Electronic Payment Developments and Emerging Technologies

1
Electronic Payment Developments and Emerging
Technologies
Presented to 2008 CSDA Conference Irvine,
California

• Michael F. Hodge
• Regional Sales Manager
• U.S. Bank Merchant Services
• September 23, 2008

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About US

• About U.S. Bancorp
• Strong commitment to the payment space
• Bought NOVA Information Systems in 2001
• Established Payment Services division in 2004
• Combines Global Acquiring Solutions, Commercial
  Payment Systems, Retail Credit Card Issuing, and
  ATM Debit Solutions
• About Elavon, North America
• Founded in 1991
• Formerly branded NOVA Information Systems
• Headquarters located in Atlanta, GA
• Wholly owned subsidiary of U.S. Bancorp
• Elavon provides end-to-end payment processing
  services in the United States, Europe, Canada and
  Puerto Rico
• Processes 200B in annual volume for more than 1
  million merchants worldwide

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Agenda

• Bill Payment PINless Debit
• Prepaid Cards
• Contactless Payments
• Kiosk
• Hosted Application

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Bill Payment PINless Debit

• What is Bill Payment?
• What are the Benefits?
• Are there acceptance restrictions?
• Low risk industries (Public Sector)

Note Along with Accel, these are the only ATM
Networks that allow PINless Debit payment
processing
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Bill Payment - PINless Debit (cont.)

• Bill Payment, also referred to as PINless Debit,
  allows governments the ability to accept online
  ATM/debit cards as payment in a card-not-present
  environment.
• Traditionally, all online debit transactions have
  required a card swipe and cardholder PIN entry.
  Through Bill Payment, consumers can now make
  payments with their ATM/debit card through a
  merchants IVR (Interactive Voice Recognition) or
  web site payment page.

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Bill Payment - PINless Debit (cont.)

• Benefits
• Immediate confirmation of available funds
• Convert more walk-in and check payers to an
  electronic payment resulting in handling fewer
  paper checks
• Reduction in the number of returned items and
  the costs associated with processing returns
• Reduction in payment processing costs
• Example 300 Payment Interchange Rate
  Interchange Costs
• ATM (PINless) debit .70 .70
• Credit card 2.00 6.00
• Signature debit card 1.60 4.80
• The above example illustrates the differences in
  interchange rates and is not indicative of actual
  interchange rates.

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Bill Payment - PINless Debit (cont.)

• Acceptance restrictions
• Bill Payment PINless debit is available only to
  specific merchant industry types, as identified
  by the participating debit networks.
• Organizations in these industries typically have
  existing and trusted relationships with their
  customers. For instance, Public Sector for
  taxes, fees, fines and penalties, licenses.
• In the future, the debit networks may add
  industries based upon demonstrated proof that
  they are low risk industries.

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Prepaid Cards

• Meeting the needs of underserved
• What are prepaid cards?
• What are the Benefits to Public Sector?
• Benefits to Government
• Benefits to Recipients

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Prepaid Cards (cont.)

• Meeting the needs of underserved
• Almost 80 million people in the U.S. without a
  traditional deposit account or with limited
  access to credit
• Receives almost 1 trillion in payments annually
  from employers, states, government entities,
  insurance companies and others
• Over 1.5 billion (annually) in fees are paid to
  cash checks

84 Million UnderservedRepresenting 1.095
Trillion!
11 million people 160.7 billion
Unbanked (No Banking Relationship) Underbanked
(Low / No Credit Score) Unregistered Immigrant
28 million people 353 billion
45 million people 581.4 billion
Source Visa USA Analysis based on data from the
Federal Reserve Bank U.S. Census Transunion,
SEC filings and the Urban Institute
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Prepaid Cards (cont.)

• Prepaid cards are customized to meet the specific
  needs for Public Sector
• Current Prepaid card uses
• Child Support
• Unemployment
• Temporary Assistance for Needy Families
• Child Care
• Other potential uses include
• Workers Compensation
• State employee payroll
• Any agency with a need to efficiently distribute
  recurring payments

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Prepaid Cards (cont.)

• Benefits to Government
• Ideal alternative to paper checks
• Increases efficiency and reduces expenses
• Higher recipient satisfaction
• NACHA studies have indicated that it costs 0.50
  to 2.00 to issue a paper check
• Benefits to Payment Recipients
• Makes receiving payments easier cheaper
• Increases safety and security
• Saves on potential expenses
• The OCC estimated that a person receiving 12,000
  annually would pay 246 in check-cashing fees
  Prepaid Trends Sept 13, 2006

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Contact-less Payments

• What are Contact-less payments?
• Opportunities/experiences in Public Sector
• Benefits based on speed and convenience

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Contact-less Payments (cont.)

• Payments made in the physical world using a
  mobile device
• Primarily targeted at low-value payments (below
  25), commonly made with cash
• Most beneficial for retail outlets where quick
  throughput is required
• Primarily uses contactless reader

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Contact-less Payments (cont.)

• Benefits for Public Sector
• Can brings the speed and convenience of
  contactless transactions to customers
• Customers can make payments faster and easier
  than having to fumble for cash
• Customers today are frequently busy and want fast
  and convenient payment solutions

• Piloted in 2008 in Spokane, WA

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Kiosk

• Why Kiosk?
• Applications for Kiosk
• Placement Opportunities
• Features, Advantages, Benefits

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Kiosk (cont.)

• Why Kiosk?
• Public sector organizations are using Kiosks to
  give customers better service and support, and
  ultimately, a lower-cost government.
• Public Sector organizations are implementing
  self-service Kiosks to provide access to a range
  of services from property tax payments, vehicle
  registration, permitting licensing to tuition or
  room and board
• The use of Kiosks has also been driven by the
  customers demand for increased hours of business
  and shorter wait times.

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Kiosk (cont.)

• Applications
• Bill Payment
• DMV
• Tax Payment
• Tuition
• Prepaid Cards
• Single Use
• Payroll Card
• Check Cashing
• Payroll
• Government
• Personal
• Placement Opportunities
• Government service centers
• Prison commissaries
• Social service agencies
• Tax collection points

• Benefits
• Operational cost reduction
• Alleviate lines at customer service centers
• Convenient method for payments
• 24/7 payment acceptance
• Real-time credit to account, avoiding late fees
  and shut off of services
• Ability to generate convenience fees for walk-up
  payments

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Hosted Application Virtual Merchant

• Virtual Merchant is a web based hosted solution.
• Turns PC into a virtual terminal allowing
  face2face transactions as well MOTO (mail
  order-telephone order transactions).
• Easy access from any PC with Internet connection,
  and secure login. Relies on familiar browser
  based interface making screens easy to navigate.
• Integrates buy button functionality easily with
  shopping carts to process e-commerce transactions.

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Virtual Merchant (cont.)

• Uses eXensible markup Language (XML) as well as
  http post integration into most web based
  environments.
• Leverages your existing PCs and Internet
  connections eliminating the expense of payment
  terminals and telephone lines.
• Supports a variety of peripherals, including
  mag-stripe readers, PIN pads, check imaging
  devices and receipt printers.
• Accommodates an unlimited numbers of users,
  departments and MIDs (Merchant Identification
  Numbers).

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Virtual Merchant (cont.)

• Eliminates fees for software upgrades, new
  releases and technical support. All part of the
  hosted service.
• Ensures CISP and PCI, hosted on the Elavon
  server, thus removing expensive compliance
  audits.
• Employs the latest SSL certificate encryption
  technologies to ensure transactions are processed
  safely and securely.
• Maintains a detailed 12-month history to assist
  in identifying trends and transactions over time.

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Questions?
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Thank You!

• For additional information, please contact
• Michael Hodge
• Regional Sales ManagerGovernment
  Institutional SalesU.S. Bank Merchant Payment
  Solutions
• Phone [phone]
• FAX [phone] Email Michael.Hodge_at_elavon.c
  om