Stores makes no warranty, express or implied, nor does it assume any legal liability or responsibility for the accuracy, completeness, or usefulness of any information, product, or process described in these materials.<br><br> t s o ery - , , CSP News July 23, 2008 The   Interchange   Challenge   Continues Cost   of   non 0 cash   0 Ne ative   + acceptance   increases     cash   transactions = bottom   line   impact RATES   INCREASE " Interchange   rates   VOLUME   INCREASES " 93.3   billion   non 0 cash   transactions   in   2006   PROFITS   DECREASE " Decrease   in   overall   rofits     " Higher   fuel   and   product   prices " Increased   securit   " Debit   transactions   overcome   credit   transactions   in   2006 " Increased   spend   in   related   technology    investments requirements Is   there   a   silver   bullet??? Source: The 2007 Federal Reserve Payments Study No   Silver   Bullet " No   one   strategy   will   minimize   the   impact   of   interchange   " Different   strategies   can   be   implemented   to   mitigate   the   impact Today 9s   3 Increase   use   of   cheaper   forms   of   payments   " Loyalty/reward   programs   drive   the   use   of   lower   cost   payments " Prom t   a ro riatel   Discussion 3 Improve   payments   basic   (blocking   and   tackling) " Ensure   transactions   are   qualifying   correctly " Review   processing   agreements 3 Marketing   efforts   to   drive   lower   cost   transactions   " Discount   for   cash   " Reward   PIN   Debit   transactions Key   Decisions   for   a   Program "   ,   ,   " Strategy   (Graduation,   Gas   Card,   Coalition) " Ava a e   Pro ucts " Your   Offer " Selection   of   Products   and   Vendors " General   Marketer   Objectives "     " Increase   vo ume   Passive   Approach "   3 Marketer   will   realize   lower   acceptance   costs   just   by   accepting 3 Suppliers   take   on   primary   responsibility   and   cost   to   issue " Products 3 Revolution   Money 3 PIN   Debit Impact   of   PIN   Debit "       e $40 = $0.45 $40 = $0.30 (cap is $0.95) (cap is $0.32) The   Potential   Impact Small   changes   can   make   a   difference Acce tance Cost & Potential Savin s $30,000 $30,000 $31,000         payment   mix   is   not   easy   and   should   not   be   $2,000 $2,071 $26,000 $27,000 $28,000 " A   strong   consumer   value   prop   is   required   to   drive   , , $23,000 $24,000 $25,000 nt % % % %   " Savings   are   feasible   and   comparable   amongst   0 Curre Mi Rev   =   ACH   =   Rev   =   1 ACH   =   1 alternative   options                     ,               " Acceptance   rate   of   current   mix   is   2.3%   and   alternative   payments   =   0.50% Active   Approach " 3 Requires   marketer   to   be   actively   involved   in   issuance 3 May   require   marketer   to   make   technology   changes 3 Marketer   is   responsible   for   rewards " Products 3 Closed   Loop   (ACH   or   Credit) 3 Open   Loop   (ACH   or   Credit) 3 Gift   cards Alternative   Payment   Overview " ACH Decou led   Debit :   HSBC Tem o   National   Payment   Card,   Kick   Back,   FDC,   Maverick,   etc.   Today 9s   " PIN   Credit :   Revolution   Money Focus " Stored   Value:   Gift   cards,   prepaid,   loyalty   /   rewards   programs " Online:   PayPal,   Bill   Me   Later,   NACHA   Secure   Vault,   Alternative   Payment   Comparisons Generally     Products     cceptance   ost .<br><br>   3 . .   + .<br><br> .   to   . Most   Pervasive New   Entrant Watch   Them Considerations " Does   not   include   PIN   Debit   0   and   Grocery   early   adopters " Risk   is       brick 0 and 0 mortar   presence     base " Mobile   may   be   path   to   brick 0 consumer s   willingness   to   sign   up " ssues   an   co 0 brands an 0 mor ar Merchant   Options   for   Reducing     Active Different   Form   Factors Retailer   Branded Online Mobile National   Stored   HSBC Merchant   Participation   Card Va ue   Cards Kick   Back Passive         Emerging   Products PIN   Debit      Revolution   N/A Acceptance   Cost   Relief Low Moderate Optimizing   Savings National   Stored   Value   ct ve eren   orm   ac ors e a er   ran e Online Mobile Issuance   &   Marketing       " Ensure   alignment   with   your   brand     Participation Acceptance   of   Emerging   Methods   include: Passive Products Revolution     Only   " Reward   programs " Cross   promotions " Coalition   programs Acceptance   Cost   Relief Low Moderate Long   Term   Goal!<br><br> National   Stored   Value   National   Active Different   Form   Factors Retailer   Branded Online Mobile " Support   alternative   payment   pilots " Accept   alternative   payment   products " aymen   ar ar s aymen   ar   Participation Toda :   Limited   Tomorrow:           Passive       Companies Revolution   N A Consumer   Base Market   Share   (2%   0 5%) Acceptance   Cost   Relief Low Moderate Success   with   Alternative   Payments " Select   the   product,   form   and   supplier(s)   that   match   your   offer   and   values " View   Alternative   Payments   as   a   product 3 Consumer   uptake   is   the   responsibility   of   the   retailer       " Differentiate   your   product         " Tie   to   food   or   product   promotions   (Starbucks) 3 Consider   offering   different   modalities,   " NFC   (cards,   stickers,   fobs,   mobile,   etc.) " Know   the   regulations   and   your   exposure 3 ACH   product   is   regulated   by   NACHA     Game   Reset What   are   the   considerations   and   implications   for   accepting   alternative   a ments? " Payment   types   are   evolving   and   will   continue   to   evo ve   " Security   requirements   will   continue   to   change   and   " POS   &   infrastructure   decisions   are   long   term   (5   to   10   Key   Implementation   Considerations " Does   my   POS   support   the   new   payment   type   and the       " Does   my   processor   support   this   payment   type?                     partners?<br><br> " Do   I   have   the   necessar   infrastructure   PIN   ads   pump   types,   controllers)? Select   Supplier   Comparisons NPC     Tempo,   Maverick Revolution Kickback Type ecoup e   e (Closed   Loop) ecoup e   e (Open   Loop) PIN   Credit ecoup e   e (Closed   Loop) An   POS   that   An   POS   that   G 0 Site,   Ruby,     Acceptance Ruby accepts   PIN   Debit accepts   PIN   Debit app re,   Passport,   and   Nucleus Processors Direct   to   NPC Anywhere   MasterCard   is   accepted   ,     Lynk (working   on   others) Direct   to   Kickback Loyalty   / Reward Need   Loyalty Need   Loyalty Need   Loyalty Integrated   with   Product Considerations   When   Choosing   a   " Alignment   with   your   needs Offer   compatibility 3 Technology   requirements " p ron   nves men " Supplier   Viability   /   Sustainability " Security " Service To   you 3 To   your   customers Other   Ways   to   Lower   Costs " Review   processing   contract   3 Seek   Transparency Terms   should   be   cInterchange   Plus d 3 Watch   for   hidden   fees   and   markups 3 3   year   max   length " Audit   your   current   transactions   0 Get   the   best   possible   interchange   qualifications Root   cause   analysis   of   downgrades 3 Don 9t   assume   your   bank/processor   does   this   for   you! " uppor     n   o y ng   e or s 3 H.R.<br><br>   5546   Credit   Card   Fee   Act   of   2008 . . Closing   Thoughts " Accept   lower   cost   cnon 0 alternative   payments d   PIN   Debit;   private   label;   gift   cards " Request   your   processor   to   turn   on   alternative   paymen   pro uc s " Payments   and   rewards/loyalty   are   linked " oose   t e   r g t   supp ers " Seek   help   in   supplier   selection   and   implementation Terry Mahoney Doug Rodewald Partner Partner .<br><br> . dblotter@wcapra.com raycroft@wcapra.com     recordings   available   for   purc ase           workshop   area   or   .            at   www.nacsonline.com NACS Member Prices Pa er Co : 175.00 Additional Copies: $40.00 Electronic Version: $500.00 - Paper Copy: $600.00 Additional Copies: $175.00 , .<br><br>   0 ,     3     3 ,   Applications available February 2009.

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