MOBIL

E RDC A

ND

THE

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LLY U

NDERSER

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AGENDA• Cachet Financial Solutions

• The Financially Underserved

• Prepaid Cards

• Mobile Remote Deposit

• Solutions

• Future of Mobile RDC

• Q & A

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WHO IS CACHET FINANCIAL SOLUTIONS?

Focused on Remote Deposit Capture solutions, including: Patent-pending Mac solution Mobile, PC, and Flatbed Scanner applications Patent-pending mobile interface flow for loading to prepaid cards

Developed CheckReview™, a proprietary, patent-pending application for real-time image verification of remotely deposited check images

Management team with extensive experience and knowledge of banking industry and financial technology

Headquartered in Minnesota with satellite offices around the country

CACHET IS A LEADING FINANCIAL TECHNOLOGY COMPANY THAT SPECIALIZES

IN THE DESIGN, DEVELOPMENT, AND DEPLOYMENT OF

REMOTE DEPOSIT CAPTURE (RDC) SOLUTIONS.

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WHO A

RE TH

E

FINANCIA

LLY

UNDERSER

VED?

AN

D W

HY D

O T

HE Y M

AT T E R?

THE UNBANKED/UNDERB

ANKED ARE A VARIED AND COMPLEX

MARKET, REPRESENTING

DIFFERENT RACES, INCOME

LEVELS, AND AGES.

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US HOUSEHOLD STATISTICS

5

Source: 2011 FDIC National Survey of Unbanked and Underbanked Households, 9/2012.

8.2%

20.1%

2.9%68.8%

Banking Status of US Households (percent)

Unbanked UnderbankedStatus Unknown Fully Banked

Overall, at least 28.3% of US households are either unbanked or underbanked

Since 2009, approximately 820,000 more households have become unbanked

Almost 70 million adults reside in unbanked or underbanked households

Unemployment and underemployment have placed millions of Americans in precarious financial positions, leaving them unable to absorb overdraft charges or minimum-balance fees

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Do not have enough money

Do not need or want an account

Can't open an account

Don't like/trust banks

Bank fees/balance requirements are too high

Banks do not have convenient hours/locations

Banks do not offer needed products/services

0% 5% 10% 15% 20% 25% 30% 35%

Never-Banked Previously Banked

WHY DON’T THEY HAVE ACCOUNTS?Comparison of reasons why Never-Banked and Previously Banked households do not have a bank account.

6

Source: 2011 FDIC National Survey of Unbanked and Underbanked Households, 9/2012.

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UNDERBANKED HOUSEHOLDS STATISTICS

Race & Ethnic-ity

White HispanicBlack Other

Age

15-24 25-34 35-4445-54 55-64 65+

Education

No High School DegreeHigh School DegreeSome CollegeCollege Degree

The demographic make up of unbanked households shows proportions that are very similar to the fully banked market

Source: 2011 FDIC National Survey of Unbanked and Underbanked Households, 9/2012.

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CONSUMER PROFILESTr

ad

itio

nal

• Construction worker

• No previous banking experience

• New to Country

• Only uses alternative financial services

New

ly

Un

ders

erv

ed

• Retired, currently working at department store to make money

• Husband recently laid off

• Small savings, can’t afford banking fees, and has switched to alternative financial services

Gen

era

tion

Y

• Young professional, with career advancement potential

• Doesn’t trust banks and/or doesn’t have a relationship

• Wants more control over money management

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WHY DEVELOP PRODUCTS FOR THE FINANCIALLY UNDERSERVED?The underserved population is very large, growing and has at least $1.1 Trillion of purchasing power.

Many of the underserved are potential customers-for-life. A significant segment of underserved individuals, such as students and immigrants,

are actively seeking to build their credit profiles. If serviced with care, it is likely that these consumers will remain loyal to the issuer of their first credit product.

Alternative data sources now exist to assess creditworthiness of the underserved. Many of these consumers may have sufficient income and other characteristics to

be considered highly creditworthy, access to alternative data, a combination of public records and non-traditional consumer information, can be used to accurately predict creditworthiness and identify attractive underserved consumers.

© 2 0 1 2 M O B C O N ─ W H E R E M O B I L E M I N D S C O N N E C T . A L L R I G H T S R E S E R V E D .

The Underbanked Consumer – Growth Opportunity for Lenders: Jeffrey Feinstein, LexisNexis, 2010

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WHAT

ARE

PREPAID

CARDS?

WH

AT AR

E TH

E I R A

DVA

NTA

GE S ?

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WHAT IS A PREPAID CARD?

IT LOOKS LIKE A CREDIT CARD AND SPENDS LIKE A DEBIT CARD. BUT A RELOADABLE PREPAID CARD IS IN A CLASS BY ITSELF.

Often confused with reloadable retailer gift cards, prepaid cards are meant for long-term use, and can be used anywhere traditional credit/debit cards are accepted (including online and paying bills)

Primary difference is that the funds on the card are pre-paid

Many cards allow consumers to take cash out at ATMs.

Cards offer the same general fraud and loss protections as any credit or debit card

11© 2 0 1 2 M O B C O N ─ W H E R E M O B I L E M I N D S C O N N E C T . A L L R I G H T S R E S E R V E D .

Network Branded and Prepaid Card Association, www.nbpca.com, 2012

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GROWTH OF PREPAID CARDSTotal value of prepaid card opportunity is expected to

quadruple by 2017

Prepaid cards are the fastest growing segment in payments

Prepaid cards appeal to all underserved consumers, particularly among those who could, but chose not to bank

A 2012 report from research firm Aite Group found: 33% of prepaid users have incomes above $45,000 While 15% earned more than $70,000. More than one-third have college degrees.

Annual percentage growth of dollars loaded on prepaid cards:

© 2 0 1 2 M O B C O N ─ W H E R E M O B I L E M I N D S C O N N E C T . A L L R I G H T S R E S E R V E D .

Mercator Advisory Group, Mercator Report on Prepaid Market Forecasts, November 2011, and Boston Consulting Group

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BENEFITS OF PREPAID CARDS

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Network Branded and Prepaid Card Association, www.nbpca.com, 2012

• Allows the financially underserved access to increasingly card-based economy and provides an improved sense of control and empowerment.

Opening Doors to Economic Participation.

• Serve as a tool with which to more effectively budget spending.

• Avoid the risk of over-spending or overdraft

Financial Responsibility.

• Businesses use to deliver payroll, provide and track health benefits and as a reward or incentive to employees and customers.

• Governments use to deliver benefits and disperse disaster relief funds

Cost-Effective Convenience

• Network branded prepaid cards are issued by regulated financial institutions, complying with federal regulations from the Federal Reserve Board, and the United States Treasury, among other regulators.

Alternative to Credit or Cash

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WHAT

IS

MOBIL

E RDC?

( RE M

OT E D

E P OS I T

CA

P T UR

E )

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HOW MOBILE REMOTE DEPOSIT WORKS

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HOW IT WORKS

Sign on

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Choose Load

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HOW IT WORKS

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Load Screen Enter Amount

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HOW IT WORKS

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Take Front Image Take Back Image

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HOW IT WORKS

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Accept Fees Upload Successful

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RISKS OF MOBILE RDC

Transaction Risks

• Counterfeit Checks

• Multiple Presentment

• NSF Returns• Operator

Errors• Image

Usability Issues

• Kiting (Float)

Operational Risks

• Data security• Check Data• Personal

Information• Technology

• Device malfunctions

• System hacks

Legal Risks

• Bank Secrecy Act

• Customer Agreements

• Check 21 Regulations

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RISK MITIGATION

Deposit Review and

Approval

Risk Parameters

& Base Rates

Endorsements

Duplicate Detection

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SECURITY FEATURES COMBAT RISK AT MULTIPLE LEVELS

Handset

Security

Internet

Sessions

Data Center Securit

y

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TECHNOLOGY TOOLS PROVIDE SECURITY

Secure Application

•No data stored on device

Secure Internet

Transmissions

Encryption of Data & Images

Multifactor Authenticati

on

Secure Sign On

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The inconvenience and cost of accessing multiple outlets or providers for everyday financial services such as bill pay, remittance and deposits will incent these consumers to adopt an aggregated service.

Presumes that cost structure will be competitive across multiple products.

The target market under consideration tend to use mobile phones rather than personal computers to access the internet.

It is not clear if general population’s concern about using mobile phones to manage financial transactions translates into this segment.

WHY MOBILE PAYMENT SYSTEMS MAKE SENSE FOR THE UNBANKED MARKET

Mercator Advisory Group 2011

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Keep it Simple

Fewer Checks & Balances

Segregation of Duties

Less Sophisticati

on of Business

MOBILE FOR SMALL BUSINESSES

Mercator Advisory Group 2011

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MOBILE USAGE IS UBIQUITOUS

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90% of phones

sold in Q1 2012 were

web-enabled

It’s expected that by 2012,

smartphones will out number

PCs

Half of U.S. Adults will

adopt mobile

banking by 2012

CTIA and Alix Partners, 2011

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MOBILE RDC BENEFITS

Security• The number one reason for adoption is urgency to deposit

checks for safekeeping

Convenience• The number two reason for adoption is urgency to

deposit checks for quicker fund access

Ease of Use• The number Three reason for adoption is for the ease of use

© 2 0 1 2 M O B C O N ─ W H E R E M O B I L E M I N D S C O N N E C T . A L L R I G H T S R E S E R V E D .

Alix Partners

1

2

3

27

MOBIL

E RDC

&

PREPAID

SOLUTI

ONS

US E C

AS E S &

BE N

E F I TS

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MOBILE RDC REVOLUTIONIZES PREPAID CARDS“[MOBILE RDC] HELPS MORPH ONE OF THE MORE TIME CONSUMING AND CLUNKY ASPECTS OF THE PREPAID CARD INTO THE NEXT GENERATION, WHERE THE PREPAID CARD BECOMES SUBSTANTIALLY EASIER TO RELOAD.

IT’S ONE OF THE MOST EXCITING THINGS I’VE SEEN IN PREPAID.

IT CAN CHANGE PEOPLE’S LIVES...”

Judith Rinearson, Partner at Bryan Cave LLP

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PUTTING IT TOGETHER

Mobile Usage is

Ubiquitous

Demand for Mobile Financial

Services is High

Prepaid Card

Benefits are

Understood

Strong Solution

for Financially Underserv

ed

© 2 0 1 2 M O B C O N ─ W H E R E M O B I L E M I N D S C O N N E C T . A L L R I G H T S R E S E R V E D . #

The combination of Mobile RDC and Prepaid cards provides a solution for the financially underserved that provides:

Financial power and stability with increased ability to save and manage money

Safety and security in depositing check funds Faster access to funds Convenience and time savings

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MOBILE RDC TO PREPAID CARDS SOLUTIONS

Potential Providers

• Banks & Credit Unions

• Prepaid Card Programs

• Check Cashers• Mobile Wallet

Providers• Telecom Providers• Online Financial

Service Providers

Solution Features

• Integration into existing mobile applications

• Check guarantee programs; providing instant good funds

• Ability for customers to load prepaid card retail locations/ATMs

Benefits for Provider

• Expands customer base without adding locations

• Taps a new market segment

• Creates loyalty with customers

• Ability to cross sell more services

• Customers are willing to pay for mobile financial services

© 2 0 1 2 M O B C O N ─ W H E R E M O B I L E M I N D S C O N N E C T . A L L R I G H T S R E S E R V E D . #

THE

FUTU

RE OF

MOBIL

E RDC

HO

W W

E G

OT H

ER

E,

WH

ER

E I

S I

T GO

I NG

?

#

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EVOLUTION OF MOBILE FINANCIAL SERVICES

Mobile

Wallet

• PoS Payments• Offers & Coupons• Loyalty & Rewards

Mobile Paymen

ts

• Bill Payment• Check Capture• eBills & Invoices• P2P transfers• Group Collections

Mobile Banking

• Balances• Transaction History• Information

Services• Transfers• Alerts

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American Bankers Association

© 2 0 1 2 M O B C O N ─ W H E R E M O B I L E M I N D S C O N N E C T . A L L R I G H T S R E S E R V E D .

KEY T

AKE-

AWAY

S

WH

AT WE ’ V

E LE A

RN

E D

1. The underserved represent a varied market, with purchasing potential

2. Prepaid cards provide this segment with a way to enter the financial market and manage money

3. The Mobile RDC to Prepaid Card solution provides convenience for consumers, and check cashing revenue for providers

4. Mobile RDC is in high demand and provides added value to mobile wallets

QUESTI

ONS &

ANSWER

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