Current State of Banking Technologies Monday, May 23 10:20 12:00 CPE: 2

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1 Current State of Banking Technologies Monday, May 23 10:20 12:00 CPE: 2 David Keller, Assistant City Manager/CFO, City of Weston, FL Pete Forsgren, Co-Founder/COO, Three + One Advisors, Pittsford,NY LaDawna Reynolds, Finance Business Process Consultant, County of Dekalb, GA John McCarthy, Head of Sales, Grant Street Group, Pittsburgh, PA

2 Introductions Speakers Topic GFOA Best Practices o Procurement of Banking Services o Electronic Payment and Collection Systems o Cash Flow Forecasts o Numerous BPs on Investing

3 Managing Banking and Treasury Management Responsibilities Through Technology Part 1 By: Peter Forsgren, CTP three+one

4 Topics: Banking Services and RFPs Using Technology to Analyze Your Operations and Streamline Tasks Thinking About Your Constituents Needs

5 Banking Services and RFPs Standard Products and RFPs Check clearing, ACH, Wire, ZBA, etc Has your RFP evolved? Treasury Management/Cash Management Collections & Disbursements Concentration & Investments Funding (TAN/RAN, BAN, other)

6 2 Areas of Treasury Management Associated Internal operations Tools Check clearing Credit Card acceptance Purchasing/Ghost Cards ACH Wire Etc

7 Those are all Standard Products Is this really the only way to do Cash Management?

8 Thinking about your Constituents Start with you how has your banking activity changed over the years? How many checks do you cut per month? How are you getting your bills? How do you pay your bills?

9 How do people transact today? How does the next generation bank? Who will you be servicing? What capabilities do people have Digital Divide Who owns the User Experience (UX)?

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11 Companies vie for UX Bank & FinTech Beta or VHS, BlueRay or HD?

12 Impact to your RFP Technology Innovation needs to be part of RFP Is your bank looking to the future of payments (receipt or disbursement)? Are they teaming with any FinTech? What are they offering? What can they support? What is the commitment to technology and innovation (not just enhancements)

13 What are your capabilities? AR/AP modules of accounting? Procedures are you flexible? Looking to the future what do you need to prepare now?

14 Using Technology to: Analyze Your Operations Streamline Tasks

15 How dependent are your collections/disbursements on: Checks Volume and size Credit cards ACH What is the cost of each? Is there a better way? How many vendors send ebills? Do you turn them into paper? Why?

16 Return on your cash assets? Net effective return on all cash Forecasting and stress testing What is the real value? What is the potential value of your cash assets?

17 LaDawna D. Reynolds Finance Business Process Consultant

18 Initial Process Invoices sent to customers, payments returned via US Mail Courier collects mail from PO Boxes and delivers to Remittance team, daily Remittance team manually sorts mail (larger envelopes taken out). Mail with windows opened on machines, other mail opened by hand. Mail put in batches, based on payment type (multi, partial, regular) and verified by person different than opener.

19 Initial Process continued Torn stubs and payments without a stub hand keyed All other payments processed on machine Batch report created and updated nightly Next morning CPAK report and batch matched for accuracy If reports match, checks bagged and picked up by Brinks Oracle invoice created to updated banking system

20 Problems Manual internal payment remittance process Various machines using various software that didn t talk to each other = lots of interfaces Unsophisticated online payment portal No control over service breakdown Multiple manual file uploads from external payment processors Increased costs due to manual process

21 Solution Implement Banking Lockbox External payment processing Implement Banking E-Box Combine files from external payment processors

22 Results Decreased Cash Float Time = quicker access to cash Automation Elimination of Manual Processes Accurate Performance Reporting Banking Interface Streamlined external files Efficient payment processing 96% of payments currently processed off site

23 How We Did It Developing Your RFP Research Look at your neighbors Review recently issued RFP s and/or contracts GFOA Listen to Your Customers Customers generally want convenience! What are their (valid) complaints? Look Within What technologies are you currently using in your personal banking?

24 How We Did It continued Rock Solid Contract Include language about adding new services = reduce the need for additional RFPs Know your bankers What additional services can they offer? What else is in the works or on the market? Review their case studies. What have they provided to others?

25 Challenges Change NOBODY LIKES IT! Rally The Troops Get buy in from the beginning ask questions. What gives you headaches? Why are you doing it this way? What would you like to see changed? Be very clear on the as is and to be process Map the processes, look for gaps

26 Challenges continued Aligning staff skill set with new responsibilities Customer adaptation Continuing to use old PO Box Lack of attention to correspondence Distinguishing between account and invoice numbers Customer account input errors Positive File

27 Other Banking Technology In Use Desktop Deposit Create department level responsibility for depositing checks received for payment. Employee Pay Cards Reduce the number of paper checks being issued to employees, reduce the cost associated with printing and distributing checks, and increase employee direct deposit and electronic payment participation.

28 E-Payments Continue to Increase

29 E-Payment Growth in U.S. Source: Federal Reserve (6.6%) annual decrease in Checks 11.1% annual increase in ACH 29 Source: 2013 Federal Reserve Payments Study

30 Noncash Growth Rates 30 Source: 2013 Federal Reserve Payments Study

31 The Players in E-Payment Transactions

32 Payer 1 Government 2 Payment 3 Agency Processor 5 5 Credit Card Processor 8 4 Government Bank Account KEY Payment Data Funds 7 Card Issuer Credit Card Network Reporting Data

33 Historical Expectations for E-Payment Providers

34 Basics an E-Payment Provider Should Offer Security Certifications Services Reliability (up-time) Low exception rate (e.g., duplicates) Low chargeback/return rate

35 Security is Everyone s Concern 92 Government & Military Breaches in 2014 alone. Actual number probably much higher. Source: IDTheftCenter.org

36 Security Certifications PCI DSS Certification SSAE 16: Effectiveness of Operating Controls ISO: Information Technology Security Assessment

37 New Expectations for E-Payment Providers

38 Adding Value to Your Payment Process Security Technologies (e.g., P2PE, Tokenization) Advice (e.g., PCI compliance) Services Multi-department payments E-billing Mobile payments

39 Security

40 Point-2-Point Encryption (P2PE) Encrypt card data at the point of swipe Protect against: Malware Skimmers Card data environment compromises

41 P2PE Hardware Contactless Reader (tap) Swiper (swipe) Chip Reader (insert/dip) Encryption of the card data at the point of card swipe/insert/ tap

42 Advice E-payment providers can also offer security advice Example: Using the P2PE solution to reduce PCI scope P2PE can eliminate your computer and network from PCI scope

43 Services

44 Multi-Department Payment Portals

45 Importance of Unified Payment Portals I want to be able to manage all of my monthly bill payments through a single portal. Source: InfoTrends

46 Bringing Government Payment Services Together Different departments take payments for different items Tickets Taxes Licenses Fees Fines Utilities, etc.

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48 Portal Characteristics Paying many items types from one site Saving payment details Saving accounts Text message/ reminders Recurring payments Future-dated payments Payment history

49 E-Billing

50 E-Billing Send bills and reminders via text/ Present multiple bills/ payment history online Allow payers to opt out of paper bills (green initiatives)

51 E-Billing Customer Expectations Within Five Years Source: InfoTrends

52 Mobile Payments

53 Growth in Mobile Payments 61% mobile payment growth in % of all payments via a mobile device in 2015 Source: 2013 Federal Reserve Payments Study

54 Mobile Transactions Different types of mobile transactions: Online (web) payment by mobile m-commerce In-person payments made by mobile Contactless and other e-wallet payments proximity mobile payment

55 Online Mobile Friendly Sites Responsive design Easy to read

56 Online Mobile Apps Image capture technology to reduce payer friction and payment exceptions:

57 In-Person Contactless Payments Android Pay Apple Pay PayPass (MasterPass) Samsung Pay Microsoft Pay Visa PayWave

58 Summary

59 Summary The e-payment industry is changing and will continue to change. Find a payment provider that will keep adopting new technologies as they emerge To help you meet changing customer expectations and keep pace with payment trends.