U.S. Bank Payment AnalyticsU.S. Bank Payment Analytics

Overview

Payment Fraud Trends

2

Reference:Association of Financial Professionals (AFP), 2011 Payments Fraud and Control Survey

55%

68%72%

71% 71% 73% 71%

0%

20%

40%

60%

80%

2004 2005 2006 2007 2008 2009 2010

Percent of Organizations Subject to Attempted or Actual Payments Fraud

A majority of organizations have experienced payment fraud

Organizations are seeking tools to mitigate their risks from fraud

Payment Fraud Trends

3

Reference:Association of Financial Professionals (AFP), 2011 Payments Fraud and Control Survey

93%

25% 23%15%

4% 4%

0%

20%

40%

60%

80%

100%

Checks ACH Debit ConsumerCards

CommercialCards

ACH Credits Wire

Vehicles for Payment Fraud

Commercial cards have built-in fraud controls:Restrict card use to specific types of merchantsEstablish spending limits for specific timeframesSet purchase and transaction limits Run reports that track and monitor expenses

4

Commercial Cards: the Benefits Commercial cards have become the

payment tool of choice for all types of business-related expenditures

• Enhanced Control– Set and control spend categories

and transaction limits

– Help ensure compliance with company policies

• Increased Efficiency– Replace cumbersome paper-based

processes with an automated payment solution

– Reduce cost, time and resources needed to procure and pay for goods and services

Commercial Cards: the Challenge Organizations plan to expand commercial card

usage over the next three years• Reduce check usage by more than half

• Double use of commercial cards

5

More Time &People

MoreSpend

MoreTransactions

MoreReview

MoreReports

How do you efficiently and cost-effectively monitor transactions for employee fraud and misuse?

Risk within a Card Program Perception: Risk of

loss is quite high Reality: Actual dollar

loss is much lower

6

Program Size $100 MM

Average Transaction Size1 $315.00

Total Transactions per Year $317,460

Estimated Amount of Fraud and Misuse

Rate2 $2.38

Amount per Year 20%

Estimated Amount ofPolicy Violation

Rate2 $60 per $1 MMin spend

Amount per Year $60,000.00

Total Amount per Year $140,000.00

References:1, 2 2010 Purchasing Card Benchmark Survey Results, Palmer & Gupta3 2009 U.S. Bank survey of commercial card clients

79% of organizations have allowed perceived risk to be a barrier for card growth3

Cost of Manual Audits High cost to manually

audit transactions• Labor Intensive

• Inefficient

• Error-prone

Program Size $100 MM

Average Transaction Size1 $315

Total Transactions per Year $317,460

Cost to Audit per Transaction2 $2.38

Audit Sample Size 20%

Number of Audits Annually 63,492

Annual Cost of Audit per Year $151,111

7

References:1 2010 Purchasing Card Benchmark Survey Results, Palmer & Gupta2 NAPCP Understanding the Processing Costs and Related Costs

How to Mitigate These Issues?

8

Reign in your audit costs?

Reduce your risk exposure?

Grow your commercial card program?

1

2

3

U.S. Bank Payment Analytics

What is Payment Analytics?

9

Enhances auditing practices by providing 100% commercial card transaction monitoring• Rules Management: Compares

each transaction to your customized rules to identifyout-of-policy spend

• Case Management: Gives program managers timely information and tools to audit and resolve out-of-policy transactions

Moving from Reactive to Proactive

10

Val

ue

of

Act

ion

Time

Detects

relationshipsbetween transactions over time

Event(s)

Proactive Reactive

Issue(s) Problem(s) Loss(es)

$

$$$

How Does Payment Analytics Work?

11

Payment Analytics

TransactionAlerts

Cases

RULES

The “Brains” behind Payment Analytics Defined templates contain logical arguments

(i.e., rules)• WHEN THEN statements

Client assigns parameters to the rules• WHEN a transaction meets all

the conditions of the rule,THEN create a response

– Alert: Notifies stakeholdersvia email when ruleviolations occur

– Case: Allows users totrack progress towardsresolving an issue andviolations over time

12

Available Rule Templates Unauthorized Merchant Category Code (MCC) Alert Merchant Watch List Alert Transaction with a Non-Preferred Merchant Alert Split Transaction Alert Split Purchase Alert Transaction Close to Single Purchase Limit Alert Large Spend Increase over Average Spend Alert Excessive Use of Convenience Checks Alert Excessive Cash Withdrawals Alert Corporate Travel Card Purchase in Cardholder’s Postal Code Alert Weekend/Holiday Purchase Alert Account Opened/Maintained with Limits Exceeding Standards Alert

13

BenefitsImprove Compliance: Manage out-of-policy spend anddetect fraudulent activities

Enhance Control: Audit 100% of transactions versus arandom sample

Reduce Risk: Route flagged transactions to the appropriate personnel for review

Increase Efficiency: Streamline the audit process with rules thatare consistently and continually applied across all transactions

Boost Cost Savings: Automate routine audit tasks

Broaden Visibility: Record all case details in one central database

Expand Revenue Share Opportunity: Realize growth incentives by identifying spend leakage

14

1

2

3

4

5

6

7

15

Questions and Next Steps

Contact your Account Coordinator or ServicePoint to get signed up with Payment Analytics

©2011 U.S. Bank National Association. All trademarks are property of their respective owners. CPS 1062 (R-11/11)