The Changing World of Payments Preparing for the changes in 2007

1. The Changing World of PaymentsPreparing for the changes in 2007

2. 2 Introducing Jane Barber - Head of Product Development Integrating Innovation with Industry Advances Bill Chalker - Product Development Manager Focusing on Industry Advances in Clearing Services Joe Douglas - Product Development Manager Focusing on Industry Advances in Electronic Payments Susan Thomson - Business Development Manager Cash Management Consultant tailoring solutions to fit new and existing customers

3. 3 Catalyst for Change OFT Payments Task Force Began work in 2004 Objectives to drive greater innovation and competition Set up cross-interest Working Groups Agreed to introduce faster electronic payments to remove Float Expected to agree changes to cheque clearing to enhance customer proposition Both due to be introduced in November 2007

4. 4 Faster Payments - What? Introduces a new near real time electronic payment type Delivered through a new platform Updates Standing Orders to become a same day payment Fits between BACS & CHAPS BACS <> IPL <> CHAPS IPL = Immediate Payments Ltd - jv between Link and Voca

5. 5 Faster Payments - Access Options Payment Type Industry Access (time taken) Limits Times Standing Orders �100,000 Bank Working (2 hours) Days Diarised Payments �10,000 24 x 7 x 365 (2 hours) Immediate Payments �10,000 24 x 7 x 365 (15 seconds)

6. 6 Reporting Balances Immediate Payments will arrive intra day Bank account balances will change intra day Bank systems will update for the next working day Payments received after cut off will update the bank account after the next bank working day For example: You pay your pothole mender his money by internet banking on Saturday morning and he can withdraw this from an ATM shortly afterwards on the same day! But all transactions will appear as Monday�s work.

7. 7 Receiving Payments Funds may arrive throughout the day Payments are Irrevocable Funds are cleared - no delay on value Standing Orders (new Maximum �100,000) Paid through to Banks between 00.00 and 06.00 May not be available in the morning balances Need to monitor intra day balances

8. 8 Making Payments Maximum payment �10,000 Individual Payment Initiation through On Line Banking Telephony Payment Initiation as direct participant Direct Corporate Access New Software added to BACSTEL-IP File based submission Existing security

9. 9 Member to Member Payment & Direct Corporate Access

10. 10 Payment Reconciliation Account Reconciliation files will provide data In existing or extended formats via existing delivery methods Options for consideration Taking additional data files for intra day information Taking data in extended format rather than Std18

11. 11 What will Faster Payments mean to you Customers can pay you faster than your systems currently identify receipts Legal orders - you will need to check for funds intra day before issuance New option to pay urgent funds at lower cost and at weekends Refunds can be made in real time enhancing customer service Validation will allow payments to be returned real time Reduces potential for unapplied items

12. OFT Payments Task ForceCheque Working Group

13. 13 OFT Group shadows CWG and reports into APACS council. CSG makes recommendations to CWG. Value= date when interest is paid Withdrawal= date funds withdrawn Terminology standardisation- e.g. SMEs think fate is same as withdrawal OFT Group shadows CWG and reports into APACS council. CSG makes recommendations to CWG. Value= date when interest is paid Withdrawal= date funds withdrawn Terminology standardisation- e.g. SMEs think fate is same as withdrawal

14. 14 Review of the Cheque Clearing Cycle Consider potential changes to the Cheque Clearing system Weigh up the Costs against potential Benefits of proposals Promote use of more efficient payment methods other than cheques Inadvertence. Event that by its nature could not be detected by the RM in time. Eg cheque paid in for cash on day 3. R + A. NW client pays in cheque at Barclays. We get electronic code from cheque in advance. Cheque does not arrived and we chase Barclays for cheque. Can take up to ten days. Now we return Four days for Scottish/English chequeInadvertence. Event that by its nature could not be detected by the RM in time. Eg cheque paid in for cash on day 3. R + A. NW client pays in cheque at Barclays. We get electronic code from cheque in advance. Cheque does not arrived and we chase Barclays for cheque. Can take up to ten days. Now we return Four days for Scottish/English cheque

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16. 16 What will the changes to cheques mean to you Changes will have to be in place before end of 2007 Banks & Building Societies will have to deliver a minimum enhanced proposition Changes to the systems must benefit Personal and Corporate customers Changes must be considered right across the UK

17. 17 Likely Future Changes Current changes are part of a wider ranging review within the UK and Europe SEPA - Single European Payment Area - aims to create pan-European Direct Debit and Direct Credit payment types - initial � launch date of 1 January 2008 running to 2010. The impact on UK payment types is under assessment. BACS - possible move to 2 day cycle, but this may not be needed if faster electronic payments becomes the norm.

18. 18 Any Questions Thank you for listening Are there any more questions?

19. 19 The contents of this document are indicative and are subject to change without notice. This document is intended for your sole use on the basis that before entering into this, and/or any related transaction, you will ensure that you fully understand the potential risks and return of this, and/or any related transaction and determine it is appropriate for you given your objectives, experience, financial and operational resources, and other relevant circumstances. You should consult with such advisors as you deem necessary to assist you in making these determinations. The Royal Bank of Scotland plc (�RBS�) will not act as your advisor or owe any fiduciary duties to you in connection with this, and/or any related transaction and no reliance may be placed on RBS for advice or recommendations of any sort. RBS makes no representations or warranties with respect to the information and disclaims all liability for any use you or your advisors make of the contents of this document. RBS and its affiliates, connected companies, employees or clients may have an interest in financial instruments of the type described in this document and/or related financial instruments. Such interest may include dealing, trading, holding, acting as market-makers in such instruments and may include providing banking, credit and other financial services to any company or issuer of securities or financial instruments referred to herein. RBS is authorised and regulated in the UK by the Financial Services Authority The Royal Bank of Scotland plc. Registered Office: 36 St Andrew Square, Edinburgh EH2 2YB. Registered in Scotland No. 90312. A Royal Bank of Scotland Group company.