Impact of U.S. Postal Service Network Consolidation on Remittance Mail

1. Phoenix-Hecht® Impact of U.S. Postal Service Network Consolidation on Remittance Mail Lex Litton, Phoenix-Hecht Blaine Carnprobst, BNY Mellon Three Rivers Financial Forum April 23, 2013

2. Session Outline • Three-year plan of U.S. Postal Service changes • Assessment of the overall impacts to First Class Mail & Remittance Mail • Recent news from the U.S. Postal Service • Remittance processor perspective • Billers’ perspective

3. Phoenix-Hecht • Phoenix-Hecht provides independent measurements of performance, quality, and pricing to both banks and their customers. • The Phoenix-Hecht Quality Index™ is an annual assessment of individual bank treasury management products, customer service, and relationship managers. • Corporate treasury managers can electronically request individual bank Postal Survey™ or Check Clearing™ times. • Visit http://www.phoenixhecht.com for more information.

4. Mail Volume Shifting to a Less Profitable Mix Mail Volume Shifting to a Less Profitable Mix Volume in Billions of Pieces

5. Mail Processing Facility FootprintNetwork Changes

6. Mail Processing Redesign Source: USPS

8. Did 46 including Pasadena. 150+ now scheduled . 5-day delivery in 2013? Loss of 1-day Full 8a – 4a plan Interim Delivery Stds (1-day intra-plant)

10. Atlanta

11. Impact of 5-day Delivery on Remittance • Transportation continues to run 7 days; caller delivery continues to operate 7 days • No delivery to physical addresses on Saturday (residential or business). Delivery to PO Box units. • No mail origination operations at any plant on Saturday • B2B – relatively minor impacts. • C2B – loss of volume receipt Monday – with shift toward Wednesday. First Class mail origination on Saturday was 10% of weekly volume. • Consumer confusion regarding Saturday as a mailing day because retail operations at Post Offices continue.

12. Trend of Average Site in Nationwide Total Float Days

13. Trend of Average Site in Nationwide Total Float Days Source: Phoenix-Hecht Postal Survey™

14. Average Site Regional Change in 2012-2 Postal Survey Source: Phoenix-Hecht Postal Survey™

15. Fastest Cities in Nationwide Hours(Ten versus 19 last survey sub-50) • Source: Phoenix-Hecht Postal Survey™

16. Most Deteriorated Cities (Nationwide Mail Hours) • Source: Phoenix-Hecht Postal Survey™

17. Disadvantage of Non-remittance Address versus City Average • Source: Phoenix-Hecht Postal Survey™

18. Recent U.S. Postal Service News

19. operate in 36 countries and over 100 markets Americas 30,000+ BNY Mellon employees Asia-Pacific 9,000+ BNY Mellon employees Investment Management Investment Services BNY Mellon Locations EMEA 9,000+ BNY Mellon employees

20. Remittance Processor Impacts:Changes Will Continue Through 2014 • Impacts will likely be gradual and will likely have “swings” • Don’t want to respond with a knee-jerk reaction • Will continue keeping customers aware of changes as we’re seeing them

21. Remittance Processor Impacts:Lockbox Operation Staffing Changes • Anticipated incoming mail for each shift • Assess changes over time; will need some staffing flexibility • Customer awarenessof volume “challenges” • Feb 2014 change to theshift operations

22. Remittance Processor Impacts:Evaluation of Customer Daily “Deadlines” • Lockbox “Cut Off” times • Deposit reporting deadlines • Transmission times: • A/R data & images • Non-lockbox transmission sources: • ACH, EDI & Wire • Image access commitment times • Recognize that end-client systems processing times will limit changes to transmissions

23. Remittance Processor Impacts:Float Impact Projections For Clients • Estimated average mail time delays • Ongoing mail sampling, though not scientific • Phoenix-Hecht Mail Study results • Service Level Agreement (SLA) timing impacts(ie. Processing timeline commitments)

24. Remittance Processor Impacts:Consideration of 3rd Party Mail Receipt And Scanning Locations • Pros: • Opens other geographic receipt locations • Cons: • Not having an established remittance address(e.g. does a Seattle non-remittance address perform any better than a Los Angeles remittance address?)

25. Remittance Processor Impacts:BNY Mellon’s Experiences Thus Far • Closure of Pasadena Processing & Distribution Center (P&DC) • Mail processing in LA with pickup in Pasadena • Potential further change to pickup location • Overall network mail time observations • Impacts observed in Phoenix-Hecht 2012-2 Postal Survey • Since October survey, mail distribution has moved a little later in Dallas • 2013-1 Postal Survey in process • Meetings with USPS have helped lessen some impacts, particularly Pasadena. Efforts coordinated with other processors. • Experiences among presentation attendees (providers & billers)?

26. Biller Impacts: Different responses by industry • “Open Account” bill payment (typically C2B) • Property & Casualty Insurance – buying a claim • Credit Card Processor – late fees & interest • Mortgage – late fees • Utilities – late fees & possible shut-off • Transaction payments, e.g. invoices (typically B2B) • Could cause product shipment delay • Could lead to a decline for additional orders / purchases

27. Marketing electronic payment alternatives • ACH pre-authorized debit • Electronic Bill Presentment & Payment • Debit Cards • Credit Cards • Home banking payments

28. Where can you get more information? • U.S. Postal Service Network Rationalization Information • http://about.usps.com/news/facility-studies/welcome.htm

29. Phoenix-Hecht® Impact of U.S. Postal Service Network Consolidation on Remittance Mail Lex Litton Phoenix-Hecht, Senior Vice President lex@phoenixhecht.com Blaine Carnprobst BNY Mellon, Managing Director, Receivables blaine.carnprobst@bnymellon.com