What do the latest consumer card trends mean for your credit union? In this webinar we uncover the key findings from Discover’s second annual study on member card payment preferences and credit, debit and prepaid card market trends. Most importantly, we discuss how to use this valuable data to deliver well-executed programs, innovative tools and member-focused services that drive interest, adoption and usage within your member base. More info at http://www.nafcu.org/discover

1. Credit, Debit and Prepaid Cards Industry Update:
A 2011 Study of Payment Trends
and Member Preferences
Kevin O’Donnell, Vice President
Discover Financial Services
1
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2. Who We Are
• Comprehensive • Leading U.S. PIN- • Global brand known for
payments solution based ATM/debit service, rewards, and
including credit, debit network with 4,400+ cardholder benefits
and prepaid participating financial
• In over 185
• $103 billion in volume institutions
countries/territories
• 30+ Issuers • All top national PIN
• Millions of premium
debit retailers accept
• Signed agreements with consumer and corporate
PULSE
126+ merchant cardmembers
acquirers representing • Over 780K ATMs and many who travel to U.S
98% of U.S. merchants cash access locations
• $27 billion in volume
worldwide
• Enabled over 1 million • 50 franchises
previous non-acceptors • $118 billion in volume
2
Note: Volume based on the trailing four quarters ending 1Q11
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3. How We Got Here
NAFCU Services Preferred Partner
– Expertise and innovation in credit, debit, and prepaid solutions
– Collaborative, flexible approach
– Known for customer service, rewards, and loyalty
– Commitment to your brand and your members financial health
Invited to share our findings to help you understand the market and
grow your member base
3
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4. High Gas Prices
High Gas Prices
As of June 20, 2011, the national average for a gallon Impact Consumer
Impact Consumer
of gas is $3.65 – up more than $0.92 from last year.1 Spending //
Spending
Sentiment
Sentiment
Price Spike – Libyan
rebellion stops 1.5 million Summer Blend
daily exports of crude3 Increases Cost
Gas prices could surpass Oil Speculators
the 2008 record level of Push Up Price
$4.11 per gallon.3
Unrest in
Analysts estimate oil and gas prices Middle East
won’t stabilize until summer.2
4
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5. Consumer Confidence Versus
Food, Gas and Unemployment
145
135
125
115
105
95
85
75
Se
N
D
Ja
Fe
M
Ap
M
Ju
Ju
Au
O
Ja
Fe
M
Ap
ov
ec
ar
ay
ct
ar
p-
n-
n-
l-1
n-
b-
b-
r-
g-
r-
-1
-1
-1
-
-
10
10
-
10
11
11
10
11
11
10
10
10
0
10
0
0
0
CPI:Food Avg Regular $/Gal Consumer Confidence Unemployment
5
Source: U.S. Bureau of Labor Statistics, U.S. Department of Energy and The Confidence Board
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6. Today’s Agenda
Credit Usage
– Credit
– Debit and Prepaid Usage
Consumer and Member Interest
– Mobile: Banking, Payments and Couponing
– Merchant Funded Rewards
Solutions for Credit Unions
– Gen Y Targeting and Offerings
Key Takeaways
6
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7. Credit Usage
7
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8. How Members Use Their Cards Credit Union
member year-
I Have Used One or More of My Major over-year use
Credit Cards in the Past Six Months is increasing
96%
95%
94%
93%
92%
91%
90%
89%
88%
87%
86%
02
03
04
05
06
07
08
09
10
11
12
01
02
/1
/1
/1
/1
/1
/1
/1
/1
/1
/1
/1
/1
/1
0-
0-
0-
0-
0-
0-
0-
0-
0-
0-
0-
1-
1-
04
05
06
07
08
09
10
11
12
01
02
03
04
/1
/1
/1
/1
/1
/1
/1
/1
/1
/1
/1
/1
/1
0
0
0
0
0
0
0
0
0
1
1
1
1
3-Month Period
CU: Average Non-CU: Average CU Non-CU
8
Source: Millward Brown, 2011 Brand Tracking Study
©2011 DFS Services LLC Confidential and Proprietary Do Not Copy or Distribute

9. How Members Use Their Cards Long term
trend: CU
Transactor -- Always/Almost Always members less
Pay the Entire Balance likely to be
transactors
58%
56%
54%
52%
50%
48%
46%
44%
42%
02
03
04
05
06
07
08
09
10
11
12
01
02
/1
/1
/1
/1
/1
/1
/1
/1
/1
/1
/1
/1
/1
0-
0-
0-
0-
0-
0-
0-
0-
0-
0-
0-
1-
1-
04
05
06
07
08
09
10
11
12
01
02
03
04
/1
/1
/1
/1
/1
/1
/1
/1
/1
/1
/1
/1
/1
0
0
0
0
0
0
0
0
0
1
1
1
1
3-Month Period
CU: Average Non-CU: Average CU Non-CU
9
Source: Millward Brown, 2011 Brand Tracking Study
©2011 DFS Services LLC Confidential and Proprietary Do Not Copy or Distribute

10. How Members Use Their Cards
Revolver -- Usually Pay
Less Than the Entire Balance
54%
52%
50%
48%
46%
44%
42%
40%
02
03
04
05
06
07
08
09
10
11
12
01
02
/1
/1
/1
/1
/1
/1
/1
/1
/1
/1
/1
/1
/1
0-
0-
0-
0-
0-
0-
0-
0-
0-
0-
0-
1-
1-
04
05
06
07
08
09
10
11
12
01
02
03
04
/1
/1
/1
/1
/1
/1
/1
/1
/1
/1
/1
/1
/1
0
0
0
0
0
0
0
0
0
1
1
1
1
3-Month Period
CU: Average Non-CU: Average CU Non-CU
10
Source: Millward Brown, 2011 Brand Tracking Study
©2011 DFS Services LLC Confidential and Proprietary Do Not Copy or Distribute

11. How Members Use Their Cards
I am Currently Paying Down a Balance
on One or More of My Major Credit Cards
58%
56%
54%
52%
50%
48%
46%
44%
42%
40%
02
03
04
05
06
07
08
09
10
11
12
01
02
/1
/1
/1
/1
/1
/1
/1
/1
/1
/1
/1
/1
/1
0-
0-
0-
0-
0-
0-
0-
0-
0-
0-
0-
1-
1-
04
05
06
07
08
09
10
11
12
01
02
03
04
/1
/1
/1
/1
/1
/1
/1
/1
/1
/1
/1
/1
/1
0
0
0
0
0
0
0
0
0
1
1
1
1
3-Month Period
CU: Average Non-CU: Average CU Non-CU
11
Source: Millward Brown, 2011 Brand Tracking Study
©2011 DFS Services LLC Confidential and Proprietary Do Not Copy or Distribute

12. Polling Question
12
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13. How Members Use Their Cards
Opened a New Credit Card Account Keep product
in the Past 3 Months offerings current
and competitive
14%
12%
10%
8%
6%
4%
2%
0%
11
12
01
02
07
08
10
09
02
03
04
05
06
/1
/1
/1
/1
/1
/1
/1
/1
/1
/1
/1
/1
/1
0-
1-
0-
0-
0-
1-
0-
0-
0-
0-
0-
0-
0-
02
10
01
03
04
12
05
09
11
04
06
07
08
/1
/1
/1
/1
/1
/1
/1
/1
/1
/1
/1
/1
/1
1
0
1
0
0
1
1
0
0
0
0
0
0
3-Month Period
CU: Average Non-CU: Average CU Non-CU
13
Source: Millward Brown, 2011 Brand Tracking Study
©2011 DFS Services LLC Confidential and Proprietary Do Not Copy or Distribute

14. How Members Use Their Cards
Credit Union
I am Concerned About My Credit Card members fear
Interest Rate Rising Over Time rising rates
56%
54%
52%
50%
48%
46%
44%
42%
02
03
04
05
06
07
08
09
10
11
12
01
02
/1
/1
/1
/1
/1
/1
/1
/1
/1
/1
/1
/1
/1
0-
0-
0-
0-
0-
0-
0-
0-
0-
0-
0-
1-
1-
04
05
06
08
09
10
11
01
02
03
04
07
12
/1
/1
/1
/1
/1
/1
/1
/1
/1
/1
/1
/1
/1
0
0
0
0
0
0
0
1
1
1
1
0
0
3-Month Period
CU: Average Non-CU: Average CU Non-CU
14
Source: Millward Brown, 2011 Brand Tracking Study
©2011 DFS Services LLC Confidential and Proprietary Do Not Copy or Distribute

15. How Members Use Their Cards
Sell on your
I Don't Trust Any Credit Card advantages but
Company to Treat Me Fairly know your
competition
35%
30%
25%
20%
15%
10%
02
03
04
05
06
07
08
09
10
11
12
01
02
/1
/1
/1
/1
/1
/1
/1
/1
/1
/1
/1
/1
/1
0-
0-
0-
0-
0-
0-
0-
0-
0-
0-
0-
1-
1-
04
05
06
08
09
10
11
01
02
03
04
07
12
/1
/1
/1
/1
/1
/1
/1
/1
/1
/1
/1
/1
/1
0
0
0
0
0
0
0
1
1
1
1
0
0
3-Month Period
CU: Average Non-CU: Average CU Non-CU
15
Source: Millward Brown, 2011 Brand Tracking Study
©2011 DFS Services LLC Confidential and Proprietary Do Not Copy or Distribute

16. How Members Use Their Cards
Grocery Spend
60%
50%
40%
30%
20%
10%
0%
02
03
04
05
06
07
08
09
10
11
12
01
02
/1
/1
/1
/1
/1
/1
/1
/1
/1
/1
/1
/1
/1
0
0
0
0
0
0
0
0
0
0
0
1
1
-0
-0
-0
-1
-0
-0
-0
-0
-1
-1
-0
-0
-0
9
0
1
1
4
5
8
2
6
7
2
3
4
/1
/1
/1
/1
/1
/1
/1
/1
/1
/1
/1
/1
/1
0
0
0
0
0
0
0
0
0
1
1
1
1
3-Month Period
Debit Avg Credit Avg Debit Credit
Members continue to
prefer debit for grocery
by 50% to 30%
16
Source: Millward Brown, 2011 Brand Tracking Study
©2011 DFS Services LLC Confidential and Proprietary Do Not Copy or Distribute

17. How Members Use Their Cards
Gas Spend
46%
44%
42%
40%
38%
36%
34%
02
03
04
05
06
07
08
09
10
11
12
01
02
/1
/1
/1
/1
/1
/1
/1
/1
/1
/1
/1
/1
/1
0
0
0
0
0
0
0
0
0
0
0
1
1
-0
-0
-0
-0
-1
-0
-0
-1
-1
-0
-0
-0
-0
9
5
0
4
8
6
7
1
2
1
2
3
4
/1
/1
/1
/1
/1
/1
/1
/1
/1
/1
/1
/1
/1
0
0
0
0
0
0
0
0
0
1
1
1
1
3-Month Period
Debit Avg Credit Avg Debit Credit
No significant shifts in
debit vs.. credit usage,
even with higher
gas prices 17
Source: Millward Brown, 2011 Brand Tracking Study
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18. How Members Use Their Cards
Dining Out Spend
45%
40%
35%
30%
25%
20%
15%
10%
5%
0%
02
03
04
05
06
07
08
09
10
11
12
01
02
/1
/1
/1
/1
/1
/1
/1
/1
/1
/1
/1
/1
/1
0
0
0
0
0
0
0
0
0
0
0
1
1
-0
-0
-0
-1
-0
-0
-0
-1
-1
-0
-0
-0
-0
4
5
8
9
0
6
7
1
2
1
2
3
4
/1
/1
/1
/1
/1
/1
/1
/1
/1
/1
/1
/1
/1
0
0
0
0
0
0
0
0
0
1
1
1
1
3-Month Period
Debit Avg Credit Avg Debit Credit
Even split between
debit vs.. credit
18
Source: Millward Brown, 2011 Brand Tracking Study
©2011 DFS Services LLC Confidential and Proprietary Do Not Copy or Distribute

19. How Members Use Their Cards
Routine Household Purchases
50%
45%
40%
35%
30%
25%
20%
15%
10%
5%
0%
08
02
03
04
05
06
07
09
10
11
12
01
02
/1
/1
/1
/1
/1
/1
/1
/1
/1
/1
/1
/1
/1
0
0
0
0
0
0
0
0
0
0
0
1
1
-1
-0
-0
-0
-0
-0
-0
-0
-1
-1
-0
-0
-0
9
0
1
4
5
6
7
8
1
2
2
3
4
/1
/1
/1
/1
/1
/1
/1
/1
/1
/1
/1
/1
/1
0
0
0
0
0
0
0
0
0
1
1
1
1
3-Month Period
Debit Avg Credit Avg Debit Credit
Members have slight
preference for debit vs..
credit at 37%
19
Source: Millward Brown, 2011 Brand Tracking Study
©2011 DFS Services LLC Confidential and Proprietary Do Not Copy or Distribute

20. How Members Use Their Cards
Major Household Purchases
80%
70%
60%
50%
40%
30%
20%
10%
0%
02
03
04
08
11
05
06
07
09
10
12
01
02
/1
/1
/1
/1
/1
/1
/1
/1
/1
/1
/1
/1
/1
0
0
0
0
0
0
0
0
0
0
0
1
1
-0
-0
-1
-0
-0
-0
-0
-0
-1
-1
-0
-0
-0
5
9
0
1
2
1
4
6
7
8
2
3
4
/1
/1
/1
/1
/1
/1
/1
/1
/1
/1
/1
/1
/1
0
0
0
0
0
0
0
0
0
1
1
1
1
3-Month Period
Debit Avg Credit Avg Debit Credit
Major household
purchases have
increased from 59% to
67% on credit 20
Source: Millward Brown, 2011 Brand Tracking Study
©2011 DFS Services LLC Confidential and Proprietary Do Not Copy or Distribute

21. How Members Use Their Cards
Major Home Improvement
60%
50%
40%
30%
20%
10%
0%
02
03
04
08
05
06
07
09
10
11
12
01
02
/1
/1
/1
/1
/1
/1
/1
/1
/1
/1
/1
/1
/1
0
0
0
0
0
0
0
0
0
0
0
1
1
-0
-0
-1
-0
-0
-0
-0
-0
-1
-1
-0
-0
-0
5
9
0
1
2
1
4
6
7
8
2
3
4
/1
/1
/1
/1
/1
/1
/1
/1
/1
/1
/1
/1
/1
0
0
0
0
0
0
0
0
0
1
1
1
1
3-Month Period
Debit Avg Credit Avg Debit Credit
Home improvement
expenses have gone from
45% to 51% on credit 21
Source: Millward Brown, 2011 Brand Tracking Study
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22. Debit and Prepaid Usage
22
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23. Debit Transaction Mix
Consumer PIN and Signature Transaction Transaction growth decreased to 8% for
Growth
PIN debit and increased slightly to 10%
for signature debit
24%
Signature debit accounted for 68% of
20% total POS transactions in 2010
Transaction growth
16%
Some regulated Financial Institutions
13% 13% (those with at least $10 billion assets)
expressed a desire to reverse the
12% 10%
9% 9% signature/PIN mix due to impending
8%
8%
regulation
4%
0%
PIN Transactions Signature
Transactions
2007-2008 2008-2009 2009-2010
23
Source: PULSE 2011 Debit Issuer Study - Oliver Wyman - May 2011
©2011 DFS Services LLC Confidential and Proprietary Do Not Copy or Distribute

24. Polling Question
24
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