What the Future Holds for CUs

What Does The Future Hold for Credit Unions?

Mark Sievewright

President, Credit Union Solutions

Fiserv, Inc.

June 9, 2012

Game Changers

2

Business Modelers • Demographic Shifts

• Social Change

• Channels

• Payments

• Regulatory Change

• Lending Patterns

• Talent management

Macroeconomic & Geopolitical Risks • Interest rates/inflation

• Unemployment

• U.S. housing market

• Sovereign Debt/EU instability

• Energy and commodity prices

3

Social Change/

Demographic Shifts

Payments

Digital Era

“Mobiliti”

Business and Technology Trends Reshaping our Industry

7

Now Then

Eastman Kodak’s “Moment”

Blockbuster’s Kodak Moment

The Evolution of Netflix – A Very Different “Kodak Moment”

Consumers take control…….

Consumer Preference is Evolving

(Percentage of Population)

Bank Online 60%

Purchase Online 61%

Prefer Internet for Financial

Information 66%

Pay Bills Online 41%

Untethered Interactions with Consumers and Businesses

425,000 ATMs 3,000,000,000

Devices

114,000 Branches

16,000 FIs

Location, Location, Location

Technology, Technology, Technology

Barnes & Noble’s – an “Almost Kodak Moment”?

Key Insights on the Branch of the Future

Branches will remain a relationship cornerstone for acquiring and

retaining deposits and growing profitably.

Fewer transactions in branches - focus shifts to advice, loans and small

business services.

The implementation of self-service technology in branches will free branch

staff to spend more time with members.

Branches must be tightly integrated with other delivery channels, giving

members channel choice that best meets their needs.

Credit unions must focus on providing an outstanding experience in each

branch, by phone and on-line (including mobile)

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22

23

Social Change/

Demographic Shifts

Payments

Digital Era

“Mobiliti”

Business and Technology Trends Reshaping our Industry

Social & Demographic Change

Age Demographic Shifts in the U.S.A.

25

The U.S. is undergoing rapid population aging

9.0 16.7 25.7 35.0 53.7 77.2

6.81%

9.24%

11.31%12.71%

16.53%

20.46%

0%

5%

10%

15%

20%

25%

0

10

20

30

40

50

60

70

80

90

1940 1960 1980 2000 2020 2040

US Population 65+ (left axis) Percentage of US Population 65+ (right axis)

Number of people

(millions)

Source: Government reports

We’re Living in the Age of Aging……..

Generational Cohort Share of Population 18 - 65 by Year

Baby Boom

30%Baby Boom

20%

Gen Y

26% Gen Y

37% Gen Y

43%

WW II Gen. 1%

Baby Boom

39%

Gen X

32%

Gen X

33%

Gen X

34%

Gen Z 4%

0%

20%

40%

60%

80%

100%

2010 2015 2020

By 2020, nearly half of the U.S. adult population will have been born after 1981………

Total: 197.4 MM Total: 204.0 MM Total: 208.8 MM 0.7% CAGR 0.5% CAGR

Source: 2008 National Population Projections.

WW II Gen: Up to 1945 Baby Boom: 1946 to 1964 Gen X: 1965 to 1980 Gen Y: 1981 to 2001 Gen Z: After 2001

31

Generation Next: These Guys are Different!

33

34

459

TMI SIG2R N2M

ATEOD

MTF

Important Millennial Behavior

• 39% Use debit card 15+ times/month

• 60% Bank and pay bills online

• 76% Use instant messaging

• 97% Have a Facebook profile or other social profile

We Share. Post. Comment. Like. Download. IM. Text. Blog. eVite. Tweet. And re-Tweet.

U.S. Social Network Usage

Social Change

39

1 in 8 couples married last year met online

The Business of Social Networking….. Blockbuster News Today!

www.YouTwitFace.com

41

Meet Ray’s Virtual Watercooler!

“With so much misinformation out there about where food

comes from and how it's produced, farmers have a responsibility

to speak up and set the record straight. And with social media,

they now have a tool to help them reach virtually anybody, anywhere.”

Meet Jeff Fowle, Cattle Rancher and Twitter Guru!

42

“When I installed pivot sprinklers on my

farm, I posted a tweet about it because

I felt it was important to show how

farmers and ranchers are continually

trying to improve water efficiency.”

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44

Bank of America

Wells Fargo: Sample of Customer Service

1) Direct message (DM) sent from user to @Ask_WellsFargo. DM makes

private message only seen by Wells.

2) Wells Fargo rep responds directly to user within 20 minutes with

a number (direct to live person) and case #.

3) Wells Fargo rep follows up with user to ensure issue was addressed.

Payments Feature Prominently for Social Media Users

46

Among all respondents using at least one social networking site.

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Social Change/

Demographic Shifts

Payments

Digital Era

“Mobiliti”

Business and Technology Trends Reshaping our Industry

Mobile Change

48

Mobile Has Impacted Consumers’ Daily Habits More Deeply and More Quickly Than Most Expected

Blogs

IM/chat

SMS/Alerts

Music

Search

News Video

Mobile web

Games

Maps

Budgets Payment Commerce

Banking

Ticketing

Transit

Social

Pictures

Email/MMS

Organizer Voice

Communicate

Create Consume

Control

TV

49

The evolution of computing changes everything…….

50

©2012 Javelin Strategy & Research

Mobile Warming

Mobile Devices Enable Ubiquitous Access

U.S. Adults With Smart Phones

66%

Smartphone

adoption

by 2014

52

Mobile Goes Mainstream – “Touch Banking”

Evolution of Mobile Financial Services

• Info services

• Balances

• Transaction history

• Alerts

Mobile Banking Mobile Transactions Mobile Commerce

• Bill payments, ebills

• Account transfers

• Person to person

• Deposit capture

• Small business

• Point of sale

• Remote

• Offers and coupons

• Loyalty and rewards

• Stored-value cards

User Adoption/Time

Creates the foundation

to expose transaction

services

Gain consumer

confidence and

build behavior

patterns

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54

55

Thought for the Day

Within 10 years, service quality will be measured – to a large degree -

by how much self-service you provide your members

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58

Social Change/

Demographic Shifts

Payments

Digital Era

“Mobiliti”

Business and Technology Trends Reshaping our Industry

Digital Transformation Is Fueling Electronic Payments

2009

46% 54%

2014

34%

66%

Electronic Cash and check

2004

61%

39%

11 Billion transactions shifting from paper to electronic in the

next five years

Source: First Annapolis Consulting 2009.

The Durbin Affect

61

The Durbin Affect

• Bank of America: • Interchange revenue fell from $1.494Bn in 3Q11 to $1.052Bn in 4Q11

• Wells Fargo: • Interchange revenue fell from $948M in 3Q11 to $611M in 4Q11.

• JPMC: • Interchange revenue fell by $263M on a sequential basis in 4Q11

• BB&T: • Interchange revenue fell from $208.4M in 3Q11 to $63.2M in 4Q11

64

Thought for the Day

Within 10 years, the companies that comprise our competition will be

radically different from those of today

65

Non-Traditional Players are Proliferating

67

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$865 billion in P2P payments

Consumer-to-consumer

check payments

grow by 3% a year

44 million U.S. children

$5 Billion industry

Mobile and Website Payments = Revenue Opportunity

Revenue

Opportunity Monetise gets $5 for an expedited

mobile phone payment in the UK

Paper or plastic? That's only part of the question.

The Future of the Plastic Card?

The Future of the Plastic Card?

77

The Future of the Plastic Card?

79

The Future of the Plastic Card?

81

Mobile Payments Innovation

83

Insight to action

Thought for the Day

In the future, the information associated with a transaction could be more

valuable than the transaction itself

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86

87

Business Model

Change Capital Preservation

& Creation

A New Economy

- Slower Growth

Regulatory

Change

Risk & Fraud

Management Empowered

Consumers

Shifting

Demographics

Technological

Advances

Non-Traditional

Players/ New Entrants

Payments

Transformation

What are the critical challenges facing Credit Unions?

90

Twin Strategies in the Digital Era

91

Win in Electronic Payments

Develop & Optimize Channels

What Does The Future Hold for Credit Unions?

Mark Sievewright

President, Credit Union Solutions

Fiserv, Inc.

June 9, 2012