How New Rewards Programs Will Usher In A New Era Of

How New Rewards Programs WillUsher In a New Era of Debit CardGrowth for FIsPresented by:Sandy DennlerSenior Product ManagerCore Debit ProcessingElan Financial ServicesRon MazurskyDirector, Debit Advisory ServicesMercator Advisory GroupBrian ConroyDirector of Strategic RelationshipsAugeo Marketing

Debit Rewards & LoyaltyPresented by:Ron MazurskyDirector, Debit Advisory ServicesMercator Advisory Group

Presentation Overview Declining DDA Account OwnershipDebit Card Household Ownership/Usage is DecliningDebit card Usage Falling Among Young AdultsThe Need for the Debit Rewards Value-AddRegulatory impact on U.S. debit card businessDurbin Amendment Impact on Rewards at Financial Institutions Growth in Interest in Merchant Funded Discount Networks – IssuerMarketing ChannelsProcessor Support of Rewards and MFDNsDebit Rewards Trends – Programs at Larger Financial InstitutionsDebit Rewards Trends – Fees and MFDNs at Larger Financial InstitutionsDebit Rewards Trends – Smaller Financial InstitutionsSummary 20143

Account Ownership is DecliningSurvey Question: Which of the following types of accounts do you have at banks or credit unions?(Base All respondents)Checking Account HoldersAge: 97% of seniors, 90% of 35–64 year olds,84% of 25–34, but 76% of 18–24 have checkingaccountsRace: 92% of Whites, 80% of Asians andHispanics, 78% of Blacks have checking accountsIncome: 94% of 100K earners, 92% of 50K–99K earners, 85% of 50K %61% cardCredit29%Mortgage*OtherNone of these*Source: Mercator Advisory Group CustomerMonitor Survey Series %3%4%*Statistically significant difference 2012–2013 at the 95% level. 20144

Debit Card Household Usage, 2009–2013Household Payment Type in Current Use(Base All Respondents)74%68%66%64%63%62%60% 63%60%59%20092010201134%34%33%30% 12%11% 11%9% 10%Debit cardPL revolvingstore card*201342%39%41%GP credit card20127%3%4%4%5%7%4% 6%6%0%GP monthly GP reloadable ATM only cardcharge cardprepaid*11% 9% 10%6% 8%5%N/APayPal instoreN/APayPalNone of theprevious cardsHousehold Card OwnershipSource: Mercator Advisory Group CustomerMonitor Survey Series 2013*Statistically significant difference 2012–2013 at 95% level. 20145

Debit Card Usage by Age and IncomeDemographic Segment, 2009–2013Have or Use Debit Card, All vs. Young AdultsHave or Use Debit Card, All vs. Earns 50K, 50-75K(Base All respondents)(Base All oung adults (1834 yrs)201175%68%201072%66%2009All67%63%68%66%62% 201173%68%68%201065%67%66%200967%59%63%Earns 50-75KEarns 50KAllSource: Mercator Advisory Group CustomerMonitor Survey Series 2013 20146

The Need for the Debit RewardsValue-AddSeveral Drivers are Causing Consumers and FinancialInstitutions to Invest in Debit Rewards– Decline in DDA accounts and Debit Cards– Attraction to Prepaid Cards and Credit Cards– Evolving value propositions, including MFDNs Debit Card HHUsage DecliningAlternativeProducts areAppealing 2014Rewards are StillCompelling toIndividuals; MFDNs7

Regulatory Impact on U.S. Debit CardBusiness2010 – Congress passes the Dodd-Frank WallStreet Reform and Consumer Protection Act,along with the Durbin Amendment.July 2013 – Merchant PaymentsCoalition sued the FederalReserve.October 1, 2011 - Durbin Amendment goesinto effect. Non-exempt issuers now had aninterchange fee cap of 21 cents pertransaction and 0.05% of the sale, plusanother possible cent for fraud prevention January 17, 2014 – U.S. Court ofAppeals for the D.C. Circuit hearsappeal of the Judge Leon ruling.Judge Leon finds: FRB didn’tcomply with the DurbinAmendment regarding a lowerswipe fee cap and he requiredthat at least 2 unaffiliated PINand 2 unaffiliated signature EFTnetworks must be allowed to beselected by each merchant toprocess a debit transaction.March 24, 2014 – U.S. Court ofAppeals for the D.C. Circuitupholds Federal Reserve Boardinterpretation of DurbinAmendmentPossibility of Further Appeal to U.S.Supreme Court 20148

Durbin Amendment Impact on DebitRewards at Financial InstitutionsDurbin Amendment(Post Appellate CourtRuling)Regulated FinancialInstitutions (over 10 B) Exempt FinancialInstitutions (under 10B)Interchange: 24 centsInterchange: 44 centsImmediate Impact on Rewards:Immediate Impact on Rewards:- Less participated; but some drops- Dropped debit rewards- Creative reward offerings tied tofees- Added fees and modified programs 20149

Merchant-Funded Discount Network Vendors AreExpanding Across Multiple Offer-Delivery ChannelsIssuer Marketing Channels Where MFN Vendors Currently Support Offer ersSMSATM AccountStatementWebPortalWeb Browser Add-OnsSocialMediaCartera Commerce Truaxis (MasterCard) Affinity Solutions Cardlytics Edo Interactive FreeMoneeAdvantage PointsVendorOther Source: Mercator Advisory Group based on company websites and interviews with company executives 201410

Processor Support of Rewardsand MFDNsUsageRetentionActivationAcquisition “By driving significant increases in key metrics across the full customer lifecycle — from acquisition toengagement 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 asbrand differentiation.”–Troy Cullen, Elan Financial Services 201411

Debit Rewards Trends –Programs at Larger Financial InstitutionsTop FIs Offering Debit Rewards30Total FIs, [VALUE]2520Top Banks, 17 15Top CUs, 101050Total FisTop Banks2012Top CUs2013 201412

Debit Rewards Trends – Fees and MFDNsat Larger Financial InstitutionsTop FIs Charging Fees onDebit Rewards301210Top FIs Offering MFDN asDebit Rewards2410258207 6151594321050Total FIsTop Banks2012Top CUs0Total Fis2013 2014Top Banks20122013Top CUs13

Debit Rewards TrendsSmaller Financial InstitutionsGrowing interest inreward programsGrowth in MFDNrewards Growing pipelineinterest inrelationship rewards 201414

SummaryDebit Issuers Are Continuing to Offer Rewards in Acquisition, Activation,Retention and Usage Rewards stillplaying animportantrole in debit“Exempt” FIsincreasinglyinterested inrewards, andrelationshiprewards inparticular 2014Merchant FundedDiscount Networksare growing inappeal – as corerewards or addons15

Advantage PointsPresented by:Brian ConroyDirector of Strategic RelationshipsAugeo Marketing

What is Advantage Points? Elan has partnered with Augeo to provide Advantage Points, a fullservice, points-based debit rewards program. It is designed togenerate maximum revenue, add value and increase ROI. Advantage Points offers a complete and total loyalty solution thatdifferentiates your product offerings. It provides a competitiveadvantage with products specifically targeted to account holdersdisplaced from large banks. Advantage Points unique enterprise strategy A personalized rewards experienceRelationship rewardsMerchant networks 201417

Total rewards loyalty We offer a complete and total loyalty solution that differentiates – a competitiveadvantage with products specifically targeted to account holders displaced fromlarge banks Enterprise rewards Credit and debit rewards Reward points for profitability, longevity, increased debit/credit transactions, certain behaviors andincreased products and servicesHouseholding of multiple cards and point conversion tools for both consumer and businessportfoliosInnovative threshold reward and BIN level program design capabilitiesMerchant funded products Swype100% merchant-funded POS instant coupons Perks Points MallDiscounts and 5x points for shopping retail partners (funded by Augeo) More Points3x points for shopping merchandise and gift cards (funded by Augeo) 201418

Benefits & objectivesBenefits for the FI Builds greater account loyalty by adding value to the relationship Encourages communication to strengthen relationships with existingmembers and customers Generates revenue, market share and return on investmentObjectivesAcquisitionActivationUsageAvg transactionRetention Value propositionBrand experienceAwarenessCatalyst to usethe card Reinforce thevalueMultiple touchpointsAdvantage Points: Provides the flexibility, within the standard program, for financial institutions to shape their reward specifications Allows some financial institution-specific branding under the Advantage Points umbrella 2014 Incrementalearning powerMerchant fundedShare of walletBaseline for crosssellMinimizes cost to issuersMaximizes cardholder valueProvides accommodations for customized solutions19

Redemption suiteWe offer an extensive arrayof products and compellingcustomization

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 engageand motivate 150 gift cards300,000 merchandise itemsTravel including airline tickets, cruises and vacation getaways Reservations can be made online or on the phone through our travel agencyUnique lifestyle experiencesGreen products for your earth-friendly account holdersMeaningful charitable donationsCash back at selected levelsPayments and credits towards loans, statements, etc.Membership programs with huge cost saving benefits Identity protectionLegal servicesFinancial advice 201421

SwypeSwype offers real-time redemption technology using a multi-channelconsumer experience that fits consumers’ on-the-go lifestyle. 201422

Perks Points Mall Our POS tracking capabilities allow accountholders to earn 5x points when they usetheir rewards card at the national, regionaland local merchants within our Perks PointsMall network Many merchants offer special discounts ontop of the bonus points Bonus points are funded by Augeo 201423

More Points Superstore & Daily DealsMore Points We have taken our Total Access merchandise database and created amembers-only superstoreDaily Deals Account holders select their location toreceive local deals pooled into one location Deals are available all over the US Account holders earn 3x points when theyuse their rewards card to purchasemerchandise and gift cards through MorePoints Savings of 50% or more Cardholders are connected to local deals incategories including: Entertainment Health Food & Drink Sports & Fitness Family More Augeo will fund extra points for every dollarspent 201424

Mobile innovations

Mobile platformSign inSign in with thesame username andpassword usedon the fullrewards siteSearchSearch forrewards invariouscategories withpoint rangesRewardsBrowse theentire rewardscatalog, viewreward detailsand add to cartor wish listMy accountstatementView theavailable pointbalance andaccountdetailsOrderstatusStay up to dateon orderstatusesWish listAdd, remove orredeem itemsin the Wish listHelpAccess programcontactinformation,review programinformation andbrowse FAQsCartRedeemrewards andcheck out onthe go 201426

Support

Redemption website 201428

Personalized marketingTools to make your program a successIn-house marketing services White-labeled rewards website design Single sign on through the FI’s website orthrough user name and passwordauthenticationCustom 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, takeones 201429

Marketing 201430