How Discover® Helps Credit Unions Serve Their Members Better with Superior Card Programs (Webinar Handouts)

Refresh Your Credit Card Program with Discover®

September 15, 2011

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Agenda

• Discover® Overview

– Discover® Acceptance

• Industry Payment Trends

• Discover® Brand

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• Program Overview

– Credit

– Debit

• Program Support and Benefits

Discover® Overview

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Global Payments Provider

• Global brand known for service, rewards, and cardholder benefits

• In over 185 countries/territories

• Millions of premium

• Growing issuance business

• Comprehensive payments solution including credit, debit and prepaid

• Fast-growing PIN-based ATM/debit network with 4,500+ participating financial institutions

• All top national PIN debit retailers accept PULSE

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1 STORES, Top100 retailers, 2007

2 Research conducted by PULSE sales dept

3 DFS Internal Data, includes North America

• Millions of premium consumer and corporate cardmembers many who travel to U.S

• Highest acceptance among top 100 merchants1

• Targeting domestic acceptance parity with leading payments networks by end of 2010

PULSE2

• Over 650K ATMs and cash access locations

• Robust global acceptance network for credit, debit, and ATM through direct

Discover® Global Acceptance Model

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• Robust global acceptance network for credit, debit, and ATM through direct relationships and alliances

• Domestic Point-of-Sale Acceptance at 97% of Visa/MC1

• Domestic ATM coverage at more than 350,000 locations

• Global Acceptance Initiative

– Global cash access at more than 780,000 ATMs

– Coverage in over 80 countries

1. Internal DFS Reporting

Payment Industry Trends

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Members Value Your Payment Products the Most

84%

94%

94%

92%

Overall

Credit Card

Debit

HELOC

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92%

92%

89%

87%

83%

CD

Mortgage

Checking

Savings

Car

However, only

29% have a

credit card

through their

credit union

Source: Javelin Strategy & Research, 05/10, CU n=1,247

46%

48%

50%

52%

Transactor – always / almost always pay the entire balance

There has been a large shift

How Members Use Their Cards

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36%

38%

40%

42%

44%

10/09-12/09 11/09-01/10 12/09-02/10 01/10-03/10 02/10-04/10

CU: Average Non-CU: Average CU Non-CU

a large shift among CU

members from revolvers to transactors,

making this an attractive, lower

risk portfolio.

Source: Millward Brown, Brand Tracking Study, 10/09-04/10, n=7,000

Application MotivatorsH

igh

Med

ium

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Med

ium

Lo

w

Source: Javelin Strategy & Research, 05/10, CU n=1,247

Does your credit union offer a rewards program on your credit card program?

� Yes

Audience Polling Question

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� Yes

� No

Penetration of Rewards Cards

©2011 DFS Services LLC Confidential and Proprietary Do Not Copy or Distribute 11TNS, State of the Card Market Report, November 2010

What kind of rewards program does your credit union offer with your credit card program? (select all that apply)

� Cash Back

� Air Miles

Audience Polling Question

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� Air Miles

� Bonus Points (Gift Certificates, Electronics, Merchandise

� Merchant Funded Discounts

� Rebates

Card Reward Preferences

Trend and Forecast by Types of Credit Card Rewards

(Among Rewards Cardholders)

2007 - 201266%

61% 63%62%57%

64%

40%41%42%42%46%45%

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TNS, Winning Rewards in a Cautious Market, December 2010

23%

23% 23%

21%

24% 22%

16% 16%22%

21%

24%23%

10% 8%8%9%9%8%

2007 2008 2009 2010 2011 2012

Cash Back Air Miles Bonus Points Discounts Rebates

Credible and Trustworthy Brand Fit

Credit Union Discover Visa MC

Company that gives you a safe, secure feeling 70% 68% 66% 66%

Leader in the financial services industry 57% 66% 64% 64%

Card I trust 72% 74% 73% 73%

A large, stable, reliable institution 72% 71% 71% 71%

Provides a good value 67% 67% 64% 64%

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Provides a good value 67% 67% 64% 64%

Best all around card 61% 61% 60% 60%

Rewards customers for using the card 47% 65% 57% 58%

Card is primary because it offers rewards (among primary cardholders of each brand)

23% 75% 39% 45%

Credit Union card members are looking for credible, trustworthy financial services brands.Perceptions of Discover are aligned with Credit Union members.

Source: State of the Card Market Report, 2010 - TNS Financial Services

Discover® Brand

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The Discover® Brand – Known for Rewards

9%

10%

15% Best Rewards Program in the Market

10%

15% Easiest to Earnand Redeem Rewards

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Page Source: Commissioned Millward Brown 4Q’ 10 Brand Tracking Survey, 4Q’ 10, N=3,362, respondents drawn from the general population

3%

2%

7%

The Discover® Brand – Seen as Refreshing

Unique Carefree

52%

Non-Traditional

52%

Different

75%

70%

75%

82%

Independent

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8%

13%

8%

28%20%

12%

21%

31%

28%

20%

47%

7%

21%

8%

Page Source: Landor Brand Asset Valuation Study, April 2011. Survey respondents=general population

Program Overview- Credit and Debit

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Discover® Comparable Consumer Credit Tiers

MasterCard® VISA®Discover®

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World Elite/World High Value

World

Enhanced

Standard

Signature Preferred

Signature

Rewards

Traditional

Premium Plus

Premium

Rewards

Core

Discover® Debit

Highly competitive interchange pricing and low fee structure produce better economics

What’s In:

All Fees:�Published �Transparent �Correlate to monthly issuer invoice

“All-In Program Fee,” based on transaction volume, is:

What’s Out:

�No Sponsorship Fees�No Branding Fees�No Quarterly Fees

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transaction volume, is:�“Pay-as-you-go”�Netted out of issuer interchange on monthly invoice

Program Support and Benefits

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Unique Enhancements

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Discover Offers

Cash OverSpend Analyzer

Discover® Giving

Unique Enhancements

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Turn-key, customizable materials to create attractive integrated campaigns

• Acquisition Programs

• Usage Programs

• Branch Communications

• Educational Materials

• Merchant Funded Offers

Discover® Turnkey Marketing Support

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• Merchant Funded Offers

• AMPs

• Online Sales Training Tool

NAFCU Member Benefits

• Reduced Issuer Set Up Fee from $15,000 to $1,000

• Waived Issuer Processor Set Up Fee of $15,000

• 100% Transaction Authorization

• Higher Interchange Rates

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• Higher Interchange Rates

• Straightforward Fees and Billing

• No Licensing or Membership Fees

Questions

Kristi Lockhart

Discover Financial Services

224-405-5939

[email protected]

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[email protected]

www.nafcu.org/discover