2009 Payments Strategy Research Program

1. 2009Payments Strategy Research Program GLOBAL CONCEPTS Syndicated research agenda and pricing October 1, 2008 Global Concepts is a wholly owned subsidiary of McKinsey & Co.

2. GCI’S 2009 SYNDICATED RESEARCH AGENDA AT A GLANCE Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec Jan US Payments Map Optimizing small business banking Evolving consumer payments behavior Consumer financial services life study Nonbanks in the payments business Annual Payments Study

3. Overview The US Payments Map is an industry profit pools model that tracks, analyzes and forecasts trends in the US payments market. It reflects McKinsey & Company’s latest thinking on the size, direction, and critical trends in the market. The quantitative output includes estimates of fee income, net interest income, expenses, and transaction activity across all sectors of the payments market. Data are both highly granular and comprehensive. The qualitative output and analyses reflect the unique insights of seasoned experts, reliable, original market research, and a thorough vetting of secondary sources. The Map sizes the market but also forecasts 5-year trends in revenues and transaction activity. The Map is a powerful tool for clients to benchmark their own payments businesses against the market, size risks and opportunities, and develop strategic plans. Scope of the Sector Report The Corporate Payments Market sector report includes analyses of the Commercial DDA market (including cash management for corporate and government clients and small business banking), Commercial Card issuing, Merchant Acquiring, and several ancillary businesses.* Detailed analyses include product-level insights and forecasts to support client business case modeling and strategy development. Scheduled Delivery: Jan 2009 Deliverables and Fees Reference year (2007) analysis and 5-year forecasts: Sector report (PPT)……………………….$10,000 Sector data series (XLS)…………………$15,000 Extended data series for corporate sector (XLS): Transactions and flows any year 2003-06, 2008-11.......................$1,000 / year Revenue forecasts for any year 2008-2010…..............................$6,000 / year US PAYMENTS MAP (1/2):CORPORATE PAYMENTS MARKET SIZING, FORECASTS AND ANALYSIS * Includes merchant courier services, verification/guarantee, and prepaid cards issued to business users.

4. Overview The US Payments Map is an industry profit pools model that tracks, analyzes and forecasts trends in the US payments market. It reflects McKinsey & Company’s latest thinking on the size, direction, and critical trends in the market. The quantitative output includes estimates of fee income, net interest income, expenses, and transaction activity across all sectors of the payments market. Data are both highly granular and comprehensive. The qualitative output and analyses reflect the unique insights of seasoned experts, reliable, original market research, and a thorough vetting of secondary sources. The Map sizes the market but also forecasts 5-year trends in revenues and transaction activity. The Map is a powerful tool for clients to benchmark their own payments businesses against the market, size risks and opportunities, and develop strategic plans. Scope of the Sector Report The Consumer Payments Market sector report includes analyses of the Consumer DDA market (including fees and NII), Consumer Credit Card issuing, Merchant Acquiring, and Other payments businesses.* Detailed analyses include product-level insights and forecasts to support client business case modeling and strategy development. Scheduled Delivery: Jan 2009 Deliverables and Fees Reference year (2007) analysis and 5-year forecasts: Sector report (PPT)……………………….$10,000 Sector data series (XLS)…………………$20,000 Extended data series for consumer sector (XLS): Transactions and flows any year 2003-06, 2008-11.......................$1,500 / year Revenue forecasts for any year 2008-2010…..............................$7,000 / year US PAYMENTS MAP (2/2):CONSUMER PAYMENTS MARKET SIZING, FORECASTS AND ANALYSIS * Includes consumer prepaid, electronic money transfer (EMT), and EBT markets.

5. Overview Nonbanks are increasingly important participants in the payments business. They act as direct competitors to banks, stirring competition and fuel innovation, serve as vendors or partners to provide valuable third-party services, and emerge as targets of acquisition by private equity firms and, increasingly, bank clients. As the number and diversity of nonbanks in the business seem to accelerate, the task of sizing up nonbank firms and the risks or opportunities they present can be challenging. It is no wonder bankers flock to conference sessions in which startup-firm panelists describe their business models in tidy compare-and-contrast sound bites. Through a sustained, sector-analyst approach to profile and analyze nonbank innovators, Global Concepts tracks and analyzes trends in the nonbank space. To support consulting studies we operate an internal “service bureau” that profiles nonbanks, their products, and their competitors and analyzes their market potential. In 2009 we make this service available directly to external clients. Deliverables Clients may choose any nonbank from a regularly updated list of over 1,000 firms that Global Concepts profiles to receive a detailed profile with analysis about each firm selected. Profiles are typically 2-5 pages in length. Fees: $1,000 / non-bank profile Scheduled Delivery Ad-hoc requests handled Feb 1 – Nov, 2009 (2-3 day turnaround) Company List Available after Dec 1, 2008 NONBANKS IN THE PAYMENTS BUSINESS:PROFILES AND ANALYSIS FOR COMPETITIVE INTELLIGENCE AND M&A

6. Overview Banks struggle with the in-between-ness of small business – at times more consumer than commercial – and are challenged to design products or bundles they not only need, but are willing to pay for. The challenge is exacerbated by the assumption that there is a small business solution. There isn’t one. There are many. The neighborhood deli and the accountant next door have only a roof in common; yet so often they’re lumped into the monolithic banking opportunity called “small business.” In late 2008, Global Concepts surveyed over 1,000 US small businesses with a conjoint design to test demand for product features and identify how banks could best meet small businesses’ needs. Our final report skimmed the surface but highlighted two critical findings: Several distinct sub-segments of small business exist; Banks can significantly enhance their value proposition through relatively modest product innovations. For 2009 we have designed a product demand simulator that brings the full power of this study to our clients’ fingertips. It allows clients to play “what-if” and get answers to critical questions about their market and products, e.g.,... Which of our products, or features, present a competitive advantage – or disadvantage – vs. our competitors’? How can we most easily improve the value of our product? Where are we giving away too much? How can we optimize our product to suit small business segments we value most? Deliverables and fees Simulator pre-populated with utility scores for 10 products, chosen by the client, in the market today*........$20,000 Each additional product added to the simulator by Global Concepts .............................................................$500 Scheduled Delivery: Feb, 2009 OPTIMIZING THE SMALL BUSINESS BANKING PACKAGE:TOOLS FOR SMALL BUSINESS SEGMENTATION AND PRODUCT DESIGN Note: screenshot from consumer DDA demand simulator * If needed, utilities can be interpolated for product features not specifically tested by the study.

7. Overview The consumer payments market has changed dramatically over the past 5-10 years. The decline of the paper check and growth of electronic instruments, particularly debit cards and ACH, is well documented. Cash trends are less obvious, but indicators point to moderate ongoing decline. The course of change, however, is neither universal nor sustainable without active strategies by banks. Several consumer segments continue to use cash avidly, for example, and the growth in card use is slowing under the weight of its own success. Continued profit growth depends on banks’ ability to segment, target, and incent consumers to adopt more optimal behaviors. The need is accentuated by countervailing forces, such as merchant/biller steering, innovations that target bank profits, and a general erosion of public opinion toward banks. This research helps client banks to understand the levers they can pull within each customer segment to strengthen their payments P/L while meeting customer needs. Research Questions What forces are driving consumer choice in turbulent economic times? What impact have behavioral drivers had on the size and characteristics of each consumer segment? Where are the near-term opportunities to incent more profitable behavior at the point-of-sale, online or for bill pay? Deliverables and Fees Written summary of findings and analysis plus two (2) ad-hoc data analysis queries*....................$10,000 Scheduled Delivery Summary report: Mar 2009 Ad-hoc requests handled Apr 1, 2009 – Jan 31, 2010 (2-3 day turnaround) EVOLVING CONSUMER PAYMENTS BEHAVIOR:MARKET SEGMENTATION AND DRIVERS OF PAYMENTS CHOICE * Includes up to eight (8) cumulative hours of analyst time. Additional hours will be billed separately at a negotiated rate.

8. Overview Consumer payments revenues (DDA and credit card issuing) are critical components to retail banking, but arguably only about 15-20% of total retail financial services revenues. Other product lines, including savings, investments, insurance and lending, round out a much larger pie. This broader view of a consumer’s financial services life often eludes financial institutions. Any one bank, for example, may capture a small fraction of a consumer’s total profitability. What’s more, the bank may have little insight into what it’s missing or how to capture it. This study brings the entire financial service portfolio into perspective to help banks better identify and target opportunities within, and across, customer segments. The research combines Global Concepts’ expertise in consumer market research and segmentation with our unique knowledge of the financial services industry and financial modeling. Research Questions Which customer segments generate the greatest overall revenue and in what ways? What payments behaviors or other indicators predict the greatest revenue potential through cross-sell? Which market segments are the most, or least, likely to concentrate revenues with their primary DDA provider? How could banks most easily improve their lowest value customer segments? Deliverables and Fees Written summary of findings and analysis plus two (2) ad-hoc data analysis queries*....................$15,000 Scheduled Delivery Summary report: May 2009 Ad-hoc requests handled Jun 1, 2009 – Jan 31, 2010 (2-3 day turnaround) CONSUMER FINANCIAL SERVICES LIFE STUDY: FINDING NEW PROFITS THROUGH TARGETED CROSS-SELL * Includes up to eight (8) cumulative hours of analyst time. Additional hours will be billed separately at a negotiated rate.

9. Overview This study measures year-to-year changes in payments processing volumes and practices at the largest US banks. Leading banks rely on the Payments Study to understand their market share, their rank among peers, and their relative mix of volume vs. confidential peer-group volumes. GCI has surveyed top-100 banks annually since 2001 to measure payments processing trends. The study measures fundamental transaction activity, such as the number and dollar value of payments by check, debit card, ACH, wire, and credit card as well as ATM withdrawals. It also measures factors such as the rate of image exchange, ECP, and IRD presentments; remote deposit capture; and the changing use of channels and instruments by bank customers. As in years past, the study measures transaction volumes and processing strategies during March and April as a basis of comparison to prior years’ estimates. Research Questions How rapidly are paper and electronic payments volumes changing among top-100 banks? How has bank competition affected ATM pricing and consumers’ use of ATMs? What market share do the very largest banks enjoy? How do individual banks compare to like-sized peers in the changing makeup of payments? Who is gaining share in the remote deposit capture business? Deliverables and Fees Written summary of findings plus one peer group analysis..........................................$8,000 Each additional peer group report*..................................$1,500 Scheduled Delivery Summary report: Sept 2009 Peer group reports on request Oct 1, 2009 – Jan 31, 2010 (1-2 day turnaround) ANNUAL PAYMENTS STUDY:PAYMENTS TRENDS AT THE LARGEST FINANCIAL INSTITUTIONS * Global Concepts reserve the right to refuse a request in order to protect the confidentiality of client data.

10. FOR MORE INFORMATION • Please contact... • David Stewart • David_Stewart@McKinsey.com • 773 667-5637