Remaining Relevant in a Changing Payments Landscape · according the 2010 Federal Reserve Payments...

Remaining Relevant in a Changing Payments Landscape

Ben Jackson Mercator Advisory Group

Terri Ferrise

Cachet Financial Solutions

Luz L. Urrutia Community & Southern Bank

September 2012

Agenda

Who is up here?

What does the landscape look like today?

Who is the new consumer market?

What is the role of Mobile Technology and RDC?

How did El Banco expanded services to the unbanked?

Where do we go from here?

Your Questions.

2 Copyright 2012, RemoteDepositCapture.com

Panelists Introductions


Ben Jackson


Who is up here? What does the landscape look like today? Who is the new consumer market?

Forces Changing The Financial Landscape

5

• Bank Customers Close or Lose Accounts • Payments Choices Change Economy

• The Internet Changes Payments Options • Smartphones Make the Internet Mobile Technology

• Durbin Amendment Changes Bank Business Models

• Merchant Payment Preferences Allowed by Law Regulation

Source: Mercator Advisory Group Copyright Mercator Advisory Group 2012

The Unbanked and Underserved by the Numbers

Unbanked 7.7% of U.S. households. 9 million households. 17 million adults. 21.7% of black

households. 19.3% of Hispanic

households. 15.6% of Native American

households. 12% of unbanked

households have a GPR card.

Underbanked 17.9% of U.S. households. 21 million households. 43 million adults. 31.6% of black

households. 28.9% Native American

households 24% of Hispanic

households. 16% of unranked

households have a GPR card. Source: FDIC Survey of Unbanked and Underbanked Households, Dec. 2009

6 Source: Mercator Advisory Group Copyright Mercator Advisory Group 2012

Some Additional Numbers Round Out the Picture

• 93.6% of all consumers have a bank account, according to the Federal Reserve 2009 Survey of Consumer Payment Choice. – Perhaps the unbanked market is smaller than thought

• 32.3% of all consumers have used a prepaid card.

• The average value of a GPR prepaid transaction was $33, according the 2010 Federal Reserve Payments Study.

• 67% of GPR transactions were less than $25. – An indication that Prepaid is displacing cash

• About 1.3 billion transactions were made using GPR cards in 2009.

• These numbers show that interest in and use of prepaid goes beyond the unbanked.


There Are Many Alternative Financial Services Products & Service Providers

• Money Orders • Check Cashing • Prepaid Financial Services • Remittance / Money Transfer • Bill Pay • Pay Day Loans • Title Loans • Secured Loans


The Many Outlets For Financial Services

Convenience Stores

Supermarkets Super Stores

Alternative Financial Services Outlets

Pharmacies

Suppliers


The Alternative Financial Services Market

• 22,000 Pay Day Loan Outlets 1 – 10,000 offer a range of services – 8,000 exclusive to PD Loans – 4,000 primarily check cashing outlets

with Pay Day Loans

• 11,000 Check Cashing Stores 2 – 180 million checks cashed 2 – 1.5 B in fees (2005)

• 148,126 Convenience Stores 3

– $54 Billion in AFS Revenue 4

1 in 2008, as estimated by FiSCA 2 in 2008, as estimated by Synergistics 3 as of December 31, 2011, per NACS/Nielsen Convenience Industry Store Count, 2012 4 Mercator / CSP Research Project, 2010

146,341

22,000

11,000

C-Stores

Check Cashers


The vast majority of these locations offer Money Orders and Remittance.

Location, Location, Location

- 20,000 40,000 60,000 80,000

100,000 120,000 140,000

Retail Access Locations

Currently providers offer cards in a total of 350,000 locations as well as online. This includes grocery stores, convenience stores, and pharmacies. Mercator research indicates approximately 62% of reloads happen at retail locations (predominantly WalMart & Check cashers).


Pay Day Check Cash

Prepaid Convenience Retail Outlets in Stockton, CA: Bank of America vs. Green Dot


Prepaid Card Access Points Dwarf Those of Major Banks

0 outlets 0 – 50 outlets 50 – 200 outlets Greater than 200 outlets SOURCE: Mercator, Green Dot, and Scarborough research survey conducted between February 2009 and March 2010 NOTE: Bank retail outlets and ATMs are as of July 2010 13

55,073 Retail Outlets

17,000 ATMs

12,355 ATMs

6,467 Retail

Outlets

9,812 ATMs

1,036 Retail

Outlets

18,135 ATMs

5,901 Retail

Outlets

15,549 ATMs

5,317 Retail

Outlets

• Additional PFS Penetration:

– Blackhawk – Western Union – InComm – Target / Amex – MoneyGram


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http://www.google.com/imgres?imgurl=http://www.fatwallet.com/attachments/8774_chaselogo.gif&imgrefurl=http://www.fatwallet.com/forums/finance/925604/&usg=__Q4ECxD3dg3n0X_b7sEHHKzBgEn8=&h=93&w=500&sz=12&hl=en&start=3&tbnid=dCau_G7-xtVz8M:&tbnh=24&tbnw=130&prev=/images?q=chase++logo&hl=en

Prepaid Financial Services Liquidity • Faster Access to Cash

– Surcharge Free ATMs at any retail location! • Deposits into the Account

– At any retail location! – Via the Mobile Phone anywhere you are!

• Same Day Bill Pay – Via card payment over phone anywhere you are! – Via mobile account access anywhere you are! – Via electronic bill pay any retail location!

• Money Order measures Bill Pays Failure

• Remittance – Over phone anywhere you are! – Via mobile account access anywhere you are! – At almost any retail location!

• Mobile Check Deposit – Immediate access to cash can be purchased for qualifying checks


BASIC PROPOSITION: Convenience & Value Wins the Consumer

Source: UNBANKED BY CHOICE: A look at how low-income Los Angeles households manage the money they earn The PEW Health Group, July 2010


Mercator Prediction

In 5 to 7 Years Prepaid Financial Services Will Have Disrupted Existing Financial Services Channels By

Delivering Improved Liquidity, Convenience, & Price


Mobile Financial Services

BUT WHICH CHANNEL WILL WIN THESE EMERGING CONSUMERS WITH THE BEST CONVENIENCE, LIQUIDITY, & PRICE?

Merchant, Bank, Check Casher, Mobile Operator, Card Network, Other?


Will Deliver Greater Convenience & Liquidity at Lower Cost

Terri Ferrise


What is the role of Mobile Technology and RDC?

Explosion of Mobile Usage

19

Sources: CTIA, October 2011, ThinkMobile w/Google April 2011, The Nielsen Company, 2011 Federal Reserve Board, Consumers and Mobile Financial Services Study, March 2012

• Mobile Usage is Ubiquitous & Common

– There are more wireless subscriber connections than people in the US

• Smartphone Usage Transcends Race and Socio-Economic Consumer Segments

– Your customers and your potential customers are using smartphone for every aspect in their lives

– Federal Reserve Board research shows that underbanked consumers have access to mobile phones and smartphones in greater numbers than the general population

New Competitors are Forming Dynamics of changing markets and technology

cause new competitors to arise


Evolution of Mobile Financial Services

• Balances • Transaction History • Information Services • Transfers • Alerts

Mobile Banking

• Bill Payment • Check Capture • eBills & Invoices • P2P transfers • Group Collections

Mobile Payments

• PoS Payments • Offers & Coupons • Loyalty & Rewards

Mobile Wallet


Creates the foundation to expose transaction services

Gain consumer confidence and build behavior patterns

Sources: American Bankers Association

Where are you?

• Where are you with your mobile offering?

• Consider what you can do to move forward.


How to Move Forward

Steps to take to improve your

mobile standing and attract these

emerging consumer segments


Understanding the Market Needs


Add Funds ACH Direct Deposit, Mobile RDC Retail Load Account 2 Account

Transfers P2P Transfers

Withdraw Funds

POS/PIN Purchase Bank Transfer, P2P

Transfer Mobile Bill

Pay/Remittance Contactless Payments ATM/Bank Teller

Withdrawals

Going Mobile: Meeting The Emerging Consumer’s Preference for Managing Their Finances

Manage Money Transaction History Balance Information Mobile RDC Status Location Services (ATM,

Load Network)

Manage Account Manage Transaction

Alerts Change PIN/Passcode Update Profile

How RDC Can Play a Role

Consider technology and services that deliver convenience, liquidity and value

– Mobile Remote Deposit Capture – Prepaid Card Programs & Mobile Check Cashing

• Immediate Good Funds

• Delayed Funding


The Benefits

A mobile deposit capture offering will increase

– Retention – Revenue – Relevance


Mobile Program Considerations

Key elements to consider when planning a mobile program

– User Experience – Security – Compliance


Mobile Program Considerations Explore Partnerships to build or expand your mobile offering

– Build relationships with technology partners who are a good fit considering your needs, including:

• Your resources

• Your capabilities & experience

• How quickly you want to get to market

• Status of your current offering


The Importance of Staying Relevant


Banks have Consumers’ Trust for now

Luz Urrutia


How did Community & Southern Bank expand services to the un/underbanked?

Who do we serve?

What are their needs?

Product solutions

Company Overview: Community & Southern Bank

1. State Chartered Bank established in January 2010

2. Assets totaling $2.5 billion – 38 branches in North, East, West and Metro

3. One of the Best Capitalized Banks in the State of Georgia

4. Acquired El Banco de Nuestra Comunidad in 2010

Jose’s Profile: • No previous banking experience • 8 years in US • Family in home country • 1 ID - including Matricula Consular • Only uses alternative financial services • Uses prepaid card

Alternative Financial Services Unbanked - Jose

“At CSB I feel safe and at home. They make me feel accepted. I can cash my checks, send money to my family in Mexico using the IDs that I have, pay my bills, use my prepaid card anywhere and save some money too.”

Existing Account Holder: Store Manager - Sue

Sue’s Profile: • Store manager for locally owned business • Husband recently got laid off, no savings • Gets paid with hand signed check every two weeks • Uses check cashing store to cash check and pay

utility bill • Deposits remaining cash in checking account for

mortgage • Has a prepaid card for day-to-day spending

Small Business Owner – “Jefe” Contractor

Luis’ Profile: Self-employed with employees – Construction Personal Bank Account used as dba for business No access to business credit with other banks 2 valid ID’s, ITIN and Matricula Cashes large checks from general contractors Deposits spending money in prepaid card Deposits remaining cash in his bank account for

safety 5 checks per month, $5,000 per check, $25,000 total

Latino Middle Market Business Value Proposition “CSB” is the banking relationship that really serves my financial needs. They understand my most important point of pain: paying my employees who need to cash their checks and keep their money in a safe place either in a prepaid card or a bank account. Because they solved my payroll problem, I chose them as my business banking partner.

MIDDLE MARKET BUSINESS

• Retail Business, with 3-10 locations • More than 15 employees with no bank account • Permanent resident or naturalized citizen • Typically incorporated with EIN • Already have a commercial relationship with a bank • Access to commercial credit • Mostly underserved by mainstream banks

Integrated Product Solution to Build Relationships

Money Remittances

Bill Payment

Low Cost Money Orders

2. Use card for basic transactions

Guaranteed/Not Guaranteed Check

Cashing

Direct Deposit

Cash Load (Retail Network

& Kiosks)

1. Load Money onto Card

ATM Cash Withdrawal

PIN/Signature Purchases

3. Use card for cash and retail purchases

Small Dollar Loans

Coming in 2013

4. Use card to access credit

• Reloadable Branded Prepaid Card (immediate funds) • Bank Account (delayed availability)

Cash Load (Mobile App)

Online/Mobile Account Access

5. Acct Access

Kiosk Delivery Platform

37

Products/Services Check Cashing (Chexar) Remittances Bill Payment Money Orders General Purpose Reloadable Card Cash dispenser

Customer Service Model Enrollment Operated by 1 Customer Service Rep Extended hours of operation Adjacent to CSB Branches, commercial businesses, shopping centers, gas stations, colleges/universities

Questions?


About The Presenters Ben Jackson • Mercator Advisory Group • [email protected] • www.mercatoradvisorygroup.com

Terri Ferrise • Cachet Financial Solutions • [email protected] • www.cachetfinanical.com

Luz Urrutia • Community & Southern Bank • [email protected] • www.mycsbonline.com


mailto:[email protected]

http://www.mercatoradvisorygroup.com/


http://www.cachetfinanical.com/


http://www.mycsbonline.com/

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Remaining Relevant in a Changing Payments Landscape · according the 2010 Federal Reserve Payments...

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