Best Practices for a Successful POP Implementation

1
Best Practices for a Successful POP
Implementation
ALWAYS LOW PRICES. ALWAYS WAL-MART.

• May 9, 2006

2
Introductions

• Shane Hughes
• Electronic Check/ACH Product Manager
• Wal-Mart Corporate Finance
• Wal-Mart Stores, Inc.
• Neil Edmonds
• Group Product Manager
• Epson America, Inc.

3
Wal-Mart Policy Disclaimer

• Will not endorse any vendor
• Will not reveal specific numbers
• Will not disclose details of Wal-Mart check
  strategy

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Todays Agenda

• Background
• Why Point-Of-Purchase Check Conversion (POP)?
• Customers
• Stores
• Supply Chain
• Store Support
• How was POP implemented?
• Customers
• Stores
• Information Systems
• Ineligible Items
• What about Check 21 BOC?

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The Conventional Wisdom MYTHS About POP

• Consumers Wont Accept It
• Cashiers Cant Be Trained for It
• The Signed Authorization Requirement is Too
  Cumbersome
• POP Slows Down the Transaction and the Lane
• POP is a Mom Pop-Store Concept, Not Workable in
  a National, Multi-Lane Environment
• Cant Believe the ROI (won't save us anything, it
  just wouldn't work for us)
• Plus, There is Really No Need to Implement POP
• Because
• Checks are going away
• Payments are going to "low cost" card
  transactions
• Check 21 is coming and will make POP obsolete
• One Retailers detailed analysis..

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Checks Were a Fluid Product at Wal-Mart A
Number Of Programs in Review

• Wal-Mart Check Programs
• POP, RCK, Collections Enhancement, Payroll Check
  Cashing

• Changed Organizational Structure to Focus
• Before Multiple Groups - Asset Protection, Ops
  Dev, Customer Service, Financial Ops, Electronic
  Payments
• After Finance Owns Check Strategy Supported by
  Customer Service

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Wal-Mart Suffered A First Mover Disadvantage With
Its POP Pilot
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The Cost Of Processing Over 680 Million Checks
Was Too High To Let POP Fail
Wal-Mart measured the cost of checks at a company
store level
Net Returns
Collection Efforts
Bank Costs
Other
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As POP Check Conversion Evolved The Common Wisdom
Became Myth
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With Increasing Levels Of ID Theft The Consumer
Benefits Of POP Became Important

• Personal information is protected
• hand the check back
• Float is preserved
• 2 days of float
• Confusion is avoided
• customer signs authorization slip
• Fraud detection is improved
• real-time analysis and faster return info

There Is Only One Boss. The Customer. Sam
Walton
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Over Time Operations Began To Really Appreciate
How The Stores Benefit From POP

• POP Conversion streamlines many cash office tasks
  allowing stores to
• Refocus efforts toward customer-facing duties
• Streamlines deposit preparation
• Provide better service to cashiers
• Keep drawers stocked with cash
• Reduce cashier training requirements
• Simple prompts and processes

If you take care of the people in the stores,
they will take care of the customers in the same
manner. Sam Walton
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Wal-Mart Appreciates The Efficiency Of POP
Traditional Check Processing
Clearing House
Customers Bank
Store
Stores Bank
Customers Bank
Federal Reserve
- Every step in the supply chain represents costs
in the system
- The entire system relies on the physical
transportation of paper
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POP Check Conversion Allows The Home Office To
Better Support The Stores

• Fewer calls than with paper checks

Call Centers
Bank Recon

• Reduce risk in case of disaster

Asset Protection

• Fewer exceptions to work

Information Systems
Corporate Finance

• Lower overall cost

• Reduce manual data entry by stores

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Choosing POP Was Only The First Of Many Decisions

• How do we explain POP to our customers?
• How do we train our stores?
• How should Information Systems design POP?
• Should we image checks in lane?
• What about ineligible items like payroll checks?

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How do we explain POP to our customers?

• Over the years weve tried everything
• Bag stuffers parking lot litter
• Extensive explanation from cashiers confusion
• Home office reps onsite overkill
• Minimize explanation non-event for customers

Most customers have already experienced POP,
others adjust quickly
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How Do We Train a 24-hr. Store With 80 Cashiers
and Significant Turnover?

• Again, weve tried everything
• Videos confusion not everyone sees it
• Extensive documentation most people dont read
  it
• Home office onsite training too many shifts
• Quick phone call with front-end leaders key
  points communicated

Follow the prompts, 2 days of float, phone
number for support
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How Should The Information Systems Division
Design POP?

• Create a new tender type
• Keep the prompts simple
• Hand check back to customer
• Have customer sign receipt
• Mirror existing systems when possible
• Recon looks like debit/credit
• Performance monitoring looks like all payments
• Avoid expense of imaging if possible
• Avoid hardware costs
• Avoid cost of imaging infrastructure

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Do We Need Check Images?

• Checks for which Wal-Mart doesnt need an image

Checks that do not return
Checks that clear during
re-presentment
Big advance since 1999
Checks the vendor can map to contact info
Checks collected passively
Fraud
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What About Ineligible Items Like Payroll Checks?

• Process them as paper checks
• Small of checks are ineligible
• Cashiers follow systems
• Dont print a signature slip
• Put check in drawer
• Deposit preparation includes a few paper checks
• Payroll
• WIC
• Convenience checks
• Not an issue

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In The End POP Check Conversion Is The Best
Solution For Customers
Privacy Protection
Avoiding Confusion
Fraud Protection
Do nothing traditional paper processes
Check 21/ imaging/ merchant capture
Point Of Purchase Conversion (POP)
Good
Bad
Advantages of POP Privacy return checks to the
customer Confusion customer signs an explicit
authorization Fraud authorization system used
on every transaction quick info on returns
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Summary

• Checks matter
• Manage overall costs not transaction volumes
• Facts over myths
• Math and real-world observations vs. assumptions
• Customers are the boss
• Protect their information
• Most have already experienced POP, others adjust
  quickly
• Stores pay our salary
• Stores love how POP makes their lives easier
• Other options make life more complicated for the
  stores
• The home office is just overhead, costs must be
  reduced to make the stores more profitable

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Questions?