Preparing for EMV chip card acceptance

Ben Brown Vice President, Regional Sales Manager, Wells Fargo Merchant Services Lily Page Vice President, Wholesale eReceivables, Wells Fargo Merchant Services

June 16, 2015

© 2015 Wells Fargo Bank, N.A. All rights reserved.

We’re here to provide AIADA members: Information about the latest in the

payments industry

Solutions for dealerships to quickly and easily accept payments from your customers

Special benefits for AIADA members such as enhanced customer support and special offers

AIADA and Wells Fargo Merchant Services

Today’s webinar: Preparing for EMV chip card acceptance

• EMV as part of a multi-layered security approach

• Benefits of accepting EMV payments

• October 2015 liability shift

• EMV acceptance and adoption

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Security strengthens with each layer

EMV (Chip technology) Embedded chip protects against counterfeit cards, reuse of stolen data, lost/stolen cards (with PIN)

Encryption & Tokenization Sensitive data encrypted into a cryptogram and replaced with a token (a random number) prevents data from being stolen in transit and at rest

PCI Compliance Industry standard which helps merchants employ and maintain practices and processes to protect cardholder data and reduce fraud

Payment security is crucial to your business Layers of security

PCI Compliance

Data security by the numbers

Over 1 billion data records were stolen from 1,500 hacking incidents in 2014*

Over 55% of breaches targeted POS systems

Less than 4% of compromised data was even partially encrypted

*pymnts.com, February 13, 2015

Improve data security with PCI compliance

Ongoing certification process to help merchants keep payment card data safe

Compliance with policies, procedures, and technology requirements created and updated to help keep cardholder data secure

Wells Fargo Merchant Services provides solutions through TrustWave, a leader in global security to help merchants get set up and stay current with changing PCI standards. Includes free webinars for Wells Fargo Merchant Services customers:

General data security webinars - Blocking cyber theft, how data is stolen, setting up firewalls, remote access vulnerabilities, detecting and protecting against malware

PCI webinars - Getting started with PCI, understanding new PCI 3.0 standards, what you need to know about the new PCI Self Assessment Questionnaire

Encryption and tokenization

TransArmor Dual-layered card data security solution delivers greater transaction security.

Encryption – protects data in transit Secures the transaction by converting payment data into a cryptogram that cannot be easily decoded by hackers Tokenization – protects data at rest Removes card data from the merchant environment by replacing the Primary Account Number (PAN) with a unique, randomly-generated number (token)

EMV chip card payments The U.S. is moving to EMV (EuroPay, MasterCard and Visa)

chip cards to increase security and reduce credit card fraud

Projected to have 575 million EMV chip cards in the U.S. by the end of 2015

Reasons to accept EMV chip cards Data security

Decreases counterfeit fraud

Liability shift

Expanded payment acceptance

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EMV chip card technology

*Visa and EMVCo studies

EMV chip cards have an embedded microchip

Global Visa chip acceptance status

Canada POS 86% ATM 92%

U.S. POS 6% ATM 0%

Latin America POS 54% ATM 40%

Visa Europe POS 93% ATM 97%

Visa worldwide POS 72% | ATM 65%

Note: Percentage of international card-present transactions that originated from chip terminals during 1Q14. Source: As of January 2014, VisaNet clearing and settlement counts. Visa Europe is the exclusive licensee of Visa Inc. in the territory covered by the European Union.

CEMEA POS 87% ATM 92%

Asia Pacific POS 79% ATM 13%

More secure transactions The embedded microchip is more difficult to counterfeit than the

standard magnetic stripe

Data changes for every transaction

PIN or signature may be required for additional authentication

Historically, up to 84% of lost, stolen, and counterfeit card-present fraud can be prevented with EMV chip and PIN implementation.*

EMV – data security

*Visa and EMVCo studies

October 1, 2015

Merchants may be liable for costs associated with card present counterfeit fraud preventable with EMV chip card acceptance

Issuers may no longer be responsible for card present fraud if merchants are presented with an EMV chip card and process the payment by swiping the magnetic stripe or manually inputting the card number

This is a new financial risk for merchants

Liability shift

*Visa and EMVCo studies

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Hierarchy of liability Visa vs. MasterCard (October 2015 EMV liability shift)

MasterCard has included Lost, Stolen and Never Received in their liability hierarchy.

Visa’s liability is for counterfeit fraud, does not include Lost/Stolen categories

Visa Counterfeit fraud losses “shift” to party who does not enable EMV if fraud would have been avoided if EMV had been used

Readiness is critical, given the ‘liability shift’ to the party that is not Chip-enabled

Issued Device/Card

Magnetic stripe and/or

Contactless magnetic stripe

EMV contact or EMV contactless (signature CVM)

EMV contact or EMV contactless

(online or offline PIN CVM)

Acceptance Terminal

Magnetic stripe and/or

Contactless magnetic stripe

EMV contact or EMV contactless (not PIN capable)

EMV contact or EMV contactless (online or offline PIN capable)

Higher Risk Lower Risk

EMV deployment status

Visa U.S.1

48 million EMV cards issued1

100,000 EMV-enabled merchant locations1

20% U.S.-issued cross-border transactions are chip on chip2

Visa global

1 billion Chip cards issued

43% POS transactions originating from chip terminals

54% ATM transactions originating from chip ATMs

Industry2 2.4 billion EMV cards issued globally

36 million EMV terminals globally

1 Visa Inc, “EMV Migration Update”, January 2015 2 Based on EMVCo Q4 2012 data combined form Visa, MasterCard, American Express and JCB

How an EMV transaction works EMV chip card holder experience

Customer inserts card instead of swiping

Terminal reads card

1 2 EMV prompts customer to sign or enter PIN (not all transactions will require a PIN or signature)

3 EMV prompts customer to remove card

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Important: card should not be removed until prompted

Expanding payment acceptance

NFC contactless payments Most EMV enabled equipment can also process near field communication (NFC) payments, expanding customer payment options

NFC contactless payments:

• Include solutions such as Apple Paytm and Google Wallet

• Contactless payments can be made with NFC-enabled plastic cards, smartphones, and other NFC-enabled devices

• Support tokenization (utilized by many mobile devices) where sensitive card information is replaced with a token – which makes data more difficult to steal and reduces fraud

*Juniper Research, November 2014

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Payments from mobile devices are expected to grow to 2 billion by the end of 2017*

How NFC (near field communication) works: NFC is a wireless, contactless technology that reads and processes mobile payments within very close range of an NFC-enabled reader. A customer waves a card or device over an NFC reader, the payment is processed without the card or device touching anything.

AIADA member offer

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Special pricing exclusively for AIADA members EMV chip and contactless enabled equipment

When processing with Wells Fargo Merchant Services, you will receive:

• Special equipment pricing

• A dedicated relationship manager

• Guidance and resources to help ensure you are in compliance and processing payments securely

• Easy evaluation and set up to accept and process credit, debit and gift card payments

• Convenient options to accept payments wherever you do business – sales and service desks, on the road and online

• Fast funding as soon as next business day with a linked Wells Fargo deposit account

• 24/7 customer support and online tools

• The peace of mind working with an experienced payment processor endorsed by AIADA

Special pricing on new

equipment

AIADA Offer Special equipment

pricing for a limited time –exclusively for

AIADA members

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• More customers will be using EMV chip cards for payments

• Benefits of accepting EMV payments include data security, reduced fraud related financial loss, and convenience of offering your customers more payment options

• Make sure you’re ready for the October 1, 2015 liability shift

• More information about EMV chip cards may be found at gochipcard.com

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Concluding thoughts

© 2015 Wells Fargo Bank, N.A. All rights reserved. Member FDIC.

We thank you for your time today.

Please contact your Wells Fargo Dealer Services Commercial Relationship Manager for more information

about getting EMV ready.

Wells Fargo Dealer Services A team dedicated to driving dealer success

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Wells Fargo Dealer Services finely tuned indirect financing operation features a full credit spectrum to meet more of your customers’ needs and an experienced staff that understands the unique characteristics of the industry. In addition, we offer commercial banking solutions to increase the efficiency of your business operation and help mitigate financial risk. Nationwide network means local decisions and fast funding We are committed to staying near dealers to provide quick, flexible credit decisions and fast, local funding. With Regional Business Centers lending nationwide1, you’ll be served by auto financing professionals with extensive local market knowledge and experience. Powerful financing, insurance, and banking options for your dealership We help open the door to more sales and greater efficiency with a powerful offering of Commercial banking products and services, including: -Floor plan financing -Loans for real estate and working capital -Treasury management -Interest rate risk management -Merchant services -Insurance2

-Employee benefits -Commercial purchasing card -Wealth management

1Alaska, Louisiana, and Arkansas have limited operations. 2Products and services are offered through Wells Fargo Insurance Services USA, Inc., a non-bank insurance agency affiliate of Wells Fargo & Company. Banking and insurance decisions are made independently and do not influence each other. Wells Fargo Dealer Services is a division of Wells Fargo Bank, N.A. Member FDIC and Equal Credit Opportunity Lender. ©2015 Wells Fargo Bank, N.A.

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To find out more, contact your Wells Fargo Dealer Services Commercial Relationship Manager or one of our Regional Sales Directors by using the following information:

Commercial team contacts

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Questions about the content in this presentation

Contact Ben Brown benbrown@wellsfargo.com

817-334-7060