Cards and Credit Cards – Evolving value propositions, including MFDNs

Alternative Rewards are Still Debit Card HH Products are Compelling to Usage Declining Appealing Individuals; MFDNs

2010 – Congress passes the Dodd-Frank Wall Street Reform and Consumer Protection Act, October 1, 2011 - Durbin Amendment goes along with the Durbin Amendment. into effect. Non-exempt issuers now had an interchange fee cap of 21 cents per transaction and 0.05% of the sale, plus another possible cent for fraud prevention

January 17, 2014 – U.S. Court of July 2013 – Merchant Payments Appeals for the D.C. Circuit hears Coalition sued the Federal appeal of the Judge Leon ruling. Reserve. © Judge Leon finds: FRB didn’t comply with the Durbin March 24, 2014 – U.S. Court of Amendment regarding a lower Appeals for the D.C. Circuit swipe fee cap and he required upholds Federal Reserve Board that at least 2 unaffiliated PIN interpretation of Durbin and 2 unaffiliated signature EFT Amendment networks must be allowed to be selected by each merchant to process a debit transaction. Possibility of Further Appeal to U.S. Supreme Court

Regulated Financial © Exempt Financial Institutions (over $10 B) Institutions (under $10B)

Interchange: ~24 cents Interchange: ~44 cents Immediate Impact on Rewards: Immediate Impact on Rewards: - Less participated; but some drops - Dropped debit rewards - Creative reward offerings tied to - Added fees and modified programs fees

Issuer Marketing Channels Where MFN Vendors Currently Support Offer Delivery Online Mobile Other Location- Account Web Social Mobile Based Vendor Statement Portal Web Browser Add-Ons Media Email App Offers SMS ATM

Cartera Commerce         

Truaxis (MasterCard)         

Affinity Solutions    ©      

Cardlytics         

Edo Interactive         

FreeMonee         

Advantage Points         

Source: Mercator Advisory Group based on company websites and interviews with company executives

Usage Retention Activation Acquisition ©

“By driving significant increases in key metrics across the full customer lifecycle — from acquisition to engagement to retention — these merchant-funded programs can drive a substantial return on investment. In addition, merchant-funded rewards programs positively impact other valuable areas as well, such as brand differentiation.” –Troy Cullen, Elan Financial Services

Top FIs Offering Debit Rewards 30 Total FIs, [VALUE]

20 Top Banks, 17

15 ©

Top CUs, 10 10

0 Total Fis Top Banks Top CUs 2012 2013

Top FIs Charging Fees on Top FIs Offering MFDN as Debit Rewards 30 Debit Rewards 12 24 10 25 10 20 8 7 15

6 © 15 9 4 3 10

2 5

0 0 Total FIs Top Banks Top CUs Total Fis Top Banks Top CUs 2012 2013 2012 2013

Growing interest in reward programs

Growing pipeline interest in relationship rewards

Debit Issuers Are Continuing to Offer Rewards in Acquisition, Activation, Retention and Usage

Merchant Funded “Exempt” FIs Discount Networks increasingly are growing in interested in appeal – as core rewards, and rewards or add- Rewards still relationship ons playing an rewards in important particular role in debit

Presented by:

Brian Conroy Director of Strategic Relationships Augeo Marketing What is Advantage Points?

• Elan has partnered with Augeo to provide Advantage Points, a full- service, points-based debit rewards program. It is designed to generate maximum revenue, add value and increase ROI.

• Advantage Points offers a complete and total loyalty solution that differentiates your product offerings. It provides a competitive advantage with products specifically targeted to account holders displaced from large banks.

• Advantage Points unique enterprise strategy • A personalized rewards experience • Relationship rewards • Merchant networks

• We offer a complete and total loyalty solution that differentiates – a competitive advantage with products specifically targeted to account holders displaced from large banks

• Enterprise rewards • Reward points for profitability, longevity, increased debit/credit transactions, certain behaviors and increased products and services

• Credit and debit rewards • Householding of multiple cards and point conversion tools for both consumer and business portfolios • Innovative threshold reward and BIN level program design capabilities

• Merchant funded products • Swype 100% merchant-funded POS instant coupons

• Perks Points Mall Discounts and 5x points for shopping retail partners (funded by Augeo)

• More Points 3x points for shopping merchandise and gift cards (funded by Augeo)

Benefits for the FI • Builds greater account loyalty by adding value to the relationship • Encourages communication to strengthen relationships with existing members and customers • Generates revenue, market share and return on investment

Objectives

Acquisition Activation Usage Avg transaction Retention

• Value proposition • Awareness • Reinforce the • Incremental • Share of wallet • Brand experience • Catalyst to use value earning power • Baseline for cross the card • Multiple touch • Merchant funded sell points

Advantage Points: • Provides the flexibility, within the standard program, for • Minimizes cost to issuers financial institutions to shape their reward specifications • Maximizes cardholder value • Allows some financial institution-specific branding under • Provides accommodations for customized solutions the Advantage Points umbrella

We offer an extensive array of products and compelling customization

Core redemption categories

• Our reward offerings are robust and can be filtered to fit account holder’s needs

• We offer top brand name products in every major category, proven to engage and motivate

• 150+ gift cards • 300,000+ merchandise items • Travel including airline tickets, cruises and vacation getaways • Reservations can be made online or on the phone through our travel agency • Unique lifestyle experiences • Green products for your earth-friendly account holders • Meaningful charitable donations • Cash back at selected levels • Payments and credits towards loans, statements, etc. • Membership programs with huge cost saving benefits • Identity protection • Legal services • Financial advice

Swype offers real-time redemption technology using a multi-channel consumer experience that fits consumers’ on-the-go lifestyle.

• Our POS tracking capabilities allow account holders to earn 5x points when they use their rewards card at the national, regional and local merchants within our Perks Points Mall network

• Many merchants offer special discounts on top of the bonus points

• Bonus points are funded by Augeo

More Points Daily Deals •We have taken our Total Access® • Account holders select their location to merchandise database and created a members-only superstore receive local deals pooled into one location • Deals are available all over the US •Account holders earn 3x points when they use their rewards card to purchase merchandise and gift cards through More • Savings of 50% or more Points • Cardholders are connected to local deals in •Augeo will fund extra points for every dollar categories including: spent • Entertainment • Health • Food & Drink • Sports & Fitness • Family • More

Mobile platform

Sign in Search Rewards My account Sign in with the Search for Browse the statement same user rewards in entire rewards View the name and various catalog, view available point password used categories with reward details balance and on the full point ranges and add to cart account rewards site or wish list details

Order Wish list Help Cart status Add, remove or Access program Redeem Stay up to date redeem items contact rewards and on order in the Wish list information, check out on statuses review program the go information and browse FAQs

Redemption website

Tools to make your program a success

In-house marketing services

•White-labeled rewards website design • Single sign on through the FI’s website or through user name and password authentication • Custom branding • Log in, colors, header, banner ads and copy

•Interactive media • E-blast, banner ads, social media and video

•Print collateral • Brochures and direct mail

•On-site advertising • Posters, banners, drive-thru buck slips, take- ones

Program management 24/7 bilingual customer service • Administrative website • Unique toll-free customer service line to manage all program inquiries • Authorized administrators will have the ability to check point balances, view transactions and add or IVR deduct points • Allows for program branding at the initial • Designated administrator can add greeting of each call additional users to the site. • Cardholder can listen to their current point balance and/or choose to speak with a travel agent or customer service • Standard reporting suite representative • Three weekly and five monthly reports Marketing and training • Not included in Elan Early/Late • Available to participating issuers: package • Marketing guide (with brand guidelines) • Separate weekly and monthly • Employee training manual (with guide to transmissions reports)

Invoicing included on the monthly Elan invoice

If you have a question, please send a chat to:

Yvonne Nealen

Or email us at: [email protected]

We stand by ready and eager to begin work on your behalf! Our loyalty programs can be launched within just 60-90 days.