Payments — the new player domainHow EY can assist

Payment is defined as an exchange of financial value between two parties

for goods or services.

Contents• Current trend ........................................................1

• Importance of an end-to-end view of payments .......1

• Areas of client focus ..............................................2

• Cross-teaming to better serve clients ......................3

• Qualifications ........................................................4

• Contact us ............................................................5

1Payments — the new player domain |

Financial institutions have long recognized the importance of payments to their overall business. Most banks generate 40% to 50% of total revenue from payment transactions, even before counting interest income generated by payments businesses like credit cards. In the last several years, however, it has become clear that the payments business is attractive to a broad range of new players interested in linking payment solutions to new business models.

Diverse players, including top technology companies and retailers, have invested heavily in payments innovations that improve customer experience; lower operating expenses; and, most important, increase total sales. Payments are critical to these non-banks because payment is the “moment of truth” in the overall commerce life cycle. Mobile technologies, open platforms and cloud-based processing solutions have accelerated the diversification of the payments industry. Venture capitalists, private equity firms, technology manufacturers, retailers and data analytic companies are investing heavily in payments.

However, even as new entrants increase investments in payment infrastructure, most traditional financial services players are faced with aging legacy infrastructure, increasing commoditization of core payments processing activities and greater competition for end-customer engagement. In this environment, financial services companies are beginning to understand that investing in their core payments businesses is critical to cutting costs, reducing risk and remaining competitive.

Current trend

Importance of an end-to-end view of paymentsBy their very nature, payments require a perspective that goes beyond organizational or product silos because their execution invariably crosses traditional operating and organizational boundaries:

• Lines of business

• Customer segments

• Product categories

• Geographic regions

• Technology platforms

As such, even the most basic understanding of how a payment moves between customers requires an end-to-end focus. Moreover, in an environment of heightened regulatory scrutiny, banks and their regulators have realized that an end-to-end view is critical to identify and remediate risk and mitigate it in the future. At the same time, an end-to-end view of payments also provides attractive opportunities to streamline and enhance the customer experience while driving down the overall cost to serve the customer.

2 | Payments — the new player domain

Areas of client focusBecause an end-to-end view of payments is critical, EY has a range of opportunities to assist our clients with important payments issues. Once most banks begin to investigate their legacy payment infrastructure, operations and processes, several issues typically surface immediately:

• Complex, aging, redundant and costly payments infrastructure

• Product innovation challenges

• Channel diversification challenges

• Uncertainty around new markets landscape

• Margin compression in traditional payments businesses

• Regulatory unevenness

In light of these challenges, EY can help banks and other traditional payments players assess their ability to compete in an increasingly competitive and global marketplace. Specific areas of focus include the following:

• Strategy and innovation:

• Product strategy

• Strategic technology design

• Globalization

• Competition

• Speed to market

• Data optimization

• Customer experience

• Operational efficiency

• Optimization of legacy infrastructure:

• Process standardization

• Outsourcing and vendor strategies

• Risk, regulation and compliance

3Payments — the new player domain |

AdvisoryWorking with midsize to large financial and government institutions, our Advisory service line helps protect their businesses, improve performance and enable change. Advisory professionals have deep competencies in risk, finance, supply chain, customer, and information technology and are divided into three sub-service lines to best serve clients: Performance Improvement, Risk, and IT Risk and Assurance.

AssuranceGlobally, EY has more than 66,000 Assurance professionals providing audit and accounting services to clients. Our services provide a clear perspective to audit committees and stakeholders that our clients’ accounts comply with required audit standards. Assurance services are divided into five sub-service lines: External Audit, Financial Accounting Advisory Services (FAAS), Climate Change and Sustainability Services (CCaSS), Accounting Compliance and Reporting (ACR), and Fraud Investigation & Dispute Services (FIDS).

TaxIn Tax, EY associates assist clients with assessing, improving and monitoring their tax-related processes, controls and risk management. Our Tax professionals focus on understanding and managing tax compliance and reporting requirements and help clients to maintain effective relationships with tax authorities. Five sub-service lines cover a range of potential challenges: Business Tax Services, Human Capital, Indirect Tax, International Tax Services and Transaction Tax.

Transaction Advisory ServicesEY’s Transaction Advisory Services works with a wide range of clients across the globe, preparing them to make educated decisions regarding strategic capital management and transactions. Three sub-service lines — Transaction Support, Capital Transformation and Transaction Tax — all work toward helping clients manage their capital agenda. Strategic planning on how to raise, invest, preserve and optimize capital helps clients gain a competitive advantage.

Financial Services OfficeEY has a unique alignment specifically dedicated to financial services clients. The Financial Services Office includes 18,000 professionals globally who are primarily aligned to key industry groups, including asset management, banking and capital markets, and insurance. They integrate with Advisory, Assurance, Tax and Transaction Advisory Services professionals to bring comprehensive coverage across four global areas.

Cross-teaming to better serve clientsEY approaches client challenges using an “account-centric” approach to intimately understand specific business issues. We deliver services through one or more of our four global service lines: Advisory, Assurance, Tax and Transaction Advisory Services. Additionally, a dedicated financial services organization brings together geographic, sector, service line and regulatory strengths specifically to serve financial services clients.

4 | Payments — the new player domain

We have specific experience and a proven ability in the payments domain, conducting technology assessment and rationalization exercises, as well as a leading customer experience practice. These factors, combined with our deep professional experience in banking operations, are key differentiators to help address the highest-priority matters and prepare institutions for a new operating environment.

• Differentiating approach and knowledge of payment applications and core banking platforms:

• We understand that payments technology integration requires folding in business process changes and documentation and asking the right questions within the context of the changing regulatory environment (e.g., OCC, CFPB, recent settlements).

• Proven track record of successful large-scale implementation at financial institutions:

• Our successful track record at top-tier financial institutions around large-scale implementations in claims management, core banking, risk management, finance, underwriting, and many other business and functional areas gives our practitioners a unique blend of experience to call upon when leading transformations within complex engagements.

• Dedicated payments and integration team with the required skills for a successful relationship:

• Our dedicated team of people has a comprehensive understanding of the payments business and technology integration challenges, as well as of the risk and regulatory environment within the financial services industry, to help you proactively clear integration and regulatory hurdles.

• Experience with payment platform transformation projects:

• We have a solid, current track record in payment consolidation and operational efficiency programs.

• Proven methodologies to balance risk and opportunity:

• Our disciplined approach addresses risk and control issues, as well as technology and business challenges.

• Clear understanding of the risk and regulatory environment at financial institutions:

• Our team members have diverse skill sets and knowledge to successfully implement payments initiatives at financial institutions both globally and in the US, and they understand the complexity of the risk and regulatory environment.

• Our successful track record of implementing risk and regulatory programs as a component of a larger initiative and a standalone perspective at various banks globally will provide the team with the ability to successfully account for risk and regulatory requirements as part of this initiative.

Qualifications

5

Contact us

Our Payments team is part of EY’s Banking network and supports clients from core locations across the country. Please contact one of our regional leaders if you would like more information about our services or would like to schedule time with our team.

Key contacts

Clayton BakerPrincipalErnst & Young LLPCharlotte/Raleigh clayton.baker@ey.com +1 214 969 0665

Margaret M. WeichertPrincipalErnst & Young LLPAtlantamargaret.weichert@ey.com+1 404 817 4854

Krishna Ramakrishna Senior ManagerErnst & Young LLPChicago krishna.ramakrishna@ey.com +1 312-810-4382

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