Card Based Receivables Management Current Priorities for the Merchant Community

1. Card Based Receivables ManagementCurrent Priorities for the Merchant Community September 10, 2013 Presented by: Keith P. Olson Director, Business Development

2. Ecosystem Priorities and Trends Business to Consumer Enterprises (B2C) Separated into two swim lanes… Business to Business Enterprises (B2B)

3. Business to Consumer (B2C) Priorities • Omni-Channel Evolution • Mobile Technology Enablement • Data Security – PCI/DSS • Network Advocacy and Management • EMV and NFC Readiness

4. Omni Channel Evolution • The convergence of retailing from in-store to online activity, and associated requirements of merchants to reconsider their distribution and support strategies • Mobile devices as a channel to compliment traditional brick and mortar and eCommerce • Major retails are pushing ahead with omni-channel strategies: • H.H. Gregg and Jo-Ann Fabrics let their consumers check inventory by store, buy online and pick up the product at their chosen location. • Restoration Hardware makes its stores into brand showrooms, where consumers can handle and test products while shopping the chain’s vast online catalogs and website. • Best Buy has suffered from the “Showroom” effect whereby their chain is used by consumers to test and handle products, only to have them order from the least cost online option whereby sales tax may be avoided. • WalmartLabs is mining SoMoLo (social, mobile, local) data to predict shoppers’ next purchases and stock Walmart.com based on social-media activity.  • Nordstrom, Best Buy, Macy’s, Urban Outfitters, Staples and Restoration Hardware are beginning to make the organizational transitions needed to develop a consistent experience for myriad types of shoppers.  • Brooks Brothers, Macy’s and Petsmart have all named “Chief Omni Channel Officers” to craft corporate strategy • GET ONLINE, LEVERAGE MOBILE; sell products and services anywhere, anytime

5. Omni Channel distribution provides customers with a consistent experience and increases sales Retailers increasingly engage Omni Channel distribution and the multi-channel consumers have proved to be more profitable Omni Channel Source: Retail Systems Research (June 2013)

6. Omni Channel Case study: Many leading retailers have benefited from their Omni Channel strategy and shared their experience • Reduced conflict between its stores and website by restructuring the company by major brands • Better website search and navigation • Richer product information • Richer visualization tools • Speedier order fulfillment and delivery Walgreens found that its Omni channel shoppers spend more than its single-channel shoppers Stores-only 1 Stores + Web 1 2 3 3.5 Stores + Web + Mobile • Increased coordination across digital and store channels • Upgraded mobile and online sites • Enhanced customer engagement features 1 2 3 4 5 6 Source: Miguel, Almeida, VP of ecommerce at Walgreens at a session at Retails’ Big Show 2013, sponsored by the National Retail Federation

7. Mobile Technology Capitalize on driving more sales through and steer consumer payment options to desired state. • In store sales personnel utilizing tablets to drive more sales

8. Mobile Technology • Retailers are increasingly using tablets as part of their 'in-store' experience, often without the integration of payments • Two thirds of retailers have taken first steps in in-store tablet deployment* • Nearly three in 10 (28%) of retailers plan to adopt mobile POS by the end of 2013. • Sales floor support (51.9%) and updating/refreshing the store experience (48.1%) • are driving retail interest in deploying tablets *Source: RIS News Custom Research, Retail Embraces Tablets, January 2012 §http://www.mobilecommercedaily.com/mobile-pos-deployments-appearing-to-be-slowing-report † Mobile POS Grows to $2 Billion Market in North America, But Retailers Are Separating Hype From Reality, According to New IHL Report, pymnts.com, May 2013

9. Mobile Technology • 60% of retailers plan to add more than three mobile POS devices per store as part of a long term strategy

10. Mobile Technology However… • Inventory/product look up (69.8%) is the primary functionality retailers are interested in when deploying tablets in-store • POS functionality ranked second on the functions list (49.1%) • Mobile POS is often viewed as an add-on to services

11. Mobile Technology Banks are motivated to invest • Customers want mobile banking • 61% of 25-34 year olds would make purchases using mobile phones (Visa) • 73% of customers want to see account balance information on mobile phones (Celent) • 53% of customers want to see transaction history on mobile phones (Celent) • 50% of 18 to 25 year olds say mobile banking is important in choosing an FI (Celent) • Strong analyst forecasts for mobile banking • Mobile payment transactions will exceed $300 billion globally by 2013 (Juniper Research) • 94% of banks surveyed in 2010 have a mobile banking strategy in place (Forrester) • 32 million U.S. households will use by 2016 (Online Banking Report) • 60% of incoming calls to bank call centers are made from mobile phones (Celent)

12. Mobile Wallet Race • Complicated space to navigate • Over 100 mobile wallets trying to gain share • Current players expanding their role… In the news today …while New Participants are Entering the Payments Value Chain.

13. Mobile Technology Macro Position • Usage of GPS to strategically market to mobile devices and users • In-store check-in solution to drive more sales and customer engagement • Driving of payment to desired state

14. Top scaled merchants increasingly look to reduce the cost of acceptance by investing in alternatives to traditional card networks In August 2012, more than a dozen large retails announced their intentions to create a private ‘mobile payments network’ called Merchant Exchange Network (MCX). MCX is intention to complete with or replace the open-loop mobile networks run by Visa, MasterCard, AMEX and Discover. Since its inception, MCX has steadily grown its membership, which now stands at over 37 US National Retailers. Many of the Canadian merchants are looking at MCX too. They were present at the last ACT meeting in NF, ON. While MCX focus is on expense management, ownership of customer sales data is the #1 priority • Starbuck’s invested in $25MM in Square during 2012 • Along with the financial investment Starbuck’s has invested considerable collaborative energy into the partnership through utilization of the solutions throughout their franchise. • 30% of U.S. transactions come from Starbucks stored value cards. • Over 10% of U.S. sales are via mobile devices • WalMart has deployed a trial of its “Scan and Go” solution in Bentonville, AR which allows shoppers to scan items being put into their physical shopping cart and then checkout at a kiosk, skipping the checkout line. To date, mobile device payment processing has not been applied but a registered user in the future could easily be driven to an ACH tx. similar to supermarkets well established checkcard that rides on the ACH network • WalMart continues to promote advantages for cash on in-store sales as well as larger delivery items • Apple has applied “EasyPay” to their retail stores whereby one’s mobile device can be utilized to checkout and have the payment applied to their iTunes account. • Apple's Passbook is already the fourth-most popular mobile commerce app among U.S. consumers. One-fifth of iPhone owners use it. It's Apple's fast-maturing attempt at a virtual wallet. Apple has over 500 million credit cards on file. • There has been an increasingly number of large merchants who are adding PayPal to their online websites for an alternative payment option for their clients. • BillMeLater represents an credit origination opportunity for merchants instead of an expense • The U.S. toll free ACH network provides financial benefit; EFT is evolving in Canada and other networks such as Interact could partner with PayPal to provide further economic value

15. Small business owners will increasingly look to apps to help them start-up and run their businesses. Mobile Technology for Local Merchants • Growth of Mobile Applications • Between 2011 and 2016, the compound annual growth rate of app downloads • (CAGR) is set to be 52.17 percent1 • In 2010 “Business Apps” was the fastest growing category (+186%) on the Apple • App Store2 • Jan 12 – July 12 “Business” was the 4th fastest growing category (+ 63%) on the • Google Play Marketplace3 5 1 – App Store Downloads – Gartner Research (2011 / 12) via Statistica (Link – WEB) 2 – Financial Post November 2010 (Link – WEB) 3 – GigaOM Mobilize 2012 (Link – WEB)

16. The number of purchases made through mobile applications will grow at an increasing rate, exceeding those made through traditional PCs within 5 years. Consumers Buying with Mobile Devices 1 1 – Emarketer Research (http://www.emarketer.com/Article/More-Shoppers-Reach-Mobile-Browse-Buy/1009615) 2 – Gartner Research via Techcrunch Article (http://techcrunch.com/2013/04/04/gartner-2012-2017-devices-forecast/)

17. Leveraging Mobile Devices while “Idle or In-Transit” Source: Comscore Mobile Future in Focus Report http://www2.comscore.com/l/1552/uture-In-Focus-Report-2013-pdf/3d78wc

18. 24% 21% % represents Mcommerce (Smartphone and Tablets) 18% 11% 7% U.S. Consumer Usage of Mobile Devices 15%

19. Mobile Technology for Local Merchants …SMB’s use apps to save time and increase productivity4 • 2011 survey suggested 31 percent of small firms (20 employees or less) use mobile apps daily • 78 percent of respondent SMB owners cited that they’ve saved an estimated 5.6 hours (a median of 4.0 hours) per day on the job simply from their firm’s use of mobile apps • 100 percent of one-person businesses using apps agreed that they’ve saved time using mobile apps 4 – Saving Time and Money with Mobile Apps - Small Business and Entrepreneurship Council (SBE Council – 2011 Report) (Link – PDF) 5 – The ABC's Of SMB Transformation: Apps, Broadband, And The Cloud – 2013 Chetan Sharma Consulting on behalf of AT&T (LINK: PDF)

20. Data Security • Exposure and the associated compliance to network requirements • PCI/DSS: Brand degradation, uncapped fines and fees, compliance cost • Average annual cost of PCI Compliance Audit = $225,000 (NetworkWorld 3/2010) • Cost of breach for Level 4 merchant = Average $36,000 (PCI Compliance Guide) • Solutions to minimize challenges: • Physical: Point-to-point encryption and tokenization • Virtual: Hosted payment page, card vault and tokenization, and account updater

21. Network Advocacy & Management • Network advocacy and management • Constant requirement to focus on interchange optimization as this expense line represents 90+% of card acceptance cost for merchants. • Durbin legislation continues • VISA/MC settlement legislation: $7.2BB in rebates to acceptors

22. EMV and NFC • EMV and NFC readiness • EMV (EuroPay, MasterCard, Visa) – Data security focus • EMV transactions contain dynamic data specific to the card and the transaction, eliminating static authentication data and counterfeit fraud when utilized • NFC (Near Field Communications) – Payment enablement focus • A set of standards for smartphones and similar devices to establish radio communication with each other by touching them together or bringing them into close proximity of each other • New devices are enabled for both • The U.S. is different than the World • Strength in telecom • Encryption and tokenization solutions occurred first • Nothing is broken for U.S. banks • Very complicated environment • PIN debit • Durbin legislation • Magnitude of banks • Plethora of ecosystem participants

23. In Canada, Visa incented the acquirers to convert their systems, POS hardware, customers, and VARs and ISPs partners to EMV through a 10 bps reduction in interchange costs for EMV transactions. As a result of the incentive, coupled with a strong commitment by the banks and other Networks to support EMV adoption, it took Canada less than 5 years to achieve over 70% EMV enablement at the merchant level, which continues to grow. As outlined in a recent White Paper issued by TSYS, the US experience and situation is vastly different. As outlined in the report, the complexities and conflicts in the U.S. payment ecosystem continue to cause paralysis for widespread EMV enablement. These include: Economic interests are disconnected; risk for issuer decreased, no interchange decrease to merchants to offset hardware CAPX Vast number of acquirers and issuers PIN Networks lack of defined EMV specifications Durbin requirements of merchant driven routing challenge Cost of replacement card issuance (est. $3B) and POS hardware (est. $2.5B) Plethora of middleware providers Merchant owned hardware There is a high likelihood, the counterfeit liability shift scheduled in the U.S. for Oct., 2015 will be pushed back, as it was in Canada on two occasions. Without the exposure of non-U.S. issuers and associated losses they experience through card data theft and usage of counterfeit cards within the U.S. mag stripe environment there would be no force to enable EMV. US merchants' conversion to EMV will diverge from Canadian conversion rates And the naysayers remain vocal… “The U.S. is going to adopt EMV in about the same way the U.S. adopted the metric system — somewhere between kicking and screaming and not at all.” Forrester Research Group EMV and NFC

24. Business to Business (B2B) Priorities • Efficiency and leverage of core infrastructure • Data Security – PCI/DSS • Access to working capital • Transparency and ready access to data • Managing fees

25. B2B Priorities • Efficiency and leverage of core infrastructure; ERPs for through-put and reconciliation • Storage of payment cards for recurring taxes • Data feeds to support automated reconciliation • Support senior management desired state to drive value from investment • Data security • The bigger the organization the larger the exposure • Complexity of systems and scale • Virtual Solutions: hosted payment page, card vault and tokenization, and account updater • Access to working capital • Opportunity to decrease receivables processing time • Obvious cost benefit analysis required • Transparency and ready access to data • Effective management of Treasury Operations • Electronic payment provides electronic data for Treasury Management Operations • Managing fees • Level II, level III and corporate large ticket programs • Multi-Currency Conversion • Drives cleaner experience for suppliers • Delivers revenue opportunities for acceptor

26. B2B – Solutions against priorities • Vault Storage/Tokenization: Moneris securely stores cardholder data and lessens the scope of merchant’s PCI/DSS requirements. Help drive more sales through recurring visits and converted sales. • Custom API Integration: Enables a simple and secure connection between the merchant’s order management system or ecommerce site and Moneris processing hosts. • Mobile Application: Take secure payments on an Apple or Android smartphone or tablet through the eSelect Plus mobile application and encrypted card reader. • Interchange Reduction and Management: Reduce #1 fee driver by managing interchange qualifications with best in breed back-office toolkit. • Convenience Fees and Surcharging: Programs offered to recoup processing fees from the cardholder. • Multi-Currency Processing: Process payments in currency of cardholder.

27. Questions and collaboration opportunity