May 9, 2006 2006 Sole Distributor Conference Payment Solutions Organization Market Trends

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May 9, 2006 2006 Sole Distributor
ConferencePayment Solutions Organization Market
Trends

• Neil Boyd
• NCR Payment Solutions, MPM

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Agenda

• 845 915 Payments Organization
• Payment Solutions Market Trends
• 915 1000 ImageMark Passport Program Overview
• 1000 1030 Morning Break
• 1030 1130 ImageMark NCompass and ECPIX
  Program Updates
• 1130 1200 New Transport Offerings

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NCR Payment SolutionsOrganization
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NCR Payment Solutions Leadership Team
Vice President General Manager Alan Chow
Admin. Assistant Michelle Petrey
REGION SALES SERVICES
SOLUTIONS SERVICE OFFERS
Product Marketing Management Dick Wheeler
Customer Services Tom Volpe
Americas Region Sales Services Ron Furnier
EMEA Region Sales Services Tony Nathanael
Japan Region Sales Services Masahiro Oogushi
Asia Pacific Region Sales Services Anthony Lau
Legal Counsel Noelle Gumm
Hardware Supply Line Management Don Naciuk
Software Eng. Dev. Kevin Thomson
CFO Dahn Nilsen
Human Resources Alison Dutton
GROUP FUNCTIONS
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Product Management Marketing
Contract Management

• ADMINATRATIVE
• SUPPORT
• Michele Petrey Dayton
• Pat Fluelling - Waterloo

John Cheeseman (Manager) Nanci Daniel
PMM
Support Services Management
Tom Volpe (Director)
Marcom And Events
Brenda Bowman (Team Ldr.) Ann Marie. Lang (Mat.
Leave) Tricia Senkiw Mary Lottman
Dick Wheeler
Transports
Capture Program (Passport TM)
Archive Program
NCompass/IX Programs
Support Services Marketing
Ben Ho (Team Leader) John Cleat (Tech. Support)
Shamir Somani (LV Transports
3rd party prod.) Kathy Caskenette
(Mktg.)
Bergeron, Denis (Program Director) Andrew Short
(PM TM) Chris Meidell (PM Branch DC) Marnie Thorp
(Prod. Mkrg.) Chris Dell (PM Commercial DC) Bob
Raterman (PMM Non-Bank Solns)
Mark Amszej (Program Director) Joe Heit (PM)
Rob Carreon
Neil Boyd (Program Director) Rick Lugg (Tech
Bus Consultant) Judy-Ann DAguilar (PM) Tania
St-Denis (Prod. Mktg) Denis Golem (Tech
Consultant) Pantelis Nicolaou (EMEA ECPIX Bus
Consultant.)
Check 21 Truncation Strategies
Ian Goodall
PLUS

• IQA/IU
• Fraud

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Program Development
Ben Ho
Denis Bergeron
Neil Boyd
Mark Amszej/ Neil Boyd
Neil Boyd
Denis Bergeron
Program Linkage
Functions
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Key NCR Payment Solutions Contacts ???

• Function Name Email Phone
• EMEA Tony Nathanael anthony.nathanael_at_ncr.com
  357-22-390-142
• Mark Timms mark.timms_at_ncr.com 27-11-799-6020
• Pantelis Nicolaou pantelis.nicolaou_at_ncr.com 35
  7-22-390-186
• APAC Anthony Lau anthony.lau_at_ncr.com
  65-736-6442
• CLA Andre Novo andre.novo_at_ncr.com
  55-11-3347-1150
• Mari Herrera amarilis.d.herrera_at_ncr.com 1-305-
  225-2268
• Product Mgmt Denis Bergeron denis.bergeron_at_ncr.com
  1-519-883-3684
• Chris Meidell christopher.meidell_at_ncr.com 1-5
  19-884-1710 x5346
• Chris Dell christopher.dell_at_ncr.com 1-519-883
  -3649
• Neil Boyd neil.boyd_at_ncr.com 1-519-883-3730
• Ben Ho ben.ho_at_ncr.com 1-519-883-3749
• Shamir Somani shamir.somani_at_ncr.com 1-519-883-
  3747
• Mark Amszej mark.amszej_at_ncr.com
  1-519-883-3762
• MARCOM Brenda Bowman brenda.bowman_at_ncr.com 1-51
  9-883-3692
• Tricia Senkiw patricia.j.senkiw_at_ncr.com
  1-937-445-2688
• Mary Lottman mary.lottman_at_ncr.com 1-519-883-3
  699
• Marketing Kathy Caskenette kathy.caskenette_at_ncr.
  com 1-519-883-3601
• Tania St-Denis tania.st-denis_at_ncr.com
  1-519-884-1710 x5163

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World-wide Trend to Electronic Clearing and
Truncation
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Overall Key Cheque Payment Trend

• MEGA TREND
• Electronic Clearing ? Image Based
• Including Move to Truncation in Many Jurisdictions

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Systems Being Implemented

• ALL Electronic Clearing with Image Exchange
• Central Bank of Jordan
• Lankaclear, Sri Lanka
• Reserve Bank of India
• SAMA, Saudi Arabia
• Central Bank of Libya
• Central Bank of Algeria
• Central Bank of United Arab Emirates
• Central Bank of Bhutan
• Canada (Canadian Payments Association)

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Other Activity

• Pending RFPs ALSO Image Exchange
• Malaysia
• Ghana
• Bahrain
• Exploring
• Pakistan
• Cyprus
• Egypt
• Belize
• Trinidad
• Romania
• Kuwait
• Zambia
• Others

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Why is This Happening?
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Regulatory Trends

• Governments and World Financial Community
  continue to impose new requirements on banks
• Basel II
• Anti-Money Laundering
• (US) Graham-Leach-Bliley
• (US) Patriot Act
• US, Europe, Canada, etc. Privacy Legislation
• On-line banking security (e.g. dual factor
  authentication)
• Countries Joining World Trade Organization
• Bank of International Settlement Recommended
  Practices
• World Bank, IMF Push for Modernized Payment
  Systems
• Electronic documents legalized

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Technology Trends

• Lower cost hardware servers, disk
• Moores Law
• Technology more affordable
• Old technology too costly to maintain
• Higher bandwidth/ more telecom
• Developing world putting in a lot of
  infrastructure over the past 5-10 years
• Relatively new wired and wireless networks in
  place
• Higher Throughput/Lower Price Transports
• US investment in imaging technology

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Competitive Trends

• Continued Bank Consolidation, Bigger Regional or
  International Banks
• BofA buys Fleet Bank
• Chase buys Bank One
• Toronto-Dominion (Canada) buys Banknorth in US
  which then buys Interchange
• HSBC.
• Consolidation occurring in Nigeria, expected in
  India
• World Trade Organization membership opening some
  markets
• Saudi Arabia 10 applications for Bank Charters
  (e.g. BNP Paribas)
• China foreign ownership caps increased

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Customer Service Trends

• Self-service
• Control what you want, when you want it
• On-line banking a must
• Multi-channel
• Convenience for customers service them how they
  want
• Continued requirement to grow the branch network
• Provide other convenience touch-points ATM,
  phone
• Customer Loyalty Declining
• Look for a better package/service elsewhere
• Can find out whats available through ample
  information on web-sites
• US DDA turn-over gt15 per year

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Environmental Trends

• Declining or Flat Cheque Volumes
• Lots of fixed costs
• Increasing Cheque Volumes
• Rising variable costs, additional fixed costs
  looming
• Increasing Cost of Labour
• Per hour
• Regulatory compliance
• More sophisticated procedures ? training
• Turn-over in active economies
• Increased Cost of Transportation
• Gas, city congestion, larger/spread-out branch
  network
• Rising Central Bank Interest Rates

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How is Cost and Service Being Improved?
Cheques sorted at Clearing Centre
Manual Processing Cheques touched 10 to 28
times!!
Deposit at Branch
Deposit Slip
8 Billion spent annually in back office
processing
Paying Institutions
Other Checks
Payee
Payor
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How is Cost and Service Being Improved?
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How is Cost and Service Being Improved?

• Service Improvements
• Commercial/Merchant Capture/ATM
• Faster funds availability
• More confidence fraud mitigation tools based on
  image and electronic data
• Image review of cheque payments
• Image statements, CD-ROM and Internet delivery
• Faster more accurate inquiries related to cheque
• Branch, Operations, Call-center ready access

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Market Trends Products
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U.S. Move to Remote Capture

• Banks adopting commercial cheque capture products
• Banks commercial customers get benefits
• Convenience, cost savings, faster availability,
  increased confidence
• Banks get benefits
• Protect customer base, increased revenues, cost
  savings, expanded market reach
• Without truncation and image exchange being
  universally adopted
• As more volume is image exchanged, Branch Capture
  will also take-off
• Greatest business case benefits

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ATM Trends Cheque Imaging

• Adoption of imaging at ATM considered top trend
  over the next 3 years

Source ATMmarketplace Future Trends Report 2004
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ATM Trends Cheque Cashing

• Check cashing a key revenue generation tool
  requires some element of imaging at ATM

Source ATMmarketplace Future Trends Report 2004
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TransportsHigh-Speed and Mid-range

• Death of high-speed sorters (gt1000 dpm)
• IBM no longer manufactures 3890
• Very few high-speed Unisys, Banctec sorters
• Decline of mid-range capture and encoding
  transports
• 43 decline 2005-2008 predicted for US Community
  Bank market, historically NCRs strongest
• Requirement for encoding declining
• Shift away from centralization
• Installed base of conventional transports but not
  likely to turn over with imaging replacement
• Internationally (CLA, MEA, APAC) still seeing
  good results, but consider truncating countries

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TransportsLow Volume

• New Models and Price-Points Driven by US
• Commodity??
• Improving to compete with one another
• Encoders
• Transitional or disappear entirely with full
  image exchange
• BUT
• Still a market until countries adopt truncation
  and image exchange

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Summary
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Summary

• Mega Trend for Cheque Payments is Image Exchange
  and Truncation
• Not just a US phenomenon by any means
• US doing it makes it visible to all, drives
  innovation
• Banks Experiencing Service and Cost Pressures
• Imaging and Image Exchange (with truncation)
  offers a solution
• This will accelerate the Mega Trend world-wide
• Product Demands Shifting
• Remote capture and remote/distributed encoding
• Low speed transports with improving
  price/performance
• Will show you that NCR is EXTREMELY well
  positioned!!

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Questions?
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Backup
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U.S. Cheque Usage In Decline
3.3 Billion Checks will be converted to ACH in
2006
(Source Celent April 2005)
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Future of ARC Cheque Conversion

• Source The Future of US Check Processing,
  Celent, October 2004

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Image Exchange Slowly Ramping
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Changing Economics for Paper Clearing
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Cost of Paper Processing in US
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Number of U.S. Branches has Grown
Source FDIC
Banks are building Branches to maintain and grow
DDA Market Share!