CASH IS DEAD LONG LIVE CASH? Fifth Third Bank All Rights Reserved

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1 CASH IS DEAD LONG LIVE CASH? Fifth Third Bank All Rights Reserved

2 Cash is probably not the future 98% consumer adoption 8MM+ merchants Phone vs. wallet Biggest names in technology Second Life $567MM in 2009 transactions Bitcoin -- $1.3BN in in 2012 transactions Oliver Wyman NYC-FSP

3 but is it going away? 400 Currency ($) 282% Indexed value (1990=100) GDP 160% 100 Population 24% Source: Federal Reserve Bank of Boston 2009 Survey of Consumer Payment Choice Oliver Wyman NYC-FSP

4 What are consumers doing with all that cash? Monthly cash transactions 21% 28% Cash is used more often but maybe only on small ticket transactions? Median cash holdings $69 $78 More cash is held but maybe it s just being hoarded? Median monthly cash withdrawal $179 $217 Is cash really on it s way out? Source: Federal Reserve Bank of Boston 2009 Survey of Consumer Payment Choice Oliver Wyman NYC-FSP

5 Will gen Y be a game changer? Consumers with cash as preferred payment method 30% 25% 20% 22% 27% 15% 10% 14% 12% 12% 9% 10% 10% 8% 5% 0% Restaurant Grocery Clothing Average Source: Oliver Wyman 2012 Consumer Survey Oliver Wyman NYC-FSP

6 Definitely a top of mind issue Loss Mitigation Many of my employees have to walk or take a bus a half mile to deposit cash if only store ops would agree to a better cash handling solution. Store Operations I was able to reduce my cash handling costs from 1.1% to 0.5% of cash receipts by redesigning my cash handling process and installing new technology. Treasury/Finance If I could reclaim some of the cash in my stores, our Private Equity owners would be thrilled no more expensive draws on bank lines of credit. Source: Oliver Wyman research Oliver Wyman NYC-FSP

7 Multiple objectives no quick fixes Loss Mitigation Maximize quality of life for employees Prevent and minimize internal theft Prevent and minimize external theft Store Operations Maximize quality of life for employees Minimize hard costs of cash handling Minimize time off floor due to cash Treasury/Finance Minimize dead cash in stores Understand where, how and why cash is deployed in the field Source: Oliver Wyman research Oliver Wyman NYC-FSP

8 Banks have been at this for a long time, why not merchants? Controls & reconciliation Limit who touches cash Get good at managing cash Check truncation Get credit for what you got Retail Banks Adoption 1. Process redesign 2. Incent electronic 3. Leverage new technologies ATMs Online account transfer Fees for cash? Merchants Image ATMs Check imaging Teller cash dispensers Teller cash recyclers Time Oliver Wyman NYC-FSP

9 Fifth Third Currency Processing Solutions

10 Bank Innovation! Ledgers by hand Drive Thru ATM 9

11 10 Retail innovation?

12 Fifth Third is innovating again Launched 1977 First online shared network First network bill payment First online adjustment system First network to offer shared deposit taking First to offer customer selected PINs First to issue over the counter ATM cards Currency Processing Solution Suite Today, I ll talk through five reasons why we have placed a big bet on CPS 11

13 #1 Risk Management Prevalent theft pressures Ongoing internal cash shrinkage Employee safety concerns VS. Technology to secure cash earlier Automated processes Improved employee safety 12

14 #2 Advancements in Safe Technology Safe Options Manufacturing Competition 13 Competitive pressures reducing cost Alternatives to handle ranges of daily cash volumes Integration points for banking services

15 #3 Managed Service Approach Traditional cash management utilizes disjoined functions. Cash Infrastructure Managed by store operations Armored Courier Service Utilizes third parties providers Treasury and Finance Supported by banking group Managed Services Alterative Create single point of accountability Eliminate silos Improve operational efficiency Gain new management tools 14 Deploy remote cash capture technology Minimize Courier Cost Access idle cash Consolidate data management and reporting but a managed services approach provides an integrated alternative

16 #4 Enterprise Currency Controls Treasury Dashboard Operational Dashboard Mobile Application View Improve forecasting with real time transactional data for cash Allow floor personal to react to changing store needs Detect cash shortage at employee or register level Access relevant information to your management role Integrate currency data with business intelligence systems 15

17 #5 Opportunity to Shift Cash Handling to a Variable Cost Model Current projections Cash handling unit cost as a % of sales 1% Today Projected Market Trends Cash handling cost represent roughly 1% of sales today with unit cost expected to grow at 2-10% * Increase driven by fixed costs and physical handling Shifting to a variable cost model Variable cost model needed for future scale and unit cost control *Source: 16

18 Client success Quick service restaurant Background Fifth Third partnered with quick service restaurant chain to deploy remote cash capture technology across a national footprint Results Achieved Eliminated need for bank runs, reducing labor costs by 1.13 hours per day Deposit prep reduction.41 hours per day Guide reduced 1.5 daily hours per day Several national and regional chains reduced guide 2 hours daily per day Till reconciliation process reduced by 50%(+) Realized net impact of $2,679,400 in annual profit contribution 17

19 Client success Casual dining restaurant Background Fifth Third partnered with a casual dining restaurant and compared a new currency processing environment to a control group comprised of nonsmart safe locations Results Achieved Quantified significant time saves for the servers and a reduction of time on non service activities 50.73% reduction in server check-out process 28% reduction in shift change and close management cash related activities Realized net impact of $1,156,952 in annual profit contribution 18

20 Client success Big box retail Background National big box retailer was seeking a new approach to eliminate its cash room and deploy its resources toward store sales activities Results Achieved Reduced labor requirements by 6 daily hours Re-engineered processes with front end supervisors Deployed proof of concept that eliminated cash shortages Leveraged Series functionality for efficiencies in opening Developed deposit process to support register reconciliation Increases and Strips entered in POS prior to Recycler Established efund process to ensure business continuity Integrated currency and coin solution Provided visibility to cash over (short) performance Returned $18,000 of vault funds per location to corporate 19

21 20 Questions?