Tony Cleggand Tom Mac DonaldRBS

BUILDING TOMORROW™ Innovation in Banking Tony Clegg & Tom Macdonald 24th February 2012 rbs.com/gts Cards in Public Sector Tony Clegg - Business Development Manager RBS00000 GPC III RBS only dual scheme issuer in GPCIII i.e MasterCard and Visa MasterCard OneCard preferred solution with Integrated MI package Comprehensive reporting system – Smart Data Online Solutions encompass both Travel & Entertainment and Purchasing style spend Tiered rebate structure available, based on annual spend and settlement period RBS00000 Rebate matrix RBS00000 Comprehensive Controls  Individual transaction limit  Cardholder monthly limit  Corporate monthly limit  Merchant Category Group Blocking (inc option to prohibit cash withdrawals)  Preferred Vendor  ‘Approved’ Supplier lists  ‘Hosted’/Virtual cards  Smart Data On-Line (SDOL)  Corporate Liability Waiver/ Lost or Stolen Card Liability  £50k per c/holder  £1.5 Million per programme RBS00000 Declining Balance Cards - Uses and Benefits Declining balance cards are an ideal solution for any programme where there is a need for a set budget or a fixed spending amount Examples of Declining Balance usage would be… - Incentives and Per Diem Meetings & Events Projects Travel and Expense - Consulting Projects - Board Meeting Arrangements - Recruiting and Relocation - Disaster Recovery Projects - Conferences & Conventions - Rewards and Recognition - Educational Grants - Parties - Temporary Workers Expenses - Government Grants - Sales / Team Meetings - Training Budgets - Pilot / Test Programmes - Trade Shows & Events - Allowances - Short-Term Projects - Product Launches RBS00000 Virtual Cards  A rapidly growing area for cards use  No Cards issued  Virtual cards can be set up in any name as not constrained by Chip & Pin regs  Usually set up in name of Department or key supplier  If with key supplier, card number is lodged with supplier  Purchases made and charged to card  Data supplied is usually level compliant removing requirement for VAT receipts  Card details held securely  Coding can be added as part of transactions to assist cost allocation RBS00000 Reporting options Functionality Includes :  Integrated MI systems or 3rd Party solutions available  Large variety of reporting options, allowing you to compile, track and manage transactions  VAT reports accredited by Customs and Excise as evidence for VAT reclaim  Manipulate raw data to produce your own bespoke reports  Web based services that enable you to access management information reports, helps analyse your cardholder’s spending, ensure internal policies are being adhered to  Create your hierarchy for reporting purposes  Cardholder logon  Assignment of GL Codes  Download data to your General Ledger/Account software systems RBS00000 Summary benefits RBS Commercial Cards through GPC, can offer increased value to both internal and end user customers through ;  Reducing the need for cash - Global Acceptance  Cash flow management – Free up cash flow of upto 45 days from date of purchases  Process efficiency – Reduce cost of invoice processing by approximately £33 (manual versus electronic)  Cost control - Card transaction limits and monthly card limits – Tight Control on Spending  On line Management Information – 24/7 visibility of Purchases RBS00000 Innovation in Banking Tom Macdonald - Cash Management RBS00000 10 Banking Innovation Backdrop Banking landscape more regulated to ensure greater future stability Liquidity and cash flow management increasingly important European initiatives driving efficient business interaction across the single market Technology continues to transform how we pay and interact Growing expectations for mobility, speed and interoperability Online is moving to Mobile as smart phone and tablet use increases Consumers are changing faster than businesses but what does this mean in the way they pay businesses? RBS00000 11 Regulation – Stability and Compliance The New Landscape Europe Basel III 1) International Agreement on the amount of capital held by banks – Goes live from 2013 Prudential Regulatory Authority US Dodd Frank Act 1) Promotes the stability of the US financial system – Improves accountability and transparency – Protects American taxpayer by ending bailouts – Protects consumers from abusive financial services practices 3) FCA supervises the individual organisations 1) New entity that will sit alongside the Financial Conduct Authority 2) PRA works with Bank of England to ensure market stability Payment Services Oversight 1) Banking Act 2009 gives the BoE responsibility in the UK for ensuring that critical payment schemes operate prudently – More banks will join schemes in their own right UK independent Commission on Banking 1) Ring fences UK retail operations 2) Improves loss absorbency, e.g equity/leverage 3) Sets higher UK capital requirements for systemically important FIs – Bacs payments will move to a £20m value cap from May 2012 2) UK Payments Council tasked to oversee and drive these changes RBS00000 12 UK Payments Council Key Objectives Innovation – research, enhance, facilitate Inclusion – improve access & inclusion Integrity – robust and secure systems RBS00000 13 Payments Council – National Payments Plan Activity Innovation    Mobile Payments Service development of a ‘proxy’ database to route payments to a bank account using a linked mobile phone number Multiple Authorisation for all business online channels to support small business demand for online banking services Investigating solutions to ensure electronic payments are made to the right payee Inclusion Integrity  Linked closely to innovation •  Working closely with the Charities & Voluntary sectors to ensure that payment services meet the needs Frameworks/concepts easy to recycle Payment system resilience e.g Bacs transaction value cap of £20m from end May 2012 • Develop minimum standards for customer authentication on internet and telephone banking • New best practice guidance on Payment Referencing for Billers and Payers in late 2010  Recent research on how older people interact with the service sector for payments RBS00000 14 UK Payments Trends 2010 - 2020 Winners and Losers 100% 40% 41% 24% 22% 17% All Payments (Non Cash) Debit Cards Credit Cards Direct Debits Auto Credits Standing Orders ATM 3% CHAPS Cash Cheques 9% 35% 100% Source: Payments Council UK Payment Markets 2011 RBS00000 15 Wider Innovation Business Efficiency Worldwide Government initiatives driving business and citizen e-enablement and activity Across Europe, mandatory B2Gov e-invoicing is spreading - Denmark, Finland, Italy, Spain and Sweden have done and other countries are expected to follow e-invoicing generally is experiencing 30-40% annual market growth In turn it supports better cash flow management and accounts payable/ receivable process efficiency, The SEPA project aims by end 2014 to deliver across participant countries mandated use of SEPA credits and direct debits For consumers UK drive to get more people on line and extend broadband reach/ speed So what might the future look like? RBS00000 16 Fast growing expectations – consumers and businesses Customers today demand payment methods that : Conform to the highest standards Don’t have onerous identification methods Are completed within hours Use devices that exist for other reasons Are 100% accurate and reliable Are widely accepted by businesses Are globally usable Are value for money Use data to enhance the bank’s offer, but not intrude Do you agree? 17 RBS00000 17 And what might this mean? Mobile, globally accepted and secure Cash is dead Possible Consumer Scenario x Efficient* Replaced by mobile phones and contactless cards Or by biometric identification and verification which brings up a list of cards/accounts to choose from stored on ‘the cloud’ Networked * Paper is dead: all payments are initiated electronically Possible Corporate Scenario Networked* Flexible* Insightful* Most are straight-through, enabled by Efficient* Freeing people to provide insights and build relationships With transparent pricing 18 18 RBS00000 *Source: characteristics of a Bank of the Future And data is used to improve tailoring and support Insightful* And approval on the go .E-invoicing Flexible* Innovation Activity PayAway-IP Direct Mobile App Intelligent Deposit Safes • Mobile app for iPhone & iPad • Service piloted in live customer premises • View BACS reports and file submissions ‘on the move’ • Proposition under assessment for potential full delivery • Secure solution for cash takings • Technology counts cash reducing errors and saving time • Combats fraud from employees and counterfeit notes • Mobile app for iPhone and iPad - File authorisation PayAway-IP Direct – new features • Evaluating enhancements based on customer feedback: • Sage integration (50 and 200) • Direct Debit Manager Mini Cash in Transit Pick Up • Regional customer pilot conducted of Bank Branch alternative • Proposition under assessment for potential full delivery • Bank provides small CIT vans collect notes/coin from customer premises (£3k - £10k) • Bureau module Mobile Channel • Assessing Mobile Channel opportunities • Potential prototypes being worked on: • SME E-invoicing prototype on handheld and iPAD • Order coin to be delivered with collections • Business cheques also collected • Quick apps - “bookshelf” and “expenses” • Mobile app for iPhone and Blackberry users linked to Bankline • Mobile wallets/Payment options RBS00000 19 Summary Definition of ‘Innovation’ The act of starting something for the first time Introducing something new A new method of doing something “If at first the idea is not absurd, then there will be no hope for it.” (A Einstein) RBS00000 20 No representation, warranty, or assurance of any kind, express or implied, is made as to the accuracy or completeness of the information contained in this document and RBS accepts no obligation to any recipient to update or correct any information contained herein The information in this document is published for information purposes only Views expressed herein are not intended to be and should not be viewed as advice or as a recommendation You should take independent advice on issues that are of concern to you This document does not purport to be all inclusive or constitute any form of recommendation and is not to be taken as a substitute for the recipient exercising his own judgement and seeking his own advice This document is for your private information only and does not constitute an analysis of all potentially material issues nor does it constitute an offer to buy or sell any investment Prior to entering into any transaction, you should consider the relevance of the information contained herein to your decision given your own investment objectives, experience, financial and operational resources and any other relevant circumstances Neither RBS nor other persons shall be liable for any direct, indirect, special, incidental, consequential, punitive or exemplary damages, including lost profits arising in any way from the information contained in this communication The products and services described in this document may be provided by The Royal Bank of Scotland plc, The Royal Bank of Scotland N.V or both The Royal Bank of Scotland plc Registered in Scotland No 90312 Registered Office: 36 St Andrew Square, Edinburgh EH2 2YB The Royal Bank of Scotland plc is authorised and regulated in the United Kingdom by the Financial Services Authority The Royal Bank of Scotland N.V is authorised by De Nederlandsche Bank and regulated by the Autoriteit Financiele Markten (AFM) for the conduct of business in the Netherlands The Royal Bank of Scotland plc is in certain jurisdictions an authorised agent of The Royal Bank of Scotland N.V and The Royal Bank of Scotland N.V is in certain jurisdictions an authorised agent of The Royal Bank of Scotland plc Copyright 2012 RBS All rights reserved This communication is for the use of intended recipients only and the contents may not be reproduced, redistributed, or copied in whole or in part for any purpose without RBS’s prior express consent RBS00000 21