Visions - November 2005

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• Why Serve Generation Y?
• Hurricane Katrina Interchange Contribution Relief Efforts
• You’re In Good Hands
• Next Generation Card Activation
• Strengthening Data Security Pipeline
• Tightening Falcon’s Talons
• Boost Bill Payment Subscribers
• Welcome Aboard BECU
• $3.3 Million in Patronage Equity Issued— Total Cash Payout Exceeds $45 Million
• Local Outreach
• Convenient Payment Options
• 66 Ways to Attract New Checking Accounts
• By The Time I Get To Phoenix

Why Serve Generation Y?

• Did you know that 20% of Generation Y will apply for a student loan, mortgage or credit card next year?
• And were you aware that members of this key market segment are twice as likely as Baby Boomers to purchase multiple products from a single provider, with 60% considering their current financial institution for their next banking product purchase?
  

Generation Y (born 1977-1995) is an influential generation. With 80 million members, they are bigger in number than the Baby Boomer generation. They represent the future of financial services because of their size, their age and the impact they are having on our culture and economy. This generation is also the most racially diverse in our nation’s history, with Hispanics making up its largest minority component.

These two segments, Youth & Young Adults and Hispanics, along with small business are expected to generate most of the industry’s future growth.
Analysts suggest that the borrowing power of 18- to 24-year-olds represents up to $14 million in loans to the average credit union over the next 10 years. Only one in four of this age group is a credit union member, so credit unions must act quickly to replace older members with future borrowers.

Act Now or Risk Missing Out

PSCU Financial Services recognizes the importance of developing and marketing products to these audiences—and the need for immediate action.
The company has taken several steps to begin developing products and
services to help credit unions attract and serve these important audiences. We support the Filene Research Institute, a respected conduit for delivering market segment information to the credit union industry.

To receive a copy of Cool Solutions, a thought-provoking assessment of the young adult market from Filene, send us an email at coolsolutions@pscufscom. It provides solutions for credit unions to reach out to the largest generation of Americans ever.

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Hurricane Katrina Interchange Contribution Relief Efforts

September Contribution - $45,685

Nearly 120 member-owners pledged to provide a percentage of their interchange revenue to aid in the Hurricane Katrina Relief Efforts. Contributions to the American Red Cross totaled $45,685 based on September interchange revenue. Collection efforts continue through year-end.

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You’re In Good Hands

Simply put, our fraud recovery program saves money for our credit union members and translates into higher portfolio returns.

What makes the difference?

It starts with our Contact Center, which serves as the initial touch point for a credit union member that has experienced card fraud. On the first call, we set the expectation for the consumer and gather the necessary information to initiate a successful merchant chargeback immediately to regain recoverable funds.

The tenure and experience of the company’s fraud and dispute representatives also play a key role in the ability to recover losses. The average tenure of those that work fraud cases is six years. And, our dispute representatives have an average tenure of seven years. The expertise of those who fully understand the rules and regulations, greatly influences our ability to help credit unions minimize their exposure to fraud losses.

In addition to recovering losses, PSCU Financial Services also employs innovative techniques to decrease or prevent the potential for fraud. These techniques include applying neural network technology, card activation, authorization and card usage controls, Issuer’s Clearinghouse participation, name matching, cardholder authentication and verification among other processes.

We’re proud of our success and the ability to lead the industry in maintaining the security of our member’s information and the results of lowering exposure to fraud.

Next Generation Card Activation

It only takes the thought of identity theft to waiver a consumer’s confidence. That’s why we are continually employing new practices to make it more difficult for card information to be compromised. In early 2006, we’re enhancing our card activation process by discontinuing the use of member social security numbers for authentication.

Through deployment of the next generation of card activation security tactics, authenticating cardholders gets even more ‘personal’, with less opportunity for a potential fraudster to intercept the data. Along with the authentication enhancements, your cardholders will be able to choose to activate their card via the IVR (Interactive Voice Response system) in English or Spanish.

PSCU Financial Services is committed to maintain the security of your information. Details about the enhancements to card activation will be distributed to your credit union in a confidential format in the next 60 days.

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Strengthening Data Security Pipeline

PSCU Financial Services is expanding its Credit Union Network (CUNET)
to all member credit unions to strengthen the security of the data as it moves between First Data, PSCU Financial Services and each member credit union. Member-owner credit unions will connect to CUNET via a Virtual Private Network (VPN), a more secure environment than the public Internet.

Upon completion of this initiative, any and all applications or reports that contain sensitive financial data will only be accessible from our member-owner credit unions’ facilities, via our private network, and not from the public Internet. This will prevent anyone who is not physically located at one of our credit unions’ facilities from accessing these applications or any report data. Some examples of applications that will be moved to the private network include mainframe terminal access, file transmissions,
report delivery, and various other applications that contain financial
information. Additionally, our member-owner website, MemberConnect, will also be moved to the private network. Information about this effort which provides a higher level of data security, will be sent directly to each credit union.

Tightening Falcon’s Talons

Safeguarding your credit and debit card portfolio is a priority for all card issuers. In October, PSCU Financial Services assumed responsibility for contacting cardholders with suspicious account activity as detected by our advanced predictive technology we call Falcon. Implemented to provide a higher level of service, the shift in responsibility has enabled us to better customize queue groups, and query transactions for fraudulent patterns and react to those situations real-time. We’ll review memos that your credit union places on the accounts for traveling cardholders and act accordingly. And, we are better equipped to build work queues for those accounts we know are part of a security-compromised event.

Management web reports to include the Fraud Detection Billing reconciliation Report and Fraud Detection Daily Statistics Report are available on MemberConnect.

Boost Bill Payment Subscribers

January, February and March are high yielding adoption months for online bill pay. For the complete 2006 Bill Payment Statement Message Marketing Calendar, or to receive marketing assistance for your bill payment solution, contact Leslie Reistrup at 800-443-7728 ext. 2506 or Michel Perreault at ext. 4771.

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Welcome Aboard BECU

BECU, formerly Boeing Employees’ Credit Union, of Seattle, Wash., converted processing services for its 153,000 credit card accounts on the CreditAbility™ platform. The credit union has more than 400,000
members and is one of the largest credit unions in the country with $5.4 billion in assets. This full-service solution will include core processing and 24 x 7 cardholder service, along with risk management servicing.

“When our management team evaluated the goals for credit card
servicing, we focused on selecting a long-term partner that could work closely with us to maximize the growth opportunities within our credit portfolio and provide innovative thinking and leading-edge technological tools,” said Gary Fee, Director of Product & Delivery Channel Management of BECU. “PSCU Financial Services has already demonstrated its excellent management and planning skills through a smooth conversion. We’ve already been able to expand our product offering to our members by adding 24 by 7 servicing, which we anticipate will also serve to reduce our fraud exposure by being able to react to potential situations real-time.”

One of those leading-edge technologies is Data eXchange, an attractive data delivery method for populating credit unions’ online applications for
members and for presenting data to employees who are providing member service or other functions. BECU employees also benefit from a new user-friendly interface for the FDR system called Evolve that equips more than 400 employees at branch locations to easily obtain card information by pointing and clicking at icons, replacing a cumbersome list of codes required to access data.

“BECU is one of the first of several credit unions to pilot this exciting new interface which gets card information into the hands of employees quickly and easily,” said David Serlo, President of PSCU Financial Services. “The
successful deployment of Evolve as part of our conversion is the first of many initiatives we have with BECU to help them to achieve their strategic growth objectives. We are very excited to be an integral partner in their process.”

$3.3 Million in Patronage Equity Issued

Total Cash Payout Exceeds $45 Million

Sharing our company’s returns with our credit union member-owners is
a powerful illustration of our commitment to our philosophy of ‘Shared Vision. Shared Values.’ In December, three months ahead of the scheduled due date, member-owners will receive the sixth redemption of patronage equities. The redemption of the 1998 revolving funds results in the return of more than $3.3 million in patronage equity to member-owner credit unions. PSCU Financial Services has paid out more than $45 million in cash dividends since it became a cooperative in 1994.

“We are fulfilling the highest expectations of our member-owners by
issuing this dividend ahead of schedule,” said David J. Serlo, President and CEO of PSCU Financial Services. “Our unique position in the industry, as a credit-union-owned cooperative that offers credit, debit/ATM, online bill payment and presentment solutions and contact center services, enables us to provide credit unions with industry-leading programs that are tailored to their current and future needs. At the same time, our cooperative structure effectively reduces the cost of services to member-owners, while providing for greater flexibility in the capital structure.“

The cooperative structure enables PSCU Financial Services’ earnings to be distributed to member-owners as tax-free patronage dividends. At least 25 percent of the dividend is paid each year in cash, while the remaining 75 percent or less is distributed in the form of equity instruments. In 2004, PSCU Financial Services announced the largest single-year dividend in our company’s history, $21.6 million.

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Local Outreach

PSCU Financial Services and our member-owner credit unions continue the efforts to broaden the outreach of American History education in our nation’s classrooms. We are gearing up for the second annual Credit Union Week at the Colonial Williamsburg Teacher Institute. The grant provides fellowship money for 25 teachers to attend, at no charge, an intensive weeklong workshop July 12 –19, 2006 at the Colonial Williamsburg Teacher Institute in Early American History.

Soon we’ll be asking for your assistance in identifying potential grant candidates and providing each an application. Your credit union can take the “credit” for nominating local teachers to receive a grant to participate in this unique educational experience in Williamsburg, Virginia. For more information, please call Merry Pateuk at 800-932-7728.

Roll Call: Class of 2005

Educators representing the following credit unions participated in Credit Union Week 2005. The Teacher Institute helps teachers and students meet national and state history standards through on-site, hands-on immersion experiences in colonial history. Participating teachers prepared new classroom teaching materials to share in their local community as part of the workshop.

• Andrews Federal Credit Union, MD

• Apple Federal Credit Union, VA

• Brokaw Credit Union, WI

• Capital Communications Federal Credit Union, NY

• Central Florida’s Educators Credit Union, FL

• Community One Federal Credit Union, NV

• Empire Federal Credit Union, NY

• First Nebraska Educators Credit Union, NE

• Florida Central Credit Union, FL

• Harborstone Credit Union, WA

• Idaho State University Federal Credit Union, ID

• Kirtland Federal Credit Union, NM

• Northern Star Credit Union, VA

• RTN Federal Credit Union, MA

• Sentry Credit Union, WI

• Sunrise Family Credit Union, MI

• West Community Credit Union, MO

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Convenient Payment Options

ffer your cardholders the convenience of paying their credit union credit card bill via the Internet or by phone. Both are terrific services for those cardholders that pay their bills at the last minute. Our Contact Center is staffed ‘round the clock to assist cardholders to pay by phone.

And, your credit union can absorb the cost of the pay by phone service or charge cardholders the processing fee. Want an online option? On demand payments can also be made via the Internet. For more information, contact your Account Executive at 800-789-7728 or 800-325-7728.

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66 Ways to Attract New Checking Accounts

“Adding a rewards program is a great way to distinguish our offerings, and the ability to combine rewards for debit and credit cards through CURewards is especially important since it enables cardholders to
accumulate rewards points quickly,” said Rona Shoopack, assistant vice president of marketing, 66 FCU.

The credit union promoted the debit rewards program to its members through direct mail, emails and posters in the branches. The credit union also used billboards, radio and television advertising to attract new members. Rewards points were issued to both employees and members for qualified referrals.

The credit union’s first promotion ran from November 2004 to April 2005. Since the promotion began, the credit union has increased the number of debit card accounts added through September by 16 percent, and boosted debit card transaction volumes by more than 18 percent comparing
September of this year to last year.

“66 FCU is breaking new ground in the industry by introducing a rewards program for its debit cards and by promoting it through community advertising as well as more traditional methods, said David J. Serlo, President and CEO of PSCU Financial Services.“This credit union has already achieved outstanding results. We believe it will continue to see higher transaction volumes for credit and debit cards and stronger member relationships in the months to come.”

The credit union continues to market its rewards program to its 48,000 members. “We believe the secret to success is to offer attractive incentives during special promotions and to continually publicize the rewards program. That combination attracts new members while drawing attention to the benefits of using our cards,” notes Shoopack.

PSCU Financial Services’ CURewards program equips credit unions with a flexible program in which points can be redeemed online or through a toll free number for appliances, jewelry, electronics and other merchandise as well as airline tickets, cruises and car rentals. As part of the CURewards program, PSCU Financial Services has funded annual sweepstakes promotions that enhance card usage and build cardholder loyalty.

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By The Time I Get To Phoenix

Plan to attend the PSCU Financial Services Member Forum April 5 – 7, 2006 at the JW Marriott Desert Ridge Resort & Spa Phoenix, Arizona.
Year after year, attendees give us high marks for the valuable insights gained from our Member Forum. Register now to join your peers for three days of networking, industry expert presentations, informative breakout sessions and entertaining group activities all in a luxurious setting.

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