Strategic Growth

Through High Value

Small Business

Targeting

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Simon Powley SVP, Strategic Account Relationship Executive

Vantiv

Ben Hoffman Partner

Oliver Wyman

Today’s Speakers

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Our agenda for today’s webinar

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• Introduce our partners at Oliver Wyman

• Share some of our recent joint thinking on:

› The importance of Small Businesses

› How financial institutions can grow their Small Business banking

franchises

• Discuss briefly how Vantiv can help

• Take your questions

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Brand strategy

and design

Economic advice

on competition,

regulation, litigation

Risk and insurance

services and solutions

Risk and reinsurance

intermediary services

Human resource consulting

and related services

+ Sister firms

• $1.7 BN in revenue

• 3,500 staff in 50+ offices globally

– Including Stockholm

• Ranked #1 in quality/consistency by

our clients1

• Growing faster than any other top 10

consulting firm

• Part of MMC, a $12 BN leader in

consulting, risk management and

insurance brokerage

1. Corporate Executive Board Survey

Oliver Wyman is the strategy and operations consulting arm of Marsh & McLennan Companies, a global professional services firm

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Oliver Wyman’s Financial Services practice group is organized into nine practice areas to best address our clients’ businesses and strategic priorities

• Banking, capital markets

and transaction services

• Market infrastructure

• Sales coverage

• Business strategy

and organization

• Treasury strategy

and applied risk

• Pre- and

post-trade strategy

• Credit portfolio

management and credit

process analysis

• Performance

measurement

and compensation

• Consumer and SME

banking strategy

• Credit and deposits –

strategic pricing, product

management

and innovation

• Information-based

decision analytics

• Sales performance and

channel management

• Credit process,

collections and

loss management

• Life, P&C,

Re-Insurance, Pensions

• Strategy, growth

and organization

• Financial, risk and

capital management

• Variable annuity strategy

and risk management

• Distribution and

marketing

• Product development

and management

• Underwriting, pricing and

claims management

• Cost and operations

• Business growth strategy

• Investment process

review and redesign

• Product and

solutions innovation

• Distribution strategy

• Customer retention

and wholesaling

• Risk management

• Operating structure

• Cost efficiency and

vendor sourcing

• Regulatory response

• Regulatory reforms

and oversight

• Financial crisis management

• Evolution of market infrastructure

• Investor and consumer protection

• Systemic risk policy

and management

• Risk quantification,

policies and processes

• Capital, funding and balance

sheet strategy

• Accounting analytics, policy

and implementation

• Regulatory compliance

• Organization design

and governance

• Operational transformation

• IT value economics/

portfolio optimization

• Information management/

data quality

• Risk technology

• Business process and

IT outsourcing

• Cost management

• Target/opportunity

identification and investment

thesis development

• Strategic and commercial due

diligence (acquirer and vendor)

• Post-transaction and portfolio

company optimization strategies

• Fund management, process

and organization design

• Valuation advice

Public Policy Finance and Risk Strategic IT and

Operations

Corporate Finance

and Advisory

Corporate and

Institutional Banking

Retail and

Business Banking

Insurance

Wealth and Asset

Management

• Retail payments strategy

(credit, debit, prepaid,

mobile and

enterprise payments)

• Corporate payments

strategy and

benchmarking

• Growth and market entry

for issuers, networks

and acquirers

• Rewards program design,

optimization and

liability management

• Cost and

efficiency improvement

• Risk assessments

Payments

Strategic Growth Through High

Value Small Business Targeting

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What do Small Businesses in the US

look like?

Source: US Census Bureau 2011 Statistical Annual

Pe

rce

nt

of

tota

l s

ma

ll b

usin

es

se

s

28MM+ Small Businesses 5MM+ Employer SBs

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Why focus on Small Businesses? Role in the economy

99.7% 64% 49% 43%

of US

employer firms

of net new

private-sector

jobs (2002–2010)

of private-sector

employment

of private-sector payroll

46% 43% 98% 33%

of private-sector output

of high-tech

employment

of firms

exporting goods

of total

exporting value

Source: SBA (http://www.sba.gov/sites/default/files/FAQ_Sept_2012.pdf)

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Why focus on Small Businesses? Profit potential for banks

• ~18% of total available

“retail” profit

• Greater average profit than

consumer

• Not as highly competed?

• Opportunity for differentiation?

Annual post-tax retail banking economic profit pools

$ BN

Note: Profits calculated with Oliver Wyman assumptions for Small Businesses with <250 employees

Source: Oliver Wyman Survey of Small Business Owners (Q2 2014), Oliver Wyman Consumer Profit Pools

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Where do banks generate profits from

Small Businesses?

Deposits Cards Loans Merchant

~50% of total SB banking profit is in Card and Merchant Services

Source: Oliver Wyman 2011 Survey of Small Business Finances

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Card and Merchant Services customers are

typically far more valuable for the bank overall

Relative value of SB by card user status Relative value of SB by merchant services

user status

Card user status Merchant services user status

Card users

generate on

average seven

times the profit

for banks as non

card users

Merchant services

users generate on

average four

times the profit

for banks as

non card

users

Source: Oliver Wyman 2011 Survey of Small Business Finances

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Drivers of need and value for small

business products

Drivers of

product need

Drivers of

product value

• Any business • Retailers

• High volume/large ticket

• Remote payment

acceptance

• Retail supply chain

• Employee purchasing

• Short-term liquidity

challenges

• Lumpy cash flows high

balances / spread income

• High transaction volume

high item fees

• High transaction volume

• Multi-channel/e-commerce

• High transaction volume

• Revolved balances

Checking account Merchant services Credit card

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Three primary small business types

Micro

Business-to-consumer

Business-to-business

• Actively managing cash

flows

• Operating capital

• Payments acceptance and

remittance

• Non-analyzed checking

account (and basic treasury

services)

• Merchant (including value

added services)

• Line of credit

• Owner operator/employer

• Primary contributor to

household income

• Retailer or service

professional (e.g.

doctor/lawyer)

• Safe store of money

• e-commerce capabilities

• Startup and tax advice

• Checking account

• Merchant services (POS

and online) & card

• Sole proprietor/non-

employer

• Non-primary contributor to

household income/hobby

vs. vocation

• Typically online retailing or

remote service provision

• Working capital

management

• Operating & investment

capital

• Large dollar electronic

payments capabilities

• Account under analysis

• Term loan and line of credit

• Treasury services (incl.

merchant, payroll, wire/ach,

multi-currency)

• Professional/dedicated

management

• Lumpy/seasonal cash flows

• Capital intensive

~50%

~25%

~25%

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Defining characteristics Common needs Bank solutions

Sample tactical approach

1 Centralized list

development

• Identify existing customers with “off-us” Credit Card and/or

Merchant Services

• Focus service efforts on these customers

2 Centrally

coordinated

outreach

• Align customer value with offer and outreach channel –

convert the sale

• Test-and-learn approach

3 Seller

refocusing

• Redirect efforts of the salesforce towards the greatest sources

of value – deposits and payments

• Change the culture – incentive compensation, performance

management, career development

4 Seller

empowerment

• Train the sales force to have the right conversations – work

with your partners

• Equip sellers with the right tools – marketing collateral,

sales guides

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Shifting customer mix alone can double the profit

of your Small Business banking operations

Profit lift NA ~2x Source: Oliver Wyman 2011 Survey of Small Business Finances

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How Vantiv can help

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Our goal in partnering with you is to help you

address your growth priorities

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Better meet your clients’ needs

Vantiv assets, capabilities and scale

Grow

customer base

Retain and deepen

existing

relationships

Improve

product

economics

Vantiv is built to make you successful

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We are new

We are different

We are hungry

• We don’t have baggage

• We are built to purpose

• We think like you

• Our focus is on you

• We are future-focused

• We strive to push the

envelope

This webinar is one of a series that we host to

share our thinking on the most important issues

in banking and payments

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Helping small businesses manage cash flow and

receivables

Coming Soon

The payments industry is rapidly changing…

Mobile

Online

Social

Multi-channel commerce

Big data

Loyalty and advertising

Chip

Next gen POS

Cloud

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…and we have leading solutions for today’s and

tomorrow’s requirements

Mobile acceptance Mobile payments Targeted offers

EMV Gift cards Analytics

Example: Attrition Alerts

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Q&A For more Vantiv Insights, visit Vantiv.com/Research

Vantiv.com/fimerchantservices

Simon Powley

513.900.3714

Simon.Powley@Vantiv.com

Strategic Growth Through High

Value Small Business Targeting

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