In the last year, the world has changed for credit unions. New legislation has been enacted and consumer activism has progressed. What does the next generation of business look like as a result? In this presentation, you will learn the answer to that question, as well as how to use your credit union's brand assets to create growth, and opportunities that exist in the payment market space. For more info: www.nafcu.org/vantiv

1. Carpe Diem
Living in a Post-Durbin World
Royal Cole
Financial Institution Services President

2. Flow of Today’s Discussion
• Overview of Credit Unions in Current Financial
Environment
• Steps to Success
• Opportunities for Growth Post-Durbin
• Emerging Marketplace
• Implications for Credit Unions
• Conclusions
2

3. Overview

4. Improving Signs Will Accelerate
Credit Unions’ Growth Opportunities
Consumer sentiment is up
Unemployment is moving downward (although slowly)
Consumers report higher satisfaction level with Credit Unions
Once-in-a-lifetime growth opportunity for Credit Unions
4

5. Overview
Consumer Confidence Index Total Unemployed & Underemployed Rate
(The Conference Board) 18%
100
90 16%
80
14%
70
60
12%
50
40 10%
30
8%
20
10 6%
0
Jun'08
Jun'09
Jun'10
Jun'11
Feb'08
Feb'09
Feb'10
Feb'11
Feb'12
Apr'08
Oct'08
Apr'09
Oct'09
Apr'10
Oct'10
Apr'11
Oct'11
Dec'07
Aug'08
Dec'08
Aug'09
Dec'09
Aug'10
Dec'10
Aug'11
Dec'11
Unemployment Underemployment
Total Debt vs. % Revolving Debt
2,600 39%
38%
2,550
37%
Total Debt (billions)
% Revolving Debt
36%
2,500
35%
2,450 34%
33%
2,400
32%
31%
2,350
30%
2,300 29%
Total Debt % Revolving Debt
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6. Overview
6

7. Overview
According to J.D. Power and Associates,
9.6% of customers switched their primary
banking relationship during the past year.
The main reasons…
Fees and Poor Service
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8. Overview
Gen Y Satisfaction with Service: 2011 vs. 2010
Gen Y:
• In their 20’s and early 30’s
• Familiar with new media and technology
• Hyper-networked: rely on each other’s opinions
• Credit Union satisfaction index at 83%
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9. Overview
Opportunity to Grow Mind - and Market - Share
Traditional Credit Union high member satisfaction level
represents a leverage point in this environment
Large Banks experiencing negative press and organized
consumer backlash post-Durbin
Momentum from Bank Transfer Day
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10. Negative Press Can Take Different
Forms
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11. Unintended Consequences
Post- Durbin
“Even though we are not at $10B in Assets (YET), the
Durbin Amendment has impacted us in several ways. We
are projecting an annual reduction of more than $500,000
in interchange income (mainly from card organization
interchange modifications and merchant routing). And we
were forced to add an unaffiliated secondary network.”
Bob Marquette - Members 1st FCU,
Mechanicsburg, PA
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12. Durbin Amendment Major Provisions
Debit ▪ Fed to set debit interchange for issuers
inter-
with $10B+ in assets
change
rate ▪ Takes effect 12 months from enactment
▪ Prepaid cards are exempt from debit interchange
Prepaid regulation unless
economics
▪ Issuers can charge cardholders overdraft fees or a
fee for the first in-network ATM withdrawal per month
Durbin
Amendment
▪ Debit card issuers must issue cards that allow
Network authorization via more than one network operator
exclusivity
▪ Network agreements cannot restrict merchant’s
routing of debit authorizations
▪ Merchants can discount based on method of payment;
Merchant prohibits discrimination by network or issuer
steering ▪ Merchants may set a $10 minimum for credit card
purchases; prohibits discrimination by network or issuer
SOURCE: Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010; McKinsey analysis
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2

13. Impact of Durbin Amendment
• The amendment is supposed to provide consumers with greater
benefits and lower costs, but we have yet to see that happen
• Most banks have eliminated or reduced debit card rewards
programs.
• Looking at new account fees to offset lost debit card revenues.
• According to a recent Ipsos Public Affairs survey, just 7% of
respondents believe most retailers are passing their savings on
to consumers.
• Total loss of revenue is estimated at $8B; for small ticket items
the merchant is actually disadvantaged due to flat rate pricing.
• In the 4th quarter of 2011 interchange revenue fell by 26% to
$6.2B
• The amendment also requires two unaffiliated payment
networks for each debit card (for pin and signature).

14. Overview
Play to Win Member
Satisfaction
Appealing
Credit
to Young
People
Union Low Fees
Strengths
Mobile
Apps
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15. Overview
• The landscape is shifting, particularly with
younger consumers
Core Consumers
Emerging Consumers
• Credit unions have built a solid platform of
strategic assets for growth
Phenomenal brand equity
Real performance, not just empty words
• What got you here won’t get you there
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16. Steps to Success

17. Steps to Success
Drive Market
Share Growth
Know the
Competitive
Environment
Incent the
Right Behaviors
Segment Your Customers; Turning
Data Into Action
Understand Your Portfolio
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18. Understand Your Portfolio
Develop Card Groups
• Any available
demographic or
performance information:
Last activity
High/Low users
Transaction type
Account type - Card
or Checking
Branch locations
VIP
And many more….
• TAKE ACTION!
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19. TAKE ACTION!
19

20. Segment Your Customers
Benchmark Performance
• Control Group
• Prior to Campaign
• During Campaign
• Post Campaign
20

21. Turning Data into Action
“There has been a shift in the nature of
added value - it’s now leaning toward
analytics and data visualization, and the
ability to turn data into action.”
—From Enterprise Data Management
Trade Association
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22. Turning Data into Action
Analyze Your Portfolio (Credit, Debit and Prepaid):
Have a 360º lens into your portfolio
Incent desired behaviors
Identify member behaviors you want to modify
Incorporate external AND internal data
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23. Incenting the Right Behaviors
Understand Which Members / Relationships
Have the Highest Potential:
Deep Dive Into
Portfolio
Incent the Identify
Potentially
Right Profitable
Behaviors Members
Test and Learn
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24. Gaining Market Share
Opportunity
Consumer Worst Fears:
Unauthorized Charges (86%),
Unexpected Fees (84%),
Being Charged by Store for Payment Method (80%),
Being Declined (77%)
From the Vantiv/Mercator Insight Series Research, February 2012
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25. Opportunities for Growth Post-Durbin
Gen Y
Big
Bank
Fees
Products
and
innovation
25

26. Opportunities for Growth Post-Durbin
• Market players are jockeying to take
advantage of the new market environment
Too soon to pick winners and losers
• Brand assets position Credit Unions
perfectly to be winners
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27. Opportunities for Growth
Attract New Members
• Branch
Traditional • Web
• Direct Marketing
Channels
• Call Center
• Mobile
Emerging • Text
• Social Media
Channels
• Email
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28. Opportunities for Growth
Attract New Members
Traditional • Credit
• Auto Loans
Channels • Small Business Services
• Prepaid
Emerging • Debit Rewards
• Personal Financial Mgmt
Channels • Mobile Banking
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29. Opportunities for Growth
“The goal is to get members in when they’re
young and make sure they’re satisfied with the
two most basic products—checking and savings
accounts. Then, through continued education,
we can be there when they’re ready for, say, a
mortgage.”
—Jenn Cloud, Vantage Credit Union’s
Young & Free Spokesperson
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30. Opportunities for Growth –
Consumers and Small Business
Develop Acquisition Strategies
Be local:
Learn about Strengthen
Leverage
their Develop relationship;
institutional
concerns and leading edge communicate
strength at
become a product trust and
the
trusted offerings reliability
grassroots
advisor
level
30

31. Emerging Trends

32. Emerging Players
Competition
• Prepaid Cards
Today’s • Web Banking
Channels • Green Dot
• On-line Banks
• PayPal
New • Facebook
Entrants • Google
• Apple
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33. Implications

34. Implications
Be Prepared for Change:
• Look over the horizon
Anticipate change
Drive strategies to adapt and grow
Use analytics to focus on the future
• Evolve your member base
Grow profitable members
Identify and attract new profitable
members
• Seek new solutions for growth
New opportunities require new
approaches
Evolve solution mix with new partners
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35. Implications
Be Prepared for Change:
Have you built mobile technologies
and social media into your future
growth strategies?
How about…
• Prepaid
• Data Rewards
• Personal Financial Management
• Mobile Banking
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36. Conclusions

37. Conclusions
Carpe Diem:
Entice younger consumers to become members
Invest in Mobile
Remember the Steps to Success
(Understand your Portfolio, Segment Your Customers, Know the Competitive
Environment, and Gain Market Share)
Don’t forget Small Businesses
Don’t ignore the new product landscape and new entrants
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