State of Washington2014 Commercial Card Forum

State of Washington2014 Commercial Card Forum

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Agenda

8:30 – 9:00 Arrival, morning refreshments provided 9:00 – 9:10 Introductions & Agenda Review (DES and USB) 9:10 – 9:30 ST of WA Program Performance Review (USB, Kevin Noren) 9:30 – 10:00 New WSCA contract update, including rebates (USB & DES) 10:00 – 10:45 VISA Industry Updates (Orson Morgan, VISA) 10:45 – 11:00 BREAK 11:00 – 11:15 Program Optimization Analysis (Kevin Noren, USB) 11:15 – 11:45 Best in Class program review (DES) 11:45 – 12:15 Access Online Q&A (USB, Sandi Hampton) 12:15 – 1:15 LUNCH (on your own) 1:15 – 1:45 EMV (Chip & PIN) rollout (USB, Kevin Noren) 1:45 – 2:15 WA ST Program Support Team (USB, Kevin Noren) 2:15 – 2:45 Best in Class program review (King Co)

2:45 – 3:00 BREAK (State Agencies may leave at this time, questionnaire) 3:00 – 3:30 Payment Plus / Epayables (Kevin Noren, USB) 3:30 – 3:45 Closing – please complete questionnaire

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WSCA Contract and Rebate

WA ST joined the WSCA contract as of 4/1/14, Q2 First rebate (Q2) under new contract paid in September New Rebate has 3 components

• Regular Spend Volume, 130 basis points

• Large Ticket Spend Volume, 75 basis points (LT report from AC to data exchange)

• File Turn, 45 basis points (lose a point each day over 15 days) DUNS

• Agent groupings

• Clean up effort

• W9’s

State of Washington

Improving the Value and Performance of your commercial Card Program

State of Washington

Improving the Value and Performance of your commercial Card Program

Increase Card Program Value

Find more value in your card program with U.S. Bank Program Optimization.

• Simple performance evaluation process

• Identifies program expansion opportunities

• Provides recommendations with ROI payback

• Includes implementation action plan

• Serves as foundation for Working Capital DNA (complete payables strategy review)

Tangible Benefits

Benefit Description

Greater Financial Gain

Improve working capital Reduce transaction costs Increase rebate opportunity Lower supplier costs

Improved Supplier

Management

Negotiate deeper price discounts Act on payment term discounts Consolidate suppliers

Increased Spend Visibility

Gain greater visibility to payment detail and enterprise spend Enable more informed decision making Leverage robust reporting

Enhanced Control

Improve oversight and management Block unwanted spend Prevent and detect fraud more easily

Card Program Trends and Best Practices Best practice organizations capture significantly more

spend on cards than the average:• 93% of travel . . . average is 72%

• 71% of transactions < $2,500 . . . average is 52%

• 53% of transactions $2,500 - $10,000 . . . average is 31%

76% of organizations expect to increase purchasing card spend…expected overall increase is 32%

Checks represent 70.4% of overall organizational payments

RPMG 2011 Travel Card Industry Benchmark Survey / RPMG 2012 Purchasing Card Benchmark Survey

Commitment/ Commitment/ ActionAction

Optimization Process

Benchmark/ Benchmark/ Capturing Capturing

OpportunityOpportunityCollect DataCollect Data

Understand Understand Objectives/ Objectives/ ChallengesChallenges

• Present Program• Develop Initial

Plan• Interview Key

Personnel

• Collect andAnalyze AP Data

• Discuss PreliminaryFindings

• Provide Benchmark Comparison

• Identify Opportunity• Build Business Case

• Obtain Executive Approval

• Build/ExecuteAction Plan

• Measure Results• Conduct Additional

Analysis

Analysis Process

ExistingProgram

Best PracticeBenchmark

Spend Gap/Business

Case

Opportunity Identification

Average Tran SizeOverall Existing

SpendOverall Existing

Trans Benchmark1 Benchmark Spend Benchmark Trans<$2,500 9,283,431$ 30,945 80% 7,426,745$ 24,756 $2,500 - $10,000 23,019,722$ 7,194 35% 8,056,903$ 2,518

$10,000 - $100,000 41,728,310$ 3,629 5% 2,086,416$ 181 Totals 74,031,463$ 41,767 17,570,063$ 27,455

Benchmark Sample

Financial Benefit Sample

Benefit Category Benefit AmountP-Card Rebate 690,000$ Transaction Cost Savings 409,281$ Cash Float Savings 43,012$

Total Financial Benefit 1,142,293$

P-Card Rebate

Transaction Cost Savings

Cash Float Savings

Closing the Gap - Initial Focus

Start with easy opportunities that require minimal change. Common examples include:

Slippage – suppliers that already accept card payment from your organization but that are being paid via other methodsSuppliers within common card categoriesCapturing spend that’s currently being made outside of existing policies.

Program Slippage Report

Supplier NameCardable Avg. Tran

Amount

4,171

499

28,188

35,108

20,540

1,180

2,362,150 115

Total 2,535,554 12,264 207 105,547,234 89,451

GULFSTREAM 70,560 548 129

3,128,905 111

XEROX CORPORATION 8,248 20 412 3,124,591 89

VERIZON 17,737 113 157

59,562,748 14,279

OFFICE DEPOT 19,634 105 187 37,368,840 74,857

WW GRAINGER(*P) 2,419,375 11,478 211

Metrics

Card Annualized Spend Amount Card No. of Trans

Card Avg. Tran Amount

Cardable Annualized

Cardable No. of Trans

Visa Acceptor: Yes

Cardable Payment Methods: CHECK

Excluded Supplier Name: None

Top Suppliers: 75

Excluded Business Unit Name: NoneExcluded Cost Center Name: None

Commercial Card vs. Cardable Spend by Supplier

Client Name: ABC Company

Transaction Limit < 2,428,455Spend Category Name: All

Closing the Gap - Advance to Next Level

Apply advanced U.S. Bank payment technologies:

Improved controls/analyticsPost invoice payment with Access Online Payment PlusConsolidated payment file deliveryGhost cards / AP cardsVirtual PaySpend AnalyticsExpense management integrationGlobal travel card issuanceManaged spend / meeting cards

Working Capital DNA

Checks

Card

ACH

Rigorous Evaluation Tools Program assessment / financial benefit Detailed reporting for opportunity identification Peer industry benchmark Best practice diagnostic Dashboard Modeling

Dashboard Modeling Capability

More value and improved performance Schedule follow-up meeting to discuss current

card program performance and preliminary objectives

Next Steps

EMV FAQ’s

EMV FAQ’s

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Frequently Asked Questions

What is EMV chip card technology? 1. What is EMV?

Named after its original developers (Europay, MasterCard® and Visa®), EMV chip cards feature embedded microprocessor chips that store and protect cardholder data.

2. What are the benefits of a chip card? While chip cards can help reduce various types of fraud, they do not eliminate it entirely. The primary benefit of a chip card is the prevention of counterfeit fraud in card present transactions. The chip embedded in the card is nearly impossible to duplicate. The chip also increases security through the use of stronger authentication methods at the point-of-sale (POS). The combination of stronger authentication methods and unique transaction elements makes chip card account data less attractive to steal and counterfeit fraud exceedingly difficult. For cardholders, the chip card provides:

• Enhanced security for card present transactions • The broadest card acceptance/interoperability around the world

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EMV FAQ’s Cont4. Does a chip card still have a magnetic stripe on it?

– Yes. Your chip card also has a magnetic stripe on it for use when a POS terminal or ATM does not support a chip-enabled card.

5. Is there a law that mandates chip cards?

– No. There is no law or mandate that requires a chip in consumer or commercial cards. Rather, in October 2015 the card organizations (Visa, MasterCard, American Express® and Discover®) will shift the financial liability of counterfeit card-present fraud to the party (issuer or merchant) not supporting chip cards.

6. How does the chip in a card work?

– The embedded chip stores information required to authenticate, authorize and process transactions. This is the same type of information that is stored today on the magnetic stripe.

– Chip cards and chip terminals work together to ensure a highly secure transaction by validating the card and cardholder and the account information, e.g., cash access, transaction limits, etc.

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EMV FAQ’s Cont

What is U.S. Bank doing?

7. What is U.S. Bank’s plan to support chip cards?

– U.S. Bank has been issuing chip cards in Canada since 2009, in Europe since 2011, and to U.S.-based cardholders who travel internationally since 2012.

– Starting in October 2014, U.S. Bank will begin migrating its U.S.-based commercial card portfolio to chip cards. The corporate travel card portfolio is expected to be 100% chip card by October 2015, and the one card and purchasing card portfolios will be 100% chip card by the end of 2017.

– See “When is this happening?” for more information.

8. Why is U.S. Bank issuing its cards with a chip?

– U.S. Bank is issuing chip cards to provide clients the latest in secure payment technology and to support the shift in financial liability that will take place in October 2015, when the card organizations shift the responsibility for any fraud resulting from a payment transaction to the party (issuer or merchant) using the least secure technology.

9. What is U.S. Bank doing to support Program Administrators during the migration?

– U.S. Bank will provide informational resources such as these FAQs and communication templates to help educate your cardholders. Your U.S. Bank Representative will work with you and keep you informed throughout the process by providing additional tools and resources.

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EMV FAQ’s Cont

When is this happening?

10. When will our cardholders begin seeing the new chip cards?

– Beginning in October 2014, clients using a U.S. Bank standard card design (see image) with a corporate travel, purchasing and/or one card program will be among the first customers whose cardholders will receive a chip card. Specifically, we will begin re-issuing chip cards to cardholders whose cards expire in November 2014. Once your card program begins migration to chip, all new and replacement cards will be issued as EMV.

– Starting in 2015, we will accelerate the re-issuance process to ensure all corporate travel cards are chip enabled by October 2015. We will provide more details on our accelerated re-issuance initiative later this year.

What is the impact to my program?11. Our company logo is on our card, will the chip cover it?

– Your U.S. Bank Representative will contact you directly if we need to change the size of your logo to accommodate the chip. If you do not hear from us, the chip will not impact the size of your logo.

– Please be aware that in some cases your logo may be positioned differently, for example, it might move to a different side of the card to avoid interference with the chip.

12. Will our organization need to pay for the new chip cards?

– U.S. Bank is covering all costs associated with the migration to chip cards. However, like today if you are interested in customizing your card, please work with your U.S. Bank Representative to determine costs.

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EMV FAQ’s Cont

13. What information will my cardholders receive related to the chip card?

– Cardholders will receive information on the card carrier, which will include instructions on how to use the new card.

14. Will my card program have both non-chip and chip-based cards?

– Until the migration is complete, you may have some cardholders with chip cards and some without.

15. What if my program already has chip cards?

– There will be no change for those cardholders.

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EMV FAQ’s Cont

16. How should cardholders use their new chip card? Cardholders should experience only minor differences when using their chip card. Instead of swiping the card at a merchant’s terminal, the cardholder inserts (“dips”) their card into the slot underneath the keypad until it “clicks,” leaving it until they see prompts to remove it. At merchants without chip-enabled terminals, the cardholder swipes the card as normal. Over time, more and more merchants will have chip-enabled terminals, so this experience will become more commonplace. In fact, several well-known national retailers already have chip-enabled terminals.

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EMV FAQ’s Cont

17. How should cardholders activate their card?

– Cardholders will need to call the number on their card and follow the prompts to activate it. Their existing card will work until the new card is activated or it reaches its expiration date, whichever comes first.

18. When will cardholders be prompted to enter a PIN?

– In the U.S., a cardholder will most likely not be prompted to enter a PIN at a merchant POS terminal. For U.S. Bank commercial cards, the primary method of authentication at the POS is signature. However, outside the U.S. a cardholder may experience a situation when a PIN is required, such as at unattended gas dispensers, parking garages, and train and bus stations.

– Note: A cardholder will always be required to enter a PIN when using an ATM.

19. How does a cardholder get a PIN?

– Cardholders will receive a PIN in the mail for their new chip card. The PIN is sent separately from their new chip card. As a reminder, cardholders may be prompted to enter their PIN when travelling internationally.

20. What happens if a cardholder forgets their PIN?

– If a cardholder forgets their PIN, they should contact Customer Service and request their PIN be mailed to them. Customer Service does not have the ability to provide a PIN over the phone. Cardholders should expect to receive their PIN, via USPS, 7-10 business days after it is requested.

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Payables Efficiency Through…

Access OnlinePAYMENT PLUS

INVOICE RECEIPT

FINANCIAL SYSTEM

APPROVALCODING PAYMENT

Your current processes remain

Only the payment method changes

Access Online Payment Plus

Access OnlinePAYMENT PLUS

FEATURES

Secure payment delivery through U.S. Bank Access Online

Dynamic credit adjustment or single-use accounts

Multiple invoices may be included on one payment

Secure supplier notification including remittance advice

Automated reconciliation between transactions and payment instructions

Reporting and financial extracts for integration with client systems

BENEFITS

Increase control and security

Improve business processes through payment automation

Reduce costs and fraud associated with check payments

Enhance cash management

Increase rebate opportunities

Payment Plus Features and Benefits

Client

U.S. Bank

Supplier

Creates or Uploads Payment Instruction

Process Transaction

Confirm Supplier Notification (Optional)

Generate Reconciliation

Report/File Extract

Reconcile Transactions Using

Access Online Report/File Extract

Adjust AccountCredit Limits

Load Payment Instructions to U.S.

BankAccess Online

SendPayment

Notification to Supplier/Buyer

Post Transaction in Access Online and Match to Payment

Instruction

Payment Plus Process Flow

1. File (automated) Standard input file

File specifications available

Options for submitting payment instructions:

May do any combination of the above

Payment Instruction File layout available today

1. Form (on-demand) Individual payments

Only eight fields required

May include: Pre-authorized limits Single use accounts

Step 1: Submit

Payment Instruction Form Only eight fields required:

1. Merchant Email 2. Expiration Date 3. Payment Account 4. Control Number 5. Amount6. Merchant Name7. Invoice Number8. Line Item Total

Submit payments directly from Access Online Select pre-authorized limits or single-use accounts

1. Submit 3. Monitor2. Pay

Submit payment instructions (file or

form)

Load to Access Online

Open accounts and adjust credit

limits

Review transactions using

reporting or file extract

Send payment notification and

remittance adviceto supplier via email

Transaction posts in Access Online and auto-matches

to payment instruction

Step 2: Pay

Sent: Tuesday, October 13, 2009 12:03 PMTo: paul.billings@verizon.comCc: APS@directconnect.comSubject: Purchase authorization for Payment # 242424422

ABC Company is now authorized for the next 20 days, to charge the credit card account ending in 2712 for the following customer: Customer Name: U.S. Bank For a total Amount of: $10296.46 This Payment covers the following Invoices: Invoice Number: Invoice Amount: 673422 2356.47 673423 3854.34 673424 4085.85Also, for the best and most efficient results, please process this charge amount in a single transaction within 72 hours of receiving this notification. Thank you.* If you have any further questions, comments, or concerns regarding this matter, please direct them to Bob Smith at 555-333-1234. DO NOT REPLY TO THIS EMAIL MESSAGE. * *** THIS E-MAIL ADDRESS IS USED BY AN AUTOMATED SYSTEM AND RESPONSES ARE NOT MONITORED. ***

Example: Pre-authorized limits

Supplier Notification

Use Access Online Reporting or financial extracts to monitor Payment Plus activity

Access Online Reporting Includes:

1. Billed Transaction Analysis with Payment Detail2. Payment Instruction Analysis 3. Payment Instruction Detail

Step 3: Monitor

Billed Transaction Analysis with Payment Instruction Detail

Step 3: Monitor

U.S. Bank Representatives• Relationship Manager

• Implementation Project Manager

• Technical Integration Manager

• Enablement Managers

• Account Coordinator

Supplier Enablement Services• Dedicated Supplier Enablement Managers

• Flexible to your needs

• Take on as much or as little of supplier enablement as desired

• Leverage expertise of U.S. Bank Payment Solutions to enablesuppliers to accept payments, enhance data capture and reviewmerchant fee structure

usbpayment.com

Your U.S. Bank Resources

Next Steps Prioritize suppliers and communicate

expectations through Visa Perform Source tools

Try it with a few payments

Transact with Payment Plus

1. Submit2. Pay3. Monitor