confidential r. c. giltner services february 11, 2014 1 companion card strategy to serve customer...

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R. C. Giltner Services

February 11, 2014

Companion Card Strategy to ServeCustomer Security and Transaction Needs

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Contents

• Introduction

• Market Drivers of the Consumer Need for a Companion Card

• Companion Card Branding and Features

• Sales Approach

• Payoff and Next Steps

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Community and regional banks can serve a growing market through a companion card, added to the current debit card, to enhance transaction security and functionality.

Introduction

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The Companion Card is simply a checking account with a “opt out” debit card linked in online banking.

PaySoundSM Companion Card

– Checking account set up.– Debit card only.– No bill pay or ACH debits.– No NSF/OD fees;

mandatory opt out.– $1.00 fee per check if

written.– Fee for ACH; checks

Introduction

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Key market drivers for consumer demand for a “companion card” are:

a) New capability to transact with alternatives that settle to a bank account.

b) Concerns about security and compromised cards with shopping risk.

c) Growth of mainstream prepaid for specialized use.

d) Growth of online shopping.

Introduction

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We are losing revenue from our customers using alternative payment methods that settle to our accounts.

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FI Checking Acct • Revenue • Relationship• Risk• Regulatory Compliance (ID)

Aggregators (BillFloat, PinPoint,

Mint, BillMyParents, Banno)

Billers and Services (Online/Phone Payment;

Manilla, Doxo, Volly)

Payment Networks: (PayPal, Google, Dwolla)

Merchants (Walmart, Target,

Home Depot)

Telephone (Isis, Boku, Verizon, AT&T (de-

coupled debit)

$

$

$

$

$

Acct Contextual Value

a) New Payment Capabilities

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Banks need to think of providing payment methods for specific transaction types.

“In-store payments are PayPal’s to lose…” Don Kingsborough, PayPal

3. “Payment Context” Drives Revenue

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The alternatives are growing for settlement, creating a leaky account. Today we tell our customers, as do others, where to not use their debit card, the primary transaction device we provide.

$ % # %Checks $ 5,400$ 67% 14.5 21%Debit Card 1,563$ 19% 39.8 56%PayPal & Alt. 225$ 3% 5.6 8%PrePaid 250$ 3% 4.8 7%Web/ARC/POP ACH 590$ 7% 5.8 8%

Total 8,028$ 100% 70.5 100%

Checking’s Leaky Account

Source: Our Analysis, Industry and NACHA Data

Remember, losing a debit transaction costs more than just interchange:• Interchange loss (net, exempt banks) $.26• NSF/OD fee (2% of transactions) $.60

Total $.86


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Use of alternative payment methods, such as prepaid or PayPal, are already used as a “companion” to checking.Prepaid Card User

Survey


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68% of consumers are concerned by card use compromised by fraud and identity theft.

Source: Unisys Corp.

b) Concerns About Security and Shopping Risk

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GPR prepaid use is growing 30%+ a year and penetrating all

segments, serving over 10% of households.

Source: The Wall Street Journal

c) Growth in Mainstream Prepaid for Specialized Use

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Prepaid Cards


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The benefits driving the growth of “prepaid” can be provided in a checking account:

• No overdraft fees ever. (73%)* (positions Reg E opt out as a benefit)

• Control over spending. (58%)*

• Retail access for loading.

• Second chance options where CheckSystems scores are low.

* Analysis of GPR Branded Prepaid Cards, Bretton Woods, 2012


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Online retail sales are growing rapidly.

d) Growth in Online Purchases

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Consumers need a second or companion card for specialized transactions.

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Consumer Needs

Online Shopping

Transaction Segments

Shopping/ Travel Control

Youth Spending

Partition Funds for Target Payment

• Protection if card stolen• Spending control• Avoid Overdraft fees

• Protection if card stolen• Spending/charge control• Avoid Overdraft fees

• Card for youth • Avoid Overdraft fees

• Separate account

Payment Methods

• Credit Card• PayPal, Alt.• Prepaid

• Prepaid

• Prepaid

• Prepaid

The Need for A Companion Card

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The Companion Card with payments branding serves customer needs or a small business payroll card for $5.95 per month.

Companion Card Branding and Features

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“Payments” branding should be employed rather than checking branding.

Payments Services

Checking Accounts


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A premium companion card for $14.95/ mo. includes:

• Multiple companion cards.

• Higher spending limits.

• Lifelock identity theft protection (see their program at http://www.lifelockbusinesssolutions.com/introduce-lifelock/texas-bank-chooses-lifelock-to-protect-customers-and-attract-new-ones/)


http://www.lifelockbusinesssolutions.com/introduce-lifelock/texas-bank-chooses-lifelock-to-protect-customers-and-attract-new-ones/



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The bottom line

Protect yourself for less. Monitor your financial statements and credit reports for suspicious activity that can lead to identity theft. At $120 a year, it's just not worth it


FIs should be aware that some authorities doubt the benefit of LifeLock and others.

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A better approach may be to provide the Companion Card so the customer can protect their main account, and access to credit information and management.


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The sales approach fits with your current approach by adding a question:

Would you like to customize your account with a companion card that allows you to:

• Shop without concern that your card information could be stolen.

• Shop online.• Use for travel, for youth or to hand to your domestic

service providers.• No overdraft fees ever.• A card to load and unload quickly and easily from

online banking.


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The revenue model shows growth in service charge revenue of 9%.

Companion Premium TotalMonthly Net Fee 5.95$ 7.95$ Annual Fees 71.40$ 95.40$ Added Inchg/Fees 26.00$ 26.00$ Total Fees/Card 97.40$ 121.40$ Penetration 8% 3%Added Fees/Acct-All Accts 7.79$ 3.64$ 11.43$ Industry Average Svc Chg Fees/Acct $128% Increase 9%

Companion Card Fee Revenue Increase

Payoff: 9% Service Charge Growth

confidential r. c. giltner services february 11, 2014 1 companion card strategy to serve customer...

Documents

companion card slide

giltner services banks

giltner services consumers

giltner services prepaid

companion card strategy

premium companion card

payments services

introduction slide