Risk Management, Knowing your Customer and Enhancing Products

Transcription

1 Risk Management, Knowing your Customer and Enhancing Products

2 NetSpend Mission Statement To be the premier provider of financial services in the eyes of the underbanked. We achieve our mission by serving our customers anytime and anywhere, being trustworthy, reliable and delivering innovative high value products and features. Confidential- Not For Distribution- Do Not Copy 2

3 Knowing the Customer Household Income Education Graduate School, 2% Graduate School, 2% Ethnicity Asian & Other, 5% Asian & Other, 3% Unbanked Demographic Profile More than $45,000 27% $30,000 $44,999 17% $15,000 $29,999 28% Less than $15,000 27% More than $50,000 27% $25,000 $49,999 37% $15,000 $24,999 16% Less than $15,000 19% College 12% Some College 18% High School 37% Less than High School 32% College 7% Some College 29% High School 38% Less than High School 24% Hispanic 18% African American 21% White 55% Hispanic 20% African American 22% White 55% GAO NetSpend Customers (Experian Data) GAO NetSpend Customers (Experian Data) GAO NetSpend Customers (Experian Data) Source: ATM s: Self-Service for the Unbanked, Celent Communications, Oct ; Electronic Transfers, United States General Accounting Office, Sept. 2002; Experian Market Penetration and Profile Report of Online and Offline Customers, Confidential- Not For Distribution- Do Not Copy 3

4 NetSpend s Average Customer Average Ticket Average Load by Channel $120 $100 $80 $60 $40 $20 $- $43.35 $36.34 Signature Purchase PIN Purchase $ ATM Withdraw al $50.89 All Transactions $600 $500 $400 $300 $200 $100 $- $ $ $ Retail Loads Direct Deposit All Loads Confidential- Not For Distribution- Do Not Copy 4

5 AML Risk Management by Customer Type NetSpend s customer base is considered low risk per FFIEC guidelines: Risk Levels Definition Customer/Account Risk Type Customer Risk Assessment 1 = Low Risk 2 = Moderate Risk 3 = High Risk FFIEC Risk Level % of Customers at NetSpend Actual NetSpend Risk Level Resident Customer Account 1 100% 1.0 Non-Resident Account 1.5 0% 0.0 Small Business % 0.0 Consumer Wealth Creation % 0.0 Non-Resident Alien- Offshore Investor 3 0% 0.0 High Net Worth Individual (Private Banking) 3 0% 0.0 Multiple Tiered Accounts 3 0% 0.0 Offshore/Shell Companies 3 0% 0.0 Overall Risk 100% 1.0 Confidential- Not For Distribution- Do Not Copy 5

6 Knowing the GPR Customer Top Spend Categories Transactions Gross Debit Volume Other 24.8% Institutions (ATMs) 19.2% Other 28.3% Financial Institutions (ATMs) Discount Stores 3.7% Telecom Services 7.1% Food Stores 12.5% Gas 17.6% Eating Places 15.1% Utility 3.5% Eating Places 4.7% Gas 5.6% Food Stores 88% 37.1% Telecom Services 11.9% Source: NetSpend MIS Reports, 2006 Confidential- Not For Distribution- Do Not Copy 6

7 Risk Categories at NetSpend Risks are broken down into 3 categories: 1. Customer Type Risk level assessed by FFIEC BSA/AML Manual 2. Product Type CIP Checks Limits Monitoring 3. Channel Load Channel Oversight Channel Load Limits Due Diligence CIP/ID Verification Confidential- Not For Distribution- Do Not Copy 7

8 AML/Fraud Monitoring via NetEconomy Confidential- Not For Distribution- Do Not Copy 8

9 Managing risk and enhancing products Program parameters designed to mitigate risk lead to enhanced program benefits for customers: In July 2004, NetSpend initiated its Overdrawn Buffers program which granted customers an additional allowance over their available balances. The purpose of this initiative was to provide customers with an additional buffer in the event they became overdrawn by a few dollars with the goal of increasing transaction approval rates, customer satisfaction, and hence retention. Confidential- Not For Distribution- Do Not Copy 9

10 Overdrawn Buffers The overdrawn buffers range were based on the profile of the customer. Authorization Strategy based on 27 segmented nodes Segmentation factors: Number of purchases Average Deposits Average Balances This strategy is a success: Incremental retention increase Acceptable charge-off rates Profitable Confidential- Not For Distribution- Do Not Copy 10

11 Road-to-Credit Program Goals Ability for cardholders to improve credit score through bill payments via NetSpend Pre-paid Debit card Telephone Cable Electricity Educate cardholders about credit building process Improve cardholder retention Grow data asset to improve product offerings Confidential- Not For Distribution- Do Not Copy 11