T H E F U T U R

T H E F U T U R

T H E F U T U R E O F PAY M E N T S December 2016 S T R I C T L Y P R IV A T E A N D C O N FI D E N TI AL CONFIDENTIAL Agenda Topic Page Trends, Insights, Implications 2 Banks and Fintechs: Collaboration and Innovation 5 Millennials: Driving and Embracing Payment Technology 6 Payment Ecosystem Changes Federal Reserve Faster Payments Initiative 7 Same-Day ACH 8 New Payment Rails 9 12 T H E F U T U R E O F PAY ME N T S Remittance Coalition Blockchain 13

Looking Ahead 14 1 CONFIDENTIAL Payments trends and the move to electronic are influencing Fintech investment Number of transactions per year, in billions 1 Change Change in in payment payment type type1 90 82.3 80 70 60 50 37.3 35.4 40 30 .3 $2 4. 5 $ o 3t ) trn ( 2 $41.1 5 to $ 26 8.80% annual growth rate in number of card transactions .03 (tr n) 8.8 0 2003 to $ 4 8 $24.11 ) .41 (trn 2006 2009 T H E F U T U R E O F PAY ME N T S

Credit, Debit, and Prepaid Cards Continued Continued shift shift to to mobile mobile 2 3 Source: 2013 Federal Reserve Payments Study Source: Federal Reserve Consumer and Mobile Financial Services 2016 Report Source: PayPal 2015 10K -6.87% annual decline rate in number of check transactions 2012 ACH Checks Alternative Alternative forms forms of of payments payments increase increase US Consumers making mobile payments doubled from 2011 to 2015,2 going from 12% to 24% 1 22.1 18.3 20 10 9.65% annual growth rate in number of ACH transactions The number of payment transactions in PayPal accounts increased 23% annually from 2013 to 20153 2 Bill Bill payments payments Bill payments are changing form and impacting the customer experience CONFIDENTIAL The Fintech ecosystem has been rapidly expanding over the past 2 years 1 Global Global FinTech FinTech Investment Investment in in the the Past

Past 5 5 Years Years1 2016 Q1 saw $5.3 billion invested in fintechs globally, a 47% increase from Q1 2015 1 1108 871 22265 772 SoFi 610 338 459 Zhong An Online Insurance 12688 Zenefits 1791 T H E F U T U R E O F PAY ME N T S 1 2010 2537 3175 Capital Invested 2011 2012 Affirm 4590 Source: Accenture, Fintech and the Evolving Landscape Global Deal Volume 2013 2014 Currently, fewer regulatory hurdles for fintechs than for large financial institutions Fintechs are providing a robust user experience, but still depend on banks for back end transactions and rails 2015

Focus on Lending, Payments, and Retail segments of fintech Maturation of the Lending, Payments, and Retail spaces, shift to other segments such as B2B Payments 44% of 2015 fintech investment has been in collaborative firms 1 Fintechs viewing banks and companies as partners rather than competitors, which presents opportunity 3 CONFIDENTIAL Fintech disruption and collaboration span all areas of the financial industry VC VC FinTech FinTech Financing Financing Activity Activity by by Product Product Segment Segment Companies Segment Total investment: ~$17.1B 29 25 118 62 49 41 Consumer Banking Financial Research Equity Financing Institutional Investment Crowdfunding (Non-Investment) Remittances 78 Banking Infrastructure 80 Digital Wealth Management 0.8 0.9 0.9 0.9 124 Personal Finance 45 78 Business Tools Payments (Acquirer - Online/Electronic) 2.2

42 Payments (Issuer/Consumer) 81 Payments (Acquirer - POS) 1.6 98 Lending (Business) 2.7 1.0 1.2 Payments and Lending constitute ~60% of all VC investment Payments: ~$3.8B Lending: ~$6.7B T H E F U T U R E O F PAY ME N T S 97 4.0 Lending (Consumer) Source: Venture Scanner (multi-year information not reconciled with CB insights annual fund raising data) Note: Not exhaustive. Data does not include Crypto companies; estimated to have ~$0.3B by 107 startups 4 CONFIDENTIAL J.P. Morgans Response Embracing the changing environment LevelUp Apple Pay + Engagement with more than 300 emerging technology firms in 2015 Move from venture capital investment to bank investments Thinking for short term fixes as well as long term innovation J.P. Morgans Response Invest Invest How Banks Embrace Financial Technology T H E F U T U R E O F PAY ME N T S

+ Engagement with more than 300 emerging technology firms in 2015 Collaborate Collaborate Shift from competition to collaboration New opportunities for smaller banks who lack capital to build solutions inhouse to leverage fintech innovation Recently invested in: Avant Digital Asset Holdings Motif Investing OnDeck Kensho Build Build J.P. Morgans Response Overall, banks spent $50 billion in 2015 on new inhouse technology development Banks planning significant boost in tech spending for 2016 5 + Other Industry leading products 40,000+ technologists $9.4bn total tech budget Robotics Center of Excellence CONFIDENTIAL The Millennial Impact Millennials Used a banks mobile app GenXers Boomers 67% 55% 33% Used a banks website or online portal 78 75

67 Used the mobile app to transfer money 26 19 8 Used the mobile app to pay a friend or family 21 12 5 Source: 2015 Chase Digital Adoption Survey Chases Digital Adoption Survey shows a high percentage of millennials using mobile apps and websites for banking and to transfer money Statistic Insight 75% of the workforce will be Millennials are highly tech savvy and grew up with internet and mobile devices, and as more and more become decision makers in businesses, the shift to electronic B2B payments could increase made up of Millennials by 2030 T H E F U T U R E O F PAY ME N T S 1 >50% of Millennials are using non-traditional payment companies like PayPal and Venmo2 1 2 Source: US Bureau of Labor Statistics Source: FICO Millennial Insight Report User friendliness and customer experience is driving Millennials toward non-traditional banking options, so companies must be willing to adapt 6 CONFIDENTIAL Federal Reserve Faster Payments The Federal Reserve has identified 5 strategies that would improve the U.S. payment system Stakeholder Engagement Faster Payments 500+ members engaging on Faster Payments and

Secure Payments Task Forces Implementation of ISO 20022 for wire transfer and ACH The Fed has created many ways for stakeholders to stay informed and offer feedback B2B, B2P, P2P, and P2B payments all in scope Federal Reserve is exploring options to Evolve ACH Evolve ATM/PIN debit infrastructure Direct clearing over public IP networks Build new infrastructure for retain payments Faster Payments Task Force established in 2015 Payment Security Reduce fraud risk and Payment Efficiency Attain better end-to-end advance the safety, security, and resiliency of the payment system Payment Identity Management work group is addressing the lack of universally accepted methods of establishing and confirming the identity of payers and payees efficiency for domestic and international payments Enhanced Federal Reserve Services Hours of the National Settlement Service were expanded in 2015 FedACH SameDay Remittance Coalition creating B2B directory, which seeks to allow businesses to make more electronic payments to

vendors, suppliers, and other payees ISO 20022 as a standard Secure Payments Task Force focusing on data protection, information sharing, law coordination T H E F U T U R E O F PAY ME N T S Faster Payments final payments report to be released Q1 2017 J.P. Morgans Engagement J.P. Morgan is a member of the Federal Reserve Faster Payments Task Force Commitment to efficient change Preparing to adopt and support new payments rails that are created 7 Service will support implementation of a universal Same Day ACH CONFIDENTIAL NACHA ACH Same-Day 1. 2. 3. Sept 2016 Sept 2017 March 2018 ACH Credits ACH Credits and Debits ACH Credits and Debits A.M. & P.M. Transmissions A.M. & P.M. Transmissions A.M. & P.M. Transmissions 5 P.M. ET Settlement 5 P.M. ET Settlement Faster Funds Availability Builds functionality over time, adding value to end-users with each step. T H E F U T U R E O F PAY ME N T S Client Use Cases Payroll

Business-to-business Bill Pay 8 Person-to-person Funding CONFIDENTIAL New Payments Rails Name Attributes Irrevocable Real-time Alias driven Use cases P2P B2C Bill Pay B2B EWS Networks Book Transfer Digital Currency Faster Payments clearXchange Visa OCT/ MC Send E.g. Earthport E.g. Bitcoin rd 3 parties rd 3 parties Wallets

(ISO 20022) Pros 20022 messaging; xborder Integrated with 7 major banks Ubiquitous, including x-border Limited to lowvalue Low cost in theory; x-border Cons Still building; cost? 60% 2016 realtime ubiquity; no x-border Content limits; 3rd parties provide alias Limited to x-border use cases Lack full AML compliance 2017 2016 2016 2016 2016 When? T H E F U T U R E O F PAY ME N T S TCH 9

CONFIDENTIAL The Clearing House Real time payments Faster Payments TCH Vision for the Future of US Payments System: Provide an end user experience and functionality that fulfills needs that are not adequately met by existing payment systems. Set risk management and fraud protection standards that are appropriate for the essential characteristics of a payment (speed, value, debit or credit, etc.) rather than the clearing system or form of the payment. Be an open, global-ready platform. Provide economic models that ensure that all service providers in the payment system can expect a return on initial an ongoing investment. T H E F U T U R E O F PAY ME N T S The Clearing House real-time system will address needs across many use cases 10 CONFIDENTIAL Early Warning Systems and clearXchange P2P Early Warning acquired clearXchange in December 2015, and clearXchange launched real-time payments in 2015, covering over 100 million online banking customers. Benefits: Consumers can pay bills anywhere, anytime, can have cheaper and more convenient access to funds, and better security Beginning in March 2016, Early Warning began processing P2P transactions through the clearXchange network for a number of banks JP Morgan, Bank of America, and US Bank joined together in June 2016 to allow customers to transfer money between the institutions in real time Chase QuickPay processed $20 billion in payments in 2015, which was more than double any Fintech. The number is expected to rise 40% in 2016 B2C Corporate Quick Pay Evolution into bill payments and refund with real-time availability Account Validation Allows confirmation of the existence and validity of an account upon receiving a check payment at a branch. T H E F U T U R E O F PAY ME N T S EWS is the preferred and only partner of NACHA for account validation services 11 CONFIDENTIAL Remittance Coalition and the Federal Reserve Remittance Coalition A group of organizations working together to promote use of electronic B2B payments and electronic remittance data exchanges The Coalition includes over 240 representatives from small and large businesses, industry associations, financial institutions, software vendors, payment processors and service providers, standards developers, and others. Why Address Remittance Data?

B2B check volume is declining, but not as fast as consumer check volume. When remittance data flows with an electronic payment, it may be separated from the notification of the payment. Because of the lack of a simple, easily adopted standard, the receiver may not have sufficient information to reconcile it with the right payment B2B Directory Project The B2B Directory is a public utility that enables payees to register either Electronic Payment Identity (EPI) and allows payers to retrieve it for simplified electronic payments. Benefits to businesses Reduces time spent manually entering vendor details, boost security, reduces check usage T H E F U T U R E O F PAY ME N T S Goal: To enable business payers of all sizes to make more electronic payments to vendors and all payees 12 CONFIDENTIAL Blockchain Blockchain is a technology that maintains a database between many participants without the need for a third party or reconciliation. It is a secured distributed ledger that holds a constantly expanding list of transaction record that are protected from modification and tampering. Entity A wants to send funds to Entity B 1 2 The transaction is denoted online as a block 3 The block is broadcast to every member in the network. Entity As Computer 4 Those in the network approve the transaction is valid before it is recorded, in a chain of computer code. 5 The block is then added to the chain, which shows a clear record of all transactions 6 Most banks prefer a closed system checking all details and controlling access via invitation, like the one displayed here, because of the increased security. Bitcoin, on the other hand, is an open source system. The funds move from Entity A to Entity B Entity Bs Computer Potential for Disruption

Settlement speed improvement Increased transparency Additional Use Cases JP Morgans Actions Proof of ownership and a marketplace for R3 consortium of 45 financial companies digital assets Digital Asset Holdings investment Simplifies cross-border payments Improving anti-counterfeit Lower costs - $20bn in savings Ledger services for a wide array of No need for a third party or reconciliation financial assets JP Morgans test of blockchain technology with 2,200 clients JP Morgans Juno blockchain project unveiled in March Source: Financial Times 13 CONFIDENTIAL General investments Payment technology is evolving at a rapid pace and J.P. Morgan is committed to investing in technology and the future of payments Robotics & automated workflow API enhancements Rich POS Experience A.I. and machine learning 1 - 2 Years 6 - 10 Years 3 - 5 Years Continued migration from physical to online Payment disruption moves from retail to B2B Robust integration making the actual payment an afterthought Digital Systems such as blockchain 9 BILLION+ Electronic Payments

$ In 2015, J.P. Morgan spent I N N O VAT I O N Efficiency 1 1/3 Fraud in Technology of spend on investments1 Specialized industries page 11 of the Firm Overview discussion presented at JPMorgan Chases Investor Day on February 23, 2016 14 CONFIDENTIAL JPMorgan is a marketing name for certain businesses of JPMorgan Chase & Co. and its subsidiaries worldwide (collectively, JPMC). Products and services may be provided by commercial bank affiliates, securities affiliates or other JPMC affiliates or entities. This document was prepared solely and exclusively for the benefit and internal use of the party to whom it is directly addressed and delivered (the Company) in order to make a preliminary presentation to the Company regarding certain products or services that might be provided by JPMorgan. This document and any related presentation materials are for discussion purposes only and are incomplete without reference to, and should be viewed solely in conjunction with, a related oral briefing provided by JPMorgan. This presentation does not constitute a commitment by any JPMC entity to extend or arrange credit or to provide any other services. The Materials and oral briefing (collectively the Information) contain information which is confidential and proprietary to JPMorgan and may only be used by the Company for the purpose of evaluating the products and services described in the Information and may not be copied, published, disclosed or used, in whole or in part, for any other purpose other than as expressly authorized by JPMorgan. In preparing the Information, JPMorgan has relied upon and assumed, without independent verification, the accuracy and completeness of information available from public sources or provided to it by or on behalf of the Company. JPMorgan does not guarantee the accuracy, completeness or reliability of that information. JPMorgans opinions and estimates contained herein reflect prevailing conditions and our views as of this date, which are accordingly subject to change, and should be regarded as indicative, preliminary and for illustrative purposes only. Our analyses are not and do not purport to be appraisals of the assets, stock, or business of the Company or any other entity. T H E F U T U R E O F PAY ME N T S The Information is not intended and shall not be deemed to constitute or contain advice on legal, tax, investment, accounting, regulatory, technology or other matters on which the Company may rely, and the Company should consult with its own financial, legal, tax, accounting, compliance, treasury, technology, information system or similar advisors prior to entering into any agreement for JPMorgan products or services. The Company is responsible for its own independent assessment as to the cost, benefit, suitability and appropriateness of any products or services it obtains from JPMorgan. JPMorgan makes no representations as to the actual value which may be received in connection with any JPMorgan product or service or the legal, tax, or accounting implications of consummating any transaction contemplated by the Information. The Information does not purport to set forth all applicable terms or issues and are not intended as an offer or solicitation for the purchase or sale of any financial product or service or a commitment by JPMorgan as to the availability of any such product or service at any time. JPMorgan products and services are subject to applicable laws, regulations, service terms and policies of JPMorgan. Not all products and services are available in all geographic areas or to all customers. Eligibility for particular products and services is subject to satisfaction of applicable legal, tax, risk, credit and other due diligence, JPMorgans know your customer, anti-money laundering, anti-terrorism and other policies and procedures. All trademarks, trade names and service marks appearing in the Information are the property of their respective registered owners. 2016 JPMorgan Chase & Co. All rights reserved. 15

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