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Paymentflex Presentation Full   07 09
 

Paymentflex Presentation Full 07 09

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    Paymentflex Presentation Full   07 09 Paymentflex Presentation Full 07 09 Presentation Transcript

    • Introducing a new, dynamic credit system for credit cards and loans; so unique, it‟s patented! With Paymentflex all your customers can get a Low Interest Rate, always! Safely Boost Portfolio Growth and Profitability, Address Regulatory Concerns Paymentflex® has been issued US Patents #5,933,817 and #6,836,764 and has patents pending in other international markets. Paymentflex® is a registered trademark in the United States, Canada, and the European Community and is pending in other international markets. This document is the confidential property of Paymentflex Technologies, LLC and is not to be distributed without the express written consent of Paymentflex Technologies, LLC. © Copyright Paymentflex Technologies, LLC 2009 – All rights reserved – No claim asserted for non-original work. 1
    • Presentation Outline • Introducing Paymentflex: How it Works & Current Deployment • How Paymentflex Changes Customer Behavior and Profitability • Easy Implementation and Quick Wins • Why Deploy Paymentflex • Corporate Brand, Imagery & Leadership Impacts • Paymentflex Message: “Give the Customer What they Want” • Additional Resources 2
    • Introducing Paymentflex A unique and innovative opportunity to safely grow your credit card portfolios and increase profitability • Customers make their payments … each month and thereby choose their interest rate … each month • Completely systemic …simple … requires no other customer or issuer interaction • A customer-friendly, self-directed risk-based pricing methodology … ties interest rates to payment behavior • Proven to increase response rates, activation, usage, revolve rate, retention and to improve credit quality • Adding Paymentflex to reward programs strengthens them, adding prestige and credibility while increasing usage, revolve and profit • Unique brand strengthening marketing proposition • Easy to implement and manage – currently programmed on TSYS and First Data and can be easily enabled on proprietary platforms Transparent, unassailable and permissible way to market lowest APR 3
    • Introducing Paymentflex (continued) “With Paymentflex the more you pay of your outstanding balance, the lower your interest rate.” Each and every month, cardholders control their interest rate by choosing how much they pay with the convenience of just making a payment Paying more saves them interest expense and improves their credit rating! With Paymentflex all cardholders can get a low interest rate always! Paymentflex gives issuers dramatic improvements on all metrics, across all portfolio segments as a new product or an enhancement: Acquisition-Activation-Usage-Retention-Reactivation-Collections-Overall Credit Quality Paymentflex is also in direct alignment with regulatory and consumer advocate initiatives. Adopting it makes the issuer the “good cop.” A compelling consumer value proposition 4
    • How Paymentflex Works Each month, customers choose their payment and resulting APR Example using Outstanding Balance of $3,000 Payment % Payment $ Interest Rate 3% $90 15.9% 5% $150 12.9% 10% $300 7.9% Promote the Lowest APR Opportunity to your customers • Flexible to allow 2 or 3 payment/interest rate tiers • Easy to implement and manage  Programmed on TSYS and First Data – Deploy in under 60 days  Proprietary systems can be enabled in similar time frames • Protect yield with risk-based priced minimum payment APR Issuer controls and sets the payment tiers and corresponding APRs – Strategy is program, segment, account and/or balance specific 5
    • Recent Paymentflex Deployment Simple, fast and easy to market … No gimmicks or tricks 6
    • Increases Overall Profitability In Market Results Pre-Tax $ Per Account Range of Improvements Based on Past Deployments Per Year Increase Metrics 1st 5 Yr Key Drivers: Used Year Avg Interest Rates: Base Case Interest Rate: 12.9% Offer • Issuer Controls Desired Yield to All Customers • Goal with Paymentflex is to Promote Lowest Interest Rate to All Customers Interest Rates with Paymentflex: (not just Super-Prime) Simple Interest Rate “Spread” of: • Opportunity for Lowest Interest Rate is Always Available with Paymentflex 15.9%/12.9/%7.9% Offer to All Customers Base Case Portfolio Balance Mix Profile By Pmt Tiers: • Min Payer (<5% Pmt of Bal): 55% • Slow Payer (5%-10% Pmt of Bal): 10% • Occas/Rev (10%-99% Pmt of Bal): 15% • Pay-in-Fulls (100% Pmt of Bal): 20% $9 $20 New Account Acquisition Cost: 50% Response Rate • Up to 3X Industry Avg Response Rate ($100 Acquisition Cost Reduced to $67; • Up to 8X  Volume in Branch Environments Impacts derived using Base Case New • Similar Proportional Lift for Reactivation and Retention Account Activation Rate of 70%) $47 $9 New Account Activation: • Up to 90+% Activation (15% to 25% Activation Rate Improvement) 15% Activation • Similar Proportional Lift for Reactivation and Retention to 85% $17 $4 Forecasting models & waterfall analyses are available to isolate your portfolio‟s key driver impacts 7
    • Increases Overall Profitability (continued) In Market Results Pre-Tax $ Per Account Range of Improvements Based on Past Deployments Per Year Increase Metrics 1st 5 Yr Key Drivers: Used Year Avg Purchases: • 15%-25+% Per Account •  Spend Velocity/Interchange • Expands Existing Purchase Power 15% Purchases $16 $21 Revolve/Pay Down Behavior Impact on Balances: Portfolio Balance Mix Profile By Pmt Tiers with Paymentflex: • Minimum (<5% Pmt of Bal) & Slow Payers (5%-10% Pmt of Bal) have Limited • Min Payer (<5% Pmt of Bal): 45% Capacity to make Larger Payments but Value the Paymentflex Low Rate „Opportunity‟ • Slow Payer (5%-10% Pmt of Bal):7.5% • Occasional Revolvers (10%-99% Pmt of Bal) take Advantage of the Lowest Interest • Occas/Rev (10%-99% Pmt of Bal):32.5% Rate Tier and Slow Down their Payments to as Low as 15% of Balance • Pay-in-Fulls (100% Pmt of Bal):15% • Pay-in-Fulls (100% Pmt of Bal): 5+% of Balances Shift t o Occasional Revolver Segment Occasional Revolver Payments: • Avg Pmt % Reduced to 20% from 33% • Revolve Rate: Up to 90+%; Customer Segment, Interest Rate and Program Dependent Minimum and Slow Payer Payments: • Avg Pmt % Reduced 50bp • Represents Residual Balances of Portfolio Balance Mix Profile By Pmt Tiers: Customers with Limited Pmt Capacity Base With Note – Base Case Avg Bal of $3,000 per Case Paymentflex Active Account  59% to $4,770: Min Payers 55% 45% • From Purchases 16% Slow Payers 10% 7.5% • From Revolve/Pay Down Effect 43%  Occas/Rev 15% 32.5% Pay-in-Fulls 20% 15% Note – Yield Analysis: • Base Case: 10.32% • Paymentflex Interest Rate Effect with Base Case Pmt Balance Mix: 11.22% • Revolve/Pay Down Effect: 10.69% $2 $7 Balances increase from increased purchases and revolve/pay down shift 8
    • Increases Overall Profitability (continued) In Market Results Pre-Tax $ Per Account Range of Improvements Based on Past Deployments Per Year Increase Metrics 1st 5 Yr Key Drivers: Used Year Avg Attrition (Retention): 200bp • All Deployments have Improved Attrition at Least 200bp in Attrition • 50+% Improvement in Save-Our-Customer Programs (11% Reduced to 9%) $0 $4 Servicing Costs: • Up to 50% Reduction in Customer Service Requests for „Lower Interest Rates‟ 5% • 5% to 10% Improvement in Collections Effectiveness using Payment flex Feature in $65 Servicing Cost to Motivate „Payment Priority‟ to Your Bank Per Active Account $3 $3 Charge-Off Rate: • 2+ Times Improvement in Quality of Unsolicited Customers Allowing for Proportional Increase in Approval Rates and Credit Lines. • 50+% Account Shift from No Pay & <Min Pay to Tier 1 Payment (3% - 5% Pmt of Bal Segment): Applicants Understand Program Requirements • Higher Quality, Larger Receivables Flow In (Actively Managed by Risk Department with Targeted 25% Line Assignments) Reduces the Ratio of Bad Account Balances Improving Loss Rates C/O Rate (25+% Charge-Off Rate Reduction) (4.5% Reduced to 3.4%) $8 $38 GRAND TOTAL $102 $106 • Not reflected in these results is the significant increased volume effect of new customers. • For additional detail, see:  Interest Income–Balance–Yield Impacts  Forecasting Tools • „Existing Account Models‟ are also available. License fee schedule is available from Paymentflex Technologies 9
    • Easy to Implement and Quick Wins Paymentflex feature on Reward and Value cards Existing “A compelling low interest rate everyone can earn all the time” Reward, Value and Teaser Paymentflex feature answers the question: Programs “What happens after my 0% Program expires?” Paymentflex: a balance build strategy to attract convenience Universal users & protect yield earned from minimum payers Enhancement Portfolio Feature Strategy Paymentflex: a retention and reactivation strategy Saves Customers & Renews Relationships Paymentflex: a pricing strategy to protect your yield in a changing interest rate environment Paymentflex Powered Paymentflex: an acquisition strategy lowers new account cost, Cards enhances portfolio quality & is aligned with current regulatory environment Partner Relationships Paymentflex enhances & protects existing & wins new ones Unique New Paymentflex as stand-alone card or loan products Products Quickest Wins Reactivation (totally inactive & purchase active/revolve inactive), reissue/renewal, retention, collections and acquisition 10
    • Why Deploy Paymentflex Compelling & differentiated way to safely grow • Unique value proposition (product or feature) attracts lower risk customers • 70% of revolvers and 50% of all cardholders said they would be likely to apply  Consistent results across 5 North American research studies • Provides opportunities for new products: General, Student and Small Businesses • Paymentflex easily integrates into and complements reward programs, introductory rate and balance transfer offers or any other simultaneous product promotion • Great product to sell in branch/retail or via telemarketing  Easy to sell … sales forces enjoy selling positive message Paymentflex will position your Bank for safe & profitable balance sheet growth 11
    • Why Deploy Paymentflex (continued) Improves the credit quality of your portfolio • Higher payments = lower risk  Fundamental Principle of FICO and Behavioral Scoring • Risk based pricing that is self-directed and as a result customer friendly:  Eliminates the need for dramatic re-pricing initiatives • Attracts higher credit quality customers (higher share of low risk revolvers)  Who can make the higher payments and get a lower APR  To whom you can safely give larger credit lines to stimulate spend and revolve • Higher quality, larger receivables flow in  Reduces the ratio of bad account balances (improving loss rates) • Collections effectiveness is improved:  Encourage payment priority to your Bank  Demonstrate your Bank‟s willingness to „work with‟ the customer  Significant Account Shift (50+%) from No Pay & <Min Pay to Minimum Payment  Corresponding improvement in FICO/Internal Behavioral Risk Scores  Movement to lower payment tiers provides advance signal of increasing risk • Creates new risk separators for future modeling With Paymentflex, you can actively manage the credit quality of your portfolio 12
    • Why Deploy Paymentflex (continued) Product designed for all customers, especially revolvers, leads to higher profitability • Response Rate and Demand lift • Applications by and Approvals of more Lower Risk customers who can be assigned higher Credit Lines • Increased Activation • Higher Usage/Spend • Revolve Rate and Balance increases from higher Quality customers • Yield improvement opportunity • Reactivation and Retention improvements • Charge Off Rate improvement • Customer Service and Collections operating expense savings Paymentflex will safely improve the profitability of your card portfolios 13
    • Imagery & Leadership Your Bank demonstrates its resourcefulness by recognizing the power of a unique patented technology • Represents an exceptional example of your Bank‟s competitive initiative to differentiate itself from all other financial services companies • Demonstrates your Bank‟s commitment to give cardholders the opportunity to use credit responsibly • Your Bank demonstrates to all stakeholders (investors, consumers, employees and consumer advocates/regulators) that you hear them and will responsibly and safely grow the balance sheet An excellent example of being Innovative – Unique – High Impact – A Leader in Financial Services 14
    • Improves your Bank‟s Brand & Public, Governmental & Investor Relations • Specifically addresses regulatory and consumer advocacy concerns ― No hidden APRs since all APRs are disclosed at marketing stage • Customer-friendly risk-based pricing ― No bait and switch as customer has power to directly determine APRs ― Higher APR is not punishment, but simply the result of customer choice • Great reception from media/press/industry/regulators/advocates ― Promotes responsible consumer credit usage and behavior ― Provides positive press opportunities ― Win-Win-Win for your Bank, Customers and Regulators “…rewards people for being “…a coup in the world of credit…” fiscally prudent.” Akron Beacon Journal New York Times “…put(s) a new wrinkle into credit card “…a benefit that helps… cardholders…” pricing (by) rewarding customers for Ruth Susswein, Executive Director paying down their loans faster…” Bankcard Holders of America The Plain Dealer American Banker Completely new message – “Cardholder Empowerment” REAL Cardholder Choice, Control, Flexibility & Savings 15
    • Give the Customer What They Want 70% of Revolvers and 50% of all Cardholders reported that they would apply for a Paymentflex credit card Revolvers say, a “permanent low interest rate” outranks all other product features … even no annual fees and reward programs … 16
    • Additional Resources 1. What the Customer Sees (Disclosures and Statement) 2. Win-Win-Win (Customers, your Bank and Regulators/Consumer Advocates) 3. Examples of Pricing and Distribution Strategies (Branch, Direct, TV, etc.) 4. Deployment Options (Marketing, Technology, Customer Service, Public/ Governmental/Investor Relations) 5. Target Products and Geographic Markets 6. Additional Economic Advantages and Forecasting Tools 7. Additional Marketing Messages 8. Paymentflex Technologies, LLC Relationship and Team Any of the these Additional Resources are available from Paymentflex Technologies 17
    • 1a – What the Customer Sees Paymentflex offers simple, seamless & transparent disclosure & messaging Solicitation Example: CHOOSE YOUR RATE If you pay: Next Month's Rate is:* 10% or more of outstanding balance 7.99% APR at least 5% of outstanding balance 13.99% APR at least 3% of outstanding balance 18.99% APR *See the disclosure page for details. *Disclosure Example: Paymentflex® Program: Standard APRs for eligible retail purchases and eligible balance transfers – 7.99% APR if a payment at least equal to the minimum monthly payment that is also at least 10% of the new balance for the prior billing period is paid on time; 13.99% APR if a payment at least equal to the minimum monthly payment that is also at least 5% (but not more than 9.99%) of the new balance for the prior billing period is paid on time; 18.99% APR if the minimum monthly payment for the prior billing period is paid on time. Note: The credit issuer‟s billing system calculates the required payment amount for each payment tier based on each customer‟s current outstanding balance. The cardholder‟s Paymentflex interest rate and required payment percentage, is determined by the credit issuer. It is recommended to always promote the lowest available interest rate(s). 18
    • 1a – What the Customer Sees (continued) Paymentflex offers simple, seamless & transparent disclosure & messaging Prominent Marketing Message Example: Example 1: Make a larger payment on your Paymentflex® Powered Card to be rewarded with a lower APR. Save money in finance charges and pay off your balance sooner. Example 2: Your Paymentflex® Powered Card gives you exactly what you want and need: Choice, Control, Flexibility and Savings! Choose a 7.99% Purchase APR every month! Statement Example: Example: Three payment/interest rate tiers; Paymentflex® interest rates are only applied to the purchase balance. Example Balance #3,000; 3% Minimum Payment: ---------- Paymentflex® Payment Options1 ---------- Pay $3002 or more and your Purchase APR next month will be 7.99%3 Pay at least $1502 and your Purchase APR next month will be 13.99%3 Pay at least $902 and your Purchase APR next month will be 18.99%3 4 1 NOTE: Calculations for referenced cardholder statement message are already programmed on TSYS and First Data and are simply directed to the Licensee‟s statement processor. Licensee determines location placement within statement. 2 The Licensee‟s billing system calculates the dollar amount based on each cardholder‟s current outstanding balance times the required payment percentage for the interest rate tier. 3 The cardholder‟s Paymentflex® interest rate, as determined by the Licensee. It is recommended to always promote the lowest available interest rate(s). 4 The APR displayed is the contractual minimum payment interest rate. 19
    • 1b – What the Customer Sees - Statement 20
    • 2 – Win-Win-Win Perspective 30. Why is Paymentflex such a WIN-WIN-WIN for customers, your Bank and regulators/consumer advocates? Very simply with Paymentflex, all constituencies win. • ALL Customers (not just the super-prime risk segment) can: - Get a "Low Interest Rate Always" - Save money on their finance charges - Pay off their balances faster - Maintain payment flexibility each month - Always Be in Control of their Personal Finances - Get the lower rate by simply paying the required amount displayed on their monthly statement - the more they pay ... the lower their interest rate the next month - Earn more reward points if they spend incremental principal payments as new purchases on their card • Your Bank can now: - Responsibly respond to Low Interest Rate Requests with attractive Interest Rates - Motivate Customers to carry balances on their Loans/Products - Provide a Compelling and Differentiated Competitive Advantage to: • enhance customer relationships • support their Brand • improve the Bottom Line at all points: - Lower New Account Acquisition Cost - Improved Balance Build, Spend Velocity and Retention - Enhanced Portfolio Quality - Embed self-directed risk-based pricing in portfolios without the need for dramatic re-pricing initiatives, in a way that the borrower perceives as fair and within their control - Easily integrate Paymentflex into reward programs, introductory rate and balance transfer offers or any other simultaneous product promotion • Regulators and Consumer Advocates have a Market-Based Simple Solution that: - Meets their concerns - Promotes responsible credit use - Appropriately balances the responsibilities of issuers and their customers - Specifically addresses regulatory and consumer advocacy concerns regarding: • minimum payment disclosure requirements to educate consumers • no hidden APRs as all the APRs can be disclosed at marketing stage - Customer-friendly risk-based pricing: • no bait and switch as customer has power to effect APRs • higher APR is not punishment, but result of customer choice - Provides positive press opportunities: • promotes responsible consumer behavior • regulators like positive message and transparency - Great reception from media and industry 21
    • 3 – Examples of Pricing Strategies (using 2 payment/interest rate tiers) Strategy: Promote the LOWEST interest rate (highest payment alternative) OPPORTUNITY to ALL customers. Straddle Spread Spend Retail Targeted Direct Mail, Branch Program/TV/Radio/ Small Business: Retail: • Target low interest rate • Target existing customers who are Objective: Reactivation/Retention: Internet: • Optimize Response, • Simplicity to boost response occasional revolvers Activation, Revolve • Elimination of • Profitability driver is spend • Profitability driver is stimulating revolve Behavior and Credit Quality “as low as” offers velocity and revolvers behavior mirroring bank card • Low risk “risk-based • Interim step before conversion pricing alternative to bank card Examples: Payment Interest Payment Interest Payment Interest Payment Interest Alternative % Rate % Alternative % Rate % Alternative % Rate % Alternative % Rate % Super Prime 8/3 6.9/8.9 10/3 7.9/9.9 25/3 5.9/9.9 15/3 7.9/21.9 Risk A 8/3 7.9/11.9 10/3 7.9/11.9 25/3 6.9/11.9 15/3 9.9/21.9 Risk B 8/3 9.9/13.9 10/3 7.9/13.9 25/3 7.9/13.9 15/3 10.9/21.9 Risk C 8/3 11.9/17.9 10/3 7.9/17.9 25/3 8.9/17.9 15/3 13.9/21.9 • The issuer is indifferent to the actual payment chosen by the customer. If customers make the larger payment, Guidelines: they represent a lower risk to the issuer and have earned the lower rate. If their payments are at the lowest alternative, the issuer is compensated with a higher interest rate for the added risk. • The highest interest rate and associated smallest minimum payment should be set at the same levels that would be offered to the targeted customer with a traditional card offer. • The highest payment level should be aligned with a low competitive interest rate. • A third (middle level) payment alternative is optional. If used, the middle level payment should be aligned with an appropriately attractive interest rate between the high and low alternative interest rates. This mid-level alternative is essentially a placeholder utilized by a minority of customers. It should, however, be considered as an option if the Highest Alternative Payment % is greater than 10%. • Issuer can alternatively target a lower or higher yield based on their strategy by adjusting the lowest payment interest rate. Pricing strategies for targeted customer segments 22
    • 4 – Deployment Options ACQUISITION - Delivery Strategies: Targeted Direct Mail with & w/o Telemarketing; Branch/Store; TV; Radio; Internet Public Relation, Governmental Relations & Investor Relations Issuer Branded: - Product - Feature on Existing "Reward" Programs - Feature on Existing Value/Lend/0% Programs Partner Programs: - Airline/Automobile/Union - Feature - Affinity - Product - Agent Bank Product - Retail Co-Brand Feature - Retail Co-Brand Product - Retail Private Label Feature Target Acquisition Lifestyle Segments: Programs - Small Business - Student - Health Care - Ethnic - Movers Risk Behavior Segments: - Moderate Risk Revolvers - Non-Prime Revolvers - Super Prime/Moderate Risk (Home Equity Loan Rate) - Recently Bankrupt 23
    • 4 – Deployment Options (continued) PORTFOLIO MANAGEMENT OF EXISTING ACCOUNTS: "Save-Our Customer" Retention: - 0%/Low Interest Rate - Balance Transfer Defense - Interest Rates "Too High" Defense Delivery Strategies: Inbound/Outbound Telemarketing and Customer Service Intervention Targeted Anti-Attrition: - 0%/Low Interest Rate - Balance Transfer Defense - Interest Rates "Too High" Defense - Pro-Active Based on Purchase and/or Balance Trigger Delivery Strategies: Direct Mail, Telemarketing, Inserts, Statement Messages Targeted Reactivation (Renew Relationship): - Purchase Active but Revolve Inactive - Purchase and Revolve Inactive Target - Before converting non-revolve Retail Private Label Card segment to Bank Card Portfolio Delivery Strategies: Direct Mail, Telemarketing, Inserts, Statement Messages Answer the Question - "What Happens After My 0% Program Expires?" - Keeps Balances on the Card: Management - Append to Existing Reward and 0% Programs before program expires Programs Delivery Strategies: Branch/Store; Direct Mail, Telemarketing, Inserts, Statement Messages Promotional Line of Credit: - Prime/Moderate Risk Customer Segment Specific Alternative to Home Equity Lines - Check or Future Purchase Monetary Trigger (i.e., Purchases>$300) - Stimulate Retail Partner Purchases (i.e., Sales>$300) at Partner Stores Delivery Strategies: Branch/Store; Direct Mail, Telemarketing, Inserts, Statement Messages Repricing Strategies: - Uninvite "Problem Customers" - Keep "Valuable Customers" Delivery Strategies: Direct Mail, Telemarketing, Inserts, Statement Messages Reissue Strategies: - Uninvite "Problem Customers" - Keep "Valuable Customers" Delivery Strategies: Direct Mail, Telemarketing, Inserts, Statement Messages Collection Strategies: - Encourage Higher Payment Priority to Issuer - Utilize payment information to develop predictive risk analytic models and tools Delivery Strategies: In/Outbound Collections Intervention; Direct Mail, Inserts, Statement Messages 24
    • 5 – Target Products & Geographic Markets Paymentflex as the product General Purpose Paymentflex as the feature “Powering” existing programs (i.e., rewards cards) Small Business Owner Student Card Life Style Ethnic Segments Products Health Care “Movers” Paymentflex Powered Co-brand/Affinity Partner Cards Relationships Retail Private Label Agent Bank Other Home Equity (card and non-card loans) Small business non-credit card loans Non-Card Unsecured revolving lines of credit Installment loans Products Debit card & checking account over draft protection Available Markets Paymentflex appeals to cultural expectations of fairness USA/Canada Central/South America UK/Europe/Africa Asia/Australasia 25
    • 6a – Increases Account Acquisition • Completely new message – “Cardholder Empowerment” ― Cardholder CHOICE, CONTROL, FLEXIBILITY & SAVINGS • Promote lowest APR to all your customers ― Promote APR lower than competitors‟ go-to-rate ― Lower APR is reward for responsible behavior ― Responsibly addresses low interest rate requests from all customers • Higher response rates ― Leads to lower acquisition cost • Higher approval rates ― Attracts a higher share of low-risk revolvers • Great product to sell in retail or via telemarketing ― Easy to sell … sales forces enjoy selling positive message A compelling product which speaks to the customers‟ needs, gets their attention and converts them 26
    • 6b – Increases Activation, Usage & Revolve • Higher activation rates ― Product specifically designed for revolvers • Higher revolve rate, balances and spend velocity ― Customers who sign up plan to revolve ― Attracts occasional/accidental revolvers also, giving them the ability to control their APR ― Higher payments open credit lines and thereby increase spend velocity ― Easily understood and accepted by customers ― Aligned with current minimum payment regulatory environment • Lower lapse rates ― Balances stick – Paymentflex Powered Cards become #1 in their wallet • Live selling boosts activation, reactivation, retention, etc. ― Creates cross-sell and product upgrade opportunities Product designed for revolving customers Leads to higher activation, greater usage and revolve 27
    • 6c – Increases Retention • Cardholders don‟t switch to other cards to get lower APRs ― Cardholders control their own rate • Not a „rate-surfers‟ product ― Rate-surfers stop surfing, as they have no reason to leave Paymentflex • Creates a powerful reactive retention tool ― Offer potential attriters Paymentflex with the ability to control their own rate ― Can tailor reactive offer directly to the segment or customer level ― Offer Paymentflex as new go-to-rate when teaser expires • Keep lowest APR tier lower than competitors‟ „go-to rate‟ ― Issuer manages payment and APR tiers: flexible, targeted and purposive • Dynamic tool in a changing interest rate environment ― Protect yield while offering positive Paymentflex rate(s) (eliminates adverse consumer reaction) Powerful retention tool – Why switch when you have Paymentflex 28
    • 6d – Improves Credit Quality • Draws a higher share of low-risk revolvers ― Attracts customers who can make the higher payments & thereby earn a lower APR • Higher payments = Lower risk ― Proven relationship between higher payments and lower customer default ― Fundamental basis of behavior scoring • Creates new risk separator for future modeling ― Self-directed risk-based pricing leads to better correlation of risk with APR • Improve loss rates ― Higher quality receivables flow in, in order to obtain the lower rate • Improve collections effectiveness ― Encourages payment priority to you ― Demonstrates issuer‟s willingness to „work with‟ the customer ― Movement to lower payment tiers provides advance signal of increasing risk Paymentflex improves credit quality and offers a low-risk growth alternative 29
    • 6e – Improves Credit Quality (continued) A direct correlation exists between payment levels and credit quality Paymentflex takes advantage of “self-directed” risk based pricing 30
    • 6f – Improves Credit Quality (continued) A direct correlation exists between payment levels and credit quality Higher Payments = Lower Risk 31
    • 6g – Paymentflex Summary Benefits: • A compelling and differentiated way to grow your credit card portfolio ― Unique value proposition fuels new account volumes ― 70% of revolvers and 50% of all cardholders said they would be likely to apply ― Move away from teasers … Complement reward programs ― Permissible and transparent way to market lowest APR • Increases the profitability of your card portfolio ― Product designed for revolvers leads to higher activation, usage, spend and revolve ― Powerful retention tool … Stop rate surfers … Go-to-rate for expiring teaser • Improves the credit quality of your portfolio ― Higher payments = lower risk ― Risk based pricing that is self-directed and as a result customer friendly • Improves your brand and public relations ― Rewards and incents responsible credit behavior ― Turn the media and regulators into advocates for your portfolio • Unique customer friendly product that consumers and regulators love Paymentflex is the Only Patented loan product in the credit industry 32
    • 6h – Interest Income-Balance-Yield Impacts Payment % Bal In Without Paymentflex APR Revolve % Bucket Yield <5%Pmt 12.9% Y 3.75% 55.0% 7.09% 5%-10%Pmt 12.9% Y 6.75% 10.0% 1.29% 10%-99%Pmt 12.9% Y 33.00% 15.0% 1.94% 100% Pmt -0- N 100.00% 20.0% 0.00 TOTAL 80% 100.0% 10.32% Average Balance of $3,000 x 10.32% = $310 Interest Income/Account Payment % Bal In With Paymentflex Revolve % APR Bucket Yield <5%Pmt 15.9% Y 3.25% 45.0% 7.15% 5%-10%Pmt 12.9% Y 6.25% 7.5% .97% 10%-99%Pmt 7.9% Y 20.00% 32.5% 2.57% 100% Pmt -0- N 100.00% 15.0% 0.00 TOTAL 85% 100.0% 10.69% Average Balance of $4,770 x 10.69% = $510 Interest Income/Account Note: Balance Increase is a result of: (a) 4.26% reduction in „effective‟ balance payment % due to above factors; (b) 15% increase in purchases “With” Paymentflex over “Without” Paymentflex Purchases of $6,000. Increased revolve & higher spend leads to higher balances and greater interest income Issuer controls desired yield 33
    • 6i – Forecasting Tools Using In Market Results Model Inputs & Outputs: Convention: Blue text is input, black text is output. Output fields are protected. Follow Steps 1, 2, 3 & 4. Note Step 2, 3 & 4 Paymentflex ® improvements have been pre-input to help the model user get started. See Notes Below for clarification. Customer Payment Tier, Interest Rate and Payment Inputs: Profitability Driver Inputs: STEP 3 Without With Paymentflex ® Paymentflex ® Paymentflex ® Pricing Guidelines & Yield Calculation (1) STEP 1 Acquisition or Portfolio Marketing Cost $100 $67 Payment Percent Active Cardholders 70.0% 85.0% Tier % (2) APR% (3) % in Tier ====> Acquisition/Marketing Cost/Active $143 $79 Tier 1 3.00% 15.900% 45.00% Annual Purchase Volume (7) $6,000 $6,900 Tier 2: Adjustment to Tier 1 Rate (Optional) 5.00% -3.000% 7.50% Net Interchange Rate (8) 1.80% 1.80% Tier 3: Adjustment to Tier 1 Rate 10.00% -8.000% 32.50% Annual Attrition Rate (9) 11.0% 9.0% 100% Payment Tier 15.00% APR on Revolving Balances (10) 12.90% 12.58% WEIGHTED RATE OF REVOLVING BALANCES= 12.58% % of Balances Revolving (11) 80.0% 85.0% WEIGHTED RATE OF ALL BALANCES= 10.69% ====> Effective Yield 10.32% 10.69% Other Fee Income (12) 0.00% 0.00% Average Customer Pay Down Calculation (4) STEP 2* All Other Income (i.e., Annual Fee, etc.) (14) $0 $0 Without Paymentflex ® With Paymentflex ® Cost of Funds (12) 4.0% 4.0% Avg Pay Avg Pay Net Charge-Off Rate (12) 4.5% 3.4% % (5) % Balance (6) Effective % % (5) % Balance (6) Effective % Servicing Cost Per Active Account (13) $65 $62 for Tier 1 3.75% 55.00% 2.06% 3.25% 45.00% 1.46% All Other Costs (Mktg, Direct, General O/H, etc.) (14) $0 $0 for Tier 2 6.75% 10.00% 0.68% 6.25% 7.50% 0.47% Tax Rate 35% 35% for Tier 3 33.00% 15.00% 4.95% 20.00% 32.50% 6.50% Discount Rate for NPV Calculation 11% 11% 100.00% 20.00% 20.00% 100.00% 15.00% 15.00% Current Purchase/Payment Lag* 21 21 Adj 58% 100.00% 16.06% 100.00% 11.80% * (Grace Period in days over a 30 day month) * See Notes 4, 5 & 6 Below to guide inputs for Two and/or Three Tier Scenarios Annual Volume Driver Inputs: STEP 4 (15) PROFITABILITY OUTPUTS - PER ACCOUNT (10YR) DELTA (16) New Accounts (Thousands) 100 125 Net Interest Income Increase/(Decrease) $950 1st Yr Annualization Adj Factor 50% 50% Net Cash Flow (Pre-Tax) Increase/(Decrease) $926 After Tax NPV Increase/(Decrease) $337 Average Active Account Balances Increase/(Decrease)($) $1,768 Average Active Account Balances Increase/(Decrease)(%) 59% Improvement* Reflects cumulative incremental improvements per account The increased volume effect of new customers, while significant, is not reflected in these results.
    • 7a – Suggested Marketing Messages Simple Transparent Seamless DM/TM, PR/GR, Branch TV/Radio, Internet, No Gimmicks and Penalties Easily integrated into Statement & Disclosure Communications Messages new or existing programs • Your credit card “Powered by Paymentflex” gives you “credit on your terms” • It‟s the “last credit card you‟ll ever need” • It will beat temporary interest rate offers, even those that offer 0% • Our bank gives you real control: interest rate choice and payment flexibility • You can have the lowest interest rate all the time and start getting out of debt faster/sooner General • Payment and interest rate choice, flexibility and control • Pay a little more each month & be rewarded with a lower interest rate – saving you money immediately and for as long as you choose • Paymentflex offers real value and not gimmicks • It‟s so unique, Paymentflex has a US patent Small Smart Small Business Owners Get the Credit Terms They Expect and Deserve Business By Using Cards “Powered by Paymentflex” Students: with Paymentflex you now have the “power to manage your personal finances” Student It‟s new and now available from ABC Bank Strong messages to enhance issuer brand and personality 35
    • 7b – Suggested Marketing Themes Be Relevant to Your Customers Create New Products Not Happy With The Direction Your Credit Card Bills Are Headed ? Introducing Prime Always From ABC Bank Now You Can Do Something About It! EVERYONE Can Get a Prime Interest Rate ALWAYS As Your Balances Go Down…So Can Your Interest Rate. With Purchases on Our Paymentflex Program Only When Your Credit Card Is Powered by Paymentflex Challenge the Status Quo Show you Understand your Customers When Your Credit Card Is Powered by Paymentflex Sometimes You’ve Got It… Sometimes You Don’t! You’ll Never Have to Look at Another Credit Card What You Need Is “Credit on Your Terms” … Even 0% Offers With Payment and Interest Rate Choice and Flexibility. Align with their Concerns Available Only When Your Credit Card Is Powered by Paymentflex Smart Small Business Owners Have Fun Talking to Your Customers Get The Credit Terms They Expect And Deserve Waiting For the Federal Reserve to Lower Interest Rates Again? By Using Cards Powered By Paymentflex Now You Can Always Pick Your Interest Rate Every Month Tap into your Customers’ Emotions …Low, Lower, Lowest Students Take Charge! Change the Rules with Paymentflex Available Only When Your Credit Card Is Powered by Paymentflex “YOU now have the Power to Manage Your Personal Finances.” Engage New Customer Segments It’s New and Everyone is Talking About It! When Your Small Business Card is Powered By Paymentflex Align with Themes that are Real You Get “Credit on Your Terms” Most Credit Cards Reward You For Getting Into Debt… With Payment and Interest Rate Choice and Flexibility Only One Rewards You For Getting Out! Align with their Motivations When Your Credit Card Is Powered by Paymentflex Smart Small Business Owner You are In Control! Manage Their Working Capital By Using Credit Cards Powered By Paymentflex Message Content Choose Your Interest Rate Every Month. Beat temporary interest rate offers and other gimmicks. You’ll gain control with interest rate and payment flexibility. You will get the power to manage your personal finances. If you pay a little more each month we will reward you by charging a lower rate – you will save money immediately for as long as you like. Can your card do that? Only Paymentflex Powered cards help you do exactly that! So make sure the next credit card you apply for is Powered by Paymentflex. Strong messages to enhance issuer brand and personality 36
    • 8a – Paymentflex Technologies, LLC Relationship Paymentflex Technologies, LLC has extensive, real-market experience/expertise and is available to provide direct support/ assistance : • Support implementation of Paymentflex, including providing pricing/risk models, alternative product & card usage segment applications • Develop alternative campaign designs, direct mail, telemarketing, research, public relations and governmental relations • Conduct post-launch analyses, program evolution and next stage approaches • And provide on-going advice and product input to ensure full utilization of the capabilities of the patents Paymentflex offers a simple, transparent and turnkey opportunity 37
    • 8b – Paymentflex Technologies, LLC Relationship (continued) Alternative business relationships: • License • Availability by product, country or portfolio segment Paymentflex aligns with corporate objectives Paymentflex Technologies looks forward to an ongoing relationship with your Bank 38
    • 8c – President & Chief Executive Officer Stephen J. Hucal 25 Years of Experience Steve Hucal developed Paymentflex® with insights from his 25 years Steve spent 10 years with Sears, Roebuck and Co., where his roles of experience in and deep understanding of the North American included senior credit policy executive, head of risk management, credit markets, risk management and information technology. model development, new product development, field operations and related information technology with a staff of 1,200 for Sears Credit's Steve has been issued US Patents #5,933,817 and #6,836,764 for the $24 billion portfolio; Director of Business Valuation, Development Paymentflex technology and has patents pending in other and Risk Management for SPS Transaction Services; and Group international markets. Director of Financial Planning and Analysis for Dean Witter Financial Group, which included Sears Consumer Financial Corporation and Additionally, Steve is the founding Chairman, President and Chief Discover Card. Executive Officer of Genesis Analytics, a risk management business focused on innovative solutions and proprietary credit decisioning Steve also served as Senior Vice President and head of the Credit technologies for the new small business sector. Card Services Division with KeyCorp, the 12th largest commercial bank in the U.S., where he successfully launched the patented new Steve holds an MBA in Finance from The Wharton School, a product KeySmartSM, and also developed the first instant credit Bachelor of Science in Accounting with Honors from Syracuse application process in the bank card industry. University and is a C.P.A. (Ernst & Young). Steve was the founding President and CEO of TD MarketSite, an electronic commerce division of TD Bank Financial Group. He also served as the Executive Vice President of Credit and Financial Services for Hudson's Bay Company, Canada's largest retailer and the world‟s oldest corporation, and was their President of Heritage General Insurance Company and Chairman of Nor-Don Collection Network Inc. 39
    • 8d – Marketing Stephen J. Bartell 25 Years of Experience Stephen Bartell started with Paymentflex Technologies, LLC in 2005 Stephen‟s background in credit card began in 1985 when he to support sales and marketing to an expanding list of targeted developed and introduced the first major sports affinity card, the financial institutions. His role includes developing sales and New York Giants VISA. He then did developmental work for communications strategies, contacts and materials for Paymentflex®, General Motors (which led to the GM MasterCard 4 years later). targeted for the various issuers/lenders that are planning to launch. Recruited by MasterCard International in 1988, he devised the Stephen sees the genuine innovation that Paymentflex represents as a strategy for co-branding, sought and received management and Board significant “win-win” for both financial institutions and their support, designed the sales, marketing and PR plan, developed customers. He agrees with those who call it “disruptive and award-winning sales/educational materials, trained staff and launched transformational,” believing it will revolutionize lending just as the initiative. After 2 years, MasterCard‟s market share loss flattened Co-Branding has done in the credit card industry. and reversed for the first time in 17 years. By 1995, Affinity and Co- branded cards represented 49% of cards and 51% in Gross Dollar Volume (GDV), up from less than 10% in 1988. Stephen was a Stephen is a graduate of Lehigh University, with a Bachelor of spokesperson/subject expert for co-branding and was a sought-after Science in Business Administration & Marketing. He is the proud speaker for industry forums and for interviews with the industry & father of son, Andrew, sings bass with the Westchester Chordsmen consumer media, worldwide. a cappella barbershop chorus and lives in and works from Larchmont, New York, USA. Stephen‟s business experience covers a broad spectrum of marketing, advertising, public relations, sales promotion, corporate branding, and sales across a wide variety of highly-competitive product and service markets. His packaged-goods training provides a solid foundation for his “out-of-the-box” perspective of any marketing challenge. His track record of dramatic, break-through accomplishments is noteworthy. His early career was with top New York advertising agencies, working on all aspects of new product development for a variety of clients, including: Clairol, Prince Tennis Racket, Sterling Drug, Hills Bros. Coffee, Cheseborough-Pond‟s, Ore-Ida Foods, TIME Inc. (LIFE Magazine). 40
    • www.paymentflex.com Presenters: Stephen J. Hucal Stephen J. Bartell President & Chief Executive Officer Marketing Paymentflex Technologies, LLC Paymentflex Technologies, LLC hucal@paymentflex.com bartell@paymentflex.com 416.762.1200 914-833-8683 Canada USA 41