Changing Landscape in Payments

30 May 2007

Adrian NgACI Worldwide

Agenda

• Introduction• Industry Trends• What Happens Next• ATM Fraud• Summary

ACI’s Mission

“To be the best global provider of consumer electronic payment software

and solutions.”

ACI Customers

• 800+ Customers• 83 countries• Supported by a

Worldwide Network of ACI Offices, Distributors and Partners

ACI Customers

• 36 of the Top 100 U.S. Banks• 27 of the Top 100 U.S. Retailers• 17 of the Top Banks in India• 8 of the Top 10 Banks in Canada• 5 of the Top 10 Banks in the UK and Mexico• 4 of the Top 5 Banks in South Africa• 3 of the Top 5 Banks in Australia & Indonesia

Industry Trends

Ongoing Growth for Electronic Payments

Regional Growth Rate for Electronic Payments(Retail Payments + Retail Transfers + Large Value)

0.0

1.0

2.0

3.0

4.0

5.0

6.0

7.0

2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014

Inde

x 20

04 =

1.0

Eastern EuropeAsia PacificMiddle East/AfricaSouth AmericaNaftaWestern Europe

The Trend Will Continue in Vietnam…

• “Vietnam’s central bank has called on the country’s banks to increase card payment volumes to reduce the population’s dependence on cash, but interoperability remains an issue.

• Three separate card payment networks exist in Vietnam, the alliance of Vietcombank with 17 joint-stock banks, BankNetVN (the national funds transfer system) and the four banks in the VNBC network. Cash payments currently represent 22.8 per cent of Vietnam’s total payments, with just 2 million ATM cards and 1,900 ATMs in use for a total population of 82 million.

• Where possible, the banks are encouraged to promote card payments and electronic payment services to customers…”

Ongoing Growth for ATM Deployments

Number of ATMs Worldwide 1967- 2005 (millions)

0.000.250.500.751.001.251.501.75

1967

1969

1971

1973

1975

1977

1979

1981

1983

1985

1987

1989

1991

1993

1995

1997

1999

2001

2003

2005

Early signs of slowdown

Early signs of slowdown

High growth in the 1990s in

all regions

High growth in the 1990s in

all regions

First ATM installed in the UK in 1967

First ATM installed in the UK in 1967

Early growth in the USA and then

Japan

Early growth in the USA and then

Japan

Source: RBR Research

Share of ATMs Worldwide, 2005

A/P Is Now The World’s Largest ATM Region

Asia-Pacific31%

North America

29%

Western Europe

22%

Middle East and

Africa2%

Central and

Eastern Europe

5%Latin

America11%

• Asia-Pacific has displaced North America as the largest region for ATMs.

• WE’s share of world installations has declined.

• CEE’s share has risen from 2% in 2001 to 5% in 2005.

• The shares of Latin America and the Middle East and Africa have risen slightly.

Source: RBR Research

Growth Rates Vary Significantly

Installed Base of ATMs by Region, 2005 and 2009 (thousands)

0

100

200

300

400

500

600

Asia-Pacific NorthAmerica

WesternEurope

LatinAmerica

EasternEurope

Middle East& Africa

2005 2009↑4-5% pa

↑1-2% pa

↑2-4% pa

↑4-5% pa

↑10-15% pa

↑8-12% pa

Source: RBR Research

What Happens Next…?

• Success Means:– Additional Complexity– Higher Costs– Increased Fraud– Customer Service Challenges– More Competition– Pressure on Profits

Problems with existing payment systems

RTGSPlatform

SettlePlatform

SwitchPlatform

ACHPlatform

RiskPlatform

CardPlatform

1. Banks operate too many payment systems on too many platforms within their payment silos.

TellerTeller

Call CenterCall Center

Web SiteWeb Site

2. Each payment system has separate connections to core systems, channels, and payment networks.

Source: How to Get to the Promised Land: Alternative Pathways to Enterprise Payments Financial Insights Aaron McPherson July 2005

IVRIVR

MobileMobile ReconciliationReconciliation

G/LG/L

DDADDA

Ch

an

nels

Core

Syste

ms

Wire•Printing•Risk & Fraud Mgmt.•Security•Monitoring & Rptg.

Debit Card•Printing•Risk & Fraud Mgmt.•Security•Monitoring & Rptg.

ACH•Printing•Risk & Fraud Mgmt.•Security•Monitoring & Rptg.

Check•Pricing•Risk & Fraud Mgmt.•Security•Monitoring & Rptg.

Payment Systems

ATM POS Branch InternetAuthentication X X X XSwitching/Routing X X X XDelivery Channel Management X X X X

Marketing X X XData Aggregation X X X XCRM X X X X

Presentation/Personalisation X X X

Monitoring X X X X

Authorisation X X X XRisk Management X X X X

Source: The Tower Group

3. Each payment type needs access to similar services … but today these services are deployed in separate silos.

Where are payment systems going?

Source: How to Get to the Promised Land: Alternative Pathways to Enterprise Payments Financial Insights Aaron McPherson July 2005

Banks are deploying enterprise payments hubs to simplify and rationalize their payments architectures.

Ch

an

nels

Core

Syste

ms

PaymentSystems

TellerTeller

Call CenterCall Center

Web SiteWeb Site

IVRIVR

MobileMobile ReconciliationReconciliation

G/LG/L

DDADDA

CheckCheck

ACHACH

Debit Card

WireWire

PaymentsDatabase

Payments HubPricing

Risk & Fraud Mgmt.Security

Unique Functions

Source: How to Get to the Promised Land: Alternative Pathways to Enterprise Payments Financial Insights Aaron McPherson July 2005

Ch

an

nels

Core

Syste

ms

PaymentSystems

ReconciliationReconciliation

G/LG/L

DDADDA

CheckCheck

ACHACH

Debit Card

WireWire

PaymentsDatabase

ACI’s Vision ---providing an enterprise payments hub

TellerTeller

Call CenterCall Center

Web SiteWeb Site

IVRIVR

MobileMobile

CIBC Hosts

CardProcessorBranch

Network

Case study - CIBC

Phone Banking

Internet Banking Payments

ManagerPRM – DebitPRM – AML

IFX

BASE24BASE24-es

ATM Fraud

The Crooks are Everywhere!

Four arrested in Russia for cross border ATM fraud

Russian police have arrested four men on suspicion of stealing around $500,000 from US

bank accounts in a cross border ATM scam, according to press reports.

Australian police recover first complete ATM skimming deviceNew Zealand Banks issue

ATM fraud warning

Singapore Banks hit by ATM

skim & steal scam

Card Fraud in A/P Higher Than World Average

0 5 10 15 20 25 30 35Losses Due to Fraud Out of Total Card Transactions (%) in 2002

US

Canada

UK

Taiwan

South Korea

Philippines

Malaysia

Japan

Indonesia

Australia

World Average

Source: The Asian Banker Research, 18 March 2004

Losses Due to Fraud Out of Total Card Transactions (%) in 2002

Card Skimming – The Set-up…

Card Skimming – The Set-up…

Card Skimming – Final Touches…

Card Skimming – Execution

Card Skimming - Receiver in Car

PC, Database, Encoder, Etc…

DIY Cards…

ATM Fraud – What can banks do?

• Operational–Education for customers–Security cameras–EMV

• Fraud detection solution–ACI Proactive Risk Manager

SUMMARY

Summary

• Establish a Vision• Build the Right Infrastructure• Buy Established Packages To Leverage Global Cards & ATM Developments

• Don’t Forget About Security• Execute Effectively • Work With Good Partners

E V E R Y S E C O N D. E V E R Y D A Y