Neil D. McHugh, CTPVP, Commercial Card Sales ManagerTD Bank, America’s Most Convenient Bank

January 26, 2011

The Sustained Expansion of Commercial Card Based Payments

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Card Payment Solutions

Gift Cards

Reloadable Debit / Payroll Cards

Corporate Credit Cards

Charge Cards……

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Card Payment Solutions

Charge Cards�Purchase Cards�Commercial Cards (“One Card”)

• Purchasing / T&E / sometimes Fleet• Declining Balance• Ghost• Virtual – Single Use

All are Complementary Payment Solutions…

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Market Trends

Growth!�Sustained demand�Trickle down effect

Why?�Shared value for all�Technology�Competition�Cost and risk mgt.�Comfort with cards

Ernst & Young

2010 Projections

Coin & Currency + 2%

Check Clearing - 7%

ACH + 2.5%

P-Card + 8%

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Market Trends

Commercial Card for Purchasing1

2005 – 2010� Annual spend in North America grew from $110 billion to $176 billion

2010 – 2014� Projected annual spend growth of nearly 10% annually to $255 billion

Commercial Card for T&E2

2004 – 2009� Annual spend in North America grew from $120 billion to $140 billion

2009 – 2011� Projected annual spend growth of nearly 7% annually to $159 billion

1 RPMG Research Corporation – 2010 Purchasing Card Benchmark Survey

$0

$75

$150

$225

$300

2005 2010 2014$0

$50

$100

$150

$200

2004 2009 2011

2 RPMG Research Corporation – 2009 Travel Card Benchmark Survey

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Better articulating the business case�Drivers

• Improve working capital• Increase DPO• Cost reduction / efficiency

�How?• Involve all stakeholders• Incorporate in vendor contracts• Employee education• Enforce strategic usage• Support from senior management

Leveraging Commercial Cards

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Leveraging Commercial Cards

Small $ Transactions Large $ Savings

Aggregate cost savings of $38 billion annually in North America

Average monthly spend per card of $2,060

Average number of monthly transactions per card is 7

Integration in an overall payments strategy�Reduce / eliminate cash�Convert check / ACH transactions�Distributed vs. centralized/vendor card programs�Target specific vendor payments�Hybrid applications

RPMG Research Corporation – 2010 Purchasing Card Benchmark Survey

Average Transaction amount of $315

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Leveraging Commercial Cards

Traditional Spend Categories Expanding Spend Categories

MRO – Maintenance, Repair and Operations

Office Supplies

Computer Equipment

T&E

Professional Services

Advertising

IT

Insurance

Telecommunications

Utilities

Other?...

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Macro Environment Fostering Demand

Aberdeen Group: February 2009

CFO’s View of A/P: High Pressures for 2009

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Macro Environment Fostering Demand

Ongoing Concerns� Nearly 70% of respondents said managing cash worries them the most� The most significant risk to cash flow will be non-performing A/R (21% of

respondents)� Other financial challenges include interest rates (55%) and access to credit

(52%)

Cautious Optimism� Over half (58%) expect sales to increase in 2011� Almost 40% of respondents expect capital investments to increase � Only 7% plan on reducing expenses in 2011

TD Bank: Survey of corporate finance executives of middle market companies - August 2010

TD Bank – Corporate Finance Executive Survey

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Substantial Economic Benefits

Issuers

CardNetworks

Processors

MerchantAcquirers

Suppliers(Merchant)

Buyers

SHAREDVALUE

Shared value

All participants benefit

More equal distribution

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Substantial Economic Benefits

Buyer (cardholder) perspective

� Elimination of the 3-way match

� Reduced processing costs

� Expedited payment cycle times

� Streamlined internal processes

� Payment controls

� Enhanced reporting and spend visibility

� Negotiate mutually beneficial trade terms

� Improve working capital

� Increased DPO – payment float

� Revenue share – rebates

Buyers

SHAREDVALUE

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Substantial Economic Benefits

Supplier (merchant) perspective

� Convenience

� Reduce DSO

� Receive prompt payment

� Improve incoming cash flow

� Eliminate costly paper remittances

� Conduct a cost/benefit analysis Suppliers

SHAREDVALUE

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And the survey says…

Commercial Card for Purchasing1

�Reduce costs by 75% or $71 per purchase�Reduce payment cycle times by 72%�Eliminate PO and other payment/remittance docs

Commercial Card for T&E�Reduce costs by nearly 50% or $10 per purchase2

� Improve discounts from travel vendors by 13%3

1 RPMG Research Corporation – 2010 Purchasing Card Benchmark Survey2 RPMG Research Corporation – 2004 Travel Card Benchmark Survey3 Visa and Deloitte & Touche -2002 T&E Card Study

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And the consultant says…

Most Expensive

Least Expensive

Projected Savings

Manual process with check $59 per transaction

Procurement Card $9 per transaction

$50 per transaction

The Role of Procurement Cards in the Source-to-Settle Process (Accenture, June 2007)

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Recent Developments

Evolution towards automated payment integration

�Single Use / Virtual Cards - “pull pay”

�Straight-Through-Processing - “push pay”

�EIPP – Electronic Invoice Presentment and Payment

� Integrated outsourced payables (check, ACH, wire, card)

Regulatory Changes…

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Recent Developments

Summary of changes to Federal IRS 1099 Requirements1

� 2010:• No change to existing reporting requirements

� 2011:• Relief - No reporting required for payment card transactions• Check transactions subject to the current rules

� 2012:• Relief - No reporting required for payment card transactions• Expanded reporting for all transactions for check payments• Revised withholding regulations for federal/state/large local governments

� Additional Resources:• Internal or External tax advisors• www.irs.gov• www.napcp.org

1 The above is intended to provide a summary of the recent changes. It is not legal or tax advice, or a complete examination of the IRS regulations. TD Bank does not make any warranty or representation as to the completeness or accuracy of this information or assume any responsibility that may result from reliance on such information. Please consult with your independent tax professionals where advice is required.

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Any Questions?

Thank You!

Neil D. McHugh, CTPVP, Commercial Card Sales Manager

Cash ManagementTD Bank, America’s Most Convenient Bank

2070 Chain Bridge Road, Suite 135Vienna, VA 22182

Phone: 703-663-4389Email: neil.mchugh@yesbank.com

Please visit www.tdbank.com for more information