October 22 2010 - Financial institutions should be pursuing the Millennial Generation with gusto as they are the greatest consumers of electronic and emerging payments according to a new nationwide Consumer Payment Preferences Study conducted by Hitachi Consulting and the Bank Administration Institute (BAI). The research was sponsored by First Data Corp., FIS, MasterCard, PULSE, and U.S. Bancorp.

According to the study, the Millennial Generation (defined in the study as ages 18 to 34) is the segment which uses debit and alternative payment methods and channels in-stores on a par or higher than the 35-54 age segment and greater than those aged 55+. The study also reveals this group intends to increase their usage of all in-store payment products more than any other age group. Ease of use (35 percent), financial security (29 percent), security and safety (27 percent) and speed (20 percent) are the primary in-store buyer values for the Millennial Generation. Based on the findings, financial institutions should consider focusing their marketing programs and messages on the primary buyer values as a way to attract the Millennial Generation as well as focus on cross-sell efforts and retention in this segment as they generally have product/solutions needs that are more profitable to banks. Financial control, safety, and security are the primary in-store buyer values for the other age groups, which should be the focus of strategies and marketing programs designed to attract them as customers.

Other considerations for financial institutions to evaluate relative to their strategies and plans regarding the Millennial Generation include:

- Debit card ownership is highest among this group (80 percent), as is ownership of contactless payment devices (12 percent)

- Credit card ownership is the lowest among this age group at 56 percent

- Making small purchases under $5 (micropayments) on the Internet is highest among this group (56 percent) compared to those between the ages of 35 to 54 (46 percent) and those over 55 (23 percent)

The study also showed that consumers are not showing signs of adopting mobile payments. Despite coverage in the media and in advertisements, an astonishing 88 percent of consumers said they do not currently use mobile payments for in-store purchases nor do they plan to use them in the next two years. At the same time only 5 percent of consumers indicated they owned a mobile device capable of making an in-store purchase, with 46 percent of these owners coming from the Millennial Generation.

The reason for the reluctance stems from their concerns over potential safety and security issues that could result in fraud and theft. When developing strategies and plans aimed at targeting the use of mobile for payments, financial institutions should be prepared to invest in consumer education to overcome concerns over safety and security.

"We see a great deal in the media about mobile capabilities. However, our study shows that consumers are not yet there when it comes to using mobile devices for payments. Financial institutions will need to address security and fraud issues with their customers if they expect to see an increase in mobile device usage for making payments and in-store purchases," said Jim Neckopulos, Senior Vice President, National Financial Services Practice for Hitachi Consulting. "Our advice to institutions at this time is to address those concerns if they want to see an uptick in mobile usage in the near future.

"It's clear that mobile banking, though it is making its way into the public arena, may not be as far along as U.S. financial institutions may have thought at this point in time," Neckopulos said. "However, Hitachi Consulting can help financial institutions with their mobile banking plans, especially when it comes to developing strategies to identify and attract consumers who are more likely to desire mobile banking products."

The study also confirmed that debit cards continue to grow in preference and usage at the expense of credit cards, cash and checks. Since 2005, use of checks for making purchases declined from 11 percent of total in-store purchases to 5 percent in 2010. During the same period, use of cash for making purchases in-stores declined from 33 percent to 26 percent of total purchases.

The study shows that credit card customers value rewards more than debit card customers. Although 21 percent of debit customers receive rewards, 64 percent indicate that rewards are neither extremely nor very influential in their choice to use debit. In comparison, 45 percent of credit card customers indicate that rewards are extremely or very influential in their choice to use credit cards. With new regulations likely to cause pressure on interchange rates, rewards in their present form are not likely to be sustainable and could present an opportunity for issuers to shift volume from credit to debit.

Other debit stats:

- While debit card product ownership remained flat, credit card ownership fell from 71 percent in 2008 to 67 percent in 2010

- Debit cards continued to grow in terms of in-store usage (42 percent of transactions in 2010 versus 37 percent in 2008), while credit card usage showed a decline (from 22 to 19 percent) of in-store transactions

- Debit cards are perceived as better than credit cards in helping to manage a budget

"With the continued decline in check volume, financial institutions may want to explore opportunities to convert any remaining fixed costs related to check processing operations to variable ones and consider where it makes sense to outsource certain activities," Neckopulos said. "With the continued use of debit at the expense of credit, checks, and cash, financial institutions may want to focus their marketing messages on the safety, convenience, and budget control aspects of debit as a way to continue the trend."

Finally, the study reveals a noteworthy point in the growth of person-to-person (P2P) payments and, to a lesser extent, prepaid cards, primarily when it comes to purchases over the Internet. On the strength of activity from PayPal, the use of P2P payment options among those who made at least one online purchase grew from 49 percent of online purchases in 2008 to 62 percent in just two years, placing second only to credit cards as the predominant online payment option. This uptick should cause financial institutions to be concerned and look at ways to mitigate the potential for loss of business.

About the Study

The 2010 study is a guide to how consumers pay in different venues, why, and how their payment habits are likely to evolve going forward. The study provides insights into consumer behavior and preferences across four payment venues: in-store purchases, Internet purchases, bill payment and mobile payments. Findings from the 2010 study are based on an online survey administered by Harris Interactive® and completed by a nationally representative sample of 3,271 U.S. consumers age 18+ in the summer of 2010. Demographic, Webographic, and sample balancing were used to weight the sample to accurately reflect the U.S. population. To inquire about purchasing the study, please call George Simotas, director of consulting services, Financial Services Industry practice, Hitachi Consulting, at 949.242.1505 or Jim Neckopulos at 415.740.1320.

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About Hitachi Consulting's Financial Services Industry Practice

Hitachi Consulting's Financial Services Industry practice works with industry leaders in banking, payments, wealth and investment management to navigate the changing landscape in this competitive industry. Our practice focuses on strategy development, business process change and technology enablement and implementation critical to creating competitive advantage, enhancing entity value and Building Market Responsive clients.

We have unequaled experience providing value to our financial services clients that spans more than 25 years. Our clients include eight of the top 10 U.S. banks, some of the largest EFT networks and card associations, the U.S. Treasury and the Federal Reserve Bank, as well as leading payment processors, ATM manufacturers and payment providers. Our consultants combine years of hands-on industry experience and management consulting expertise.

Hitachi Consulting's depth of financial services experience ensures successful change and implementation for our clients.

Building the Market Responsive Company®

For more information, the firm can be reached at www.hitachiconsulting.com.

About First Data Corp.

First Data powers the global economy by making it easy, fast and secure for people and businesses to buy goods and services using virtually any form of electronic payment. Whether the choice of payment is a gift card, a credit or debit card or a check, First Data securely processes the transaction and harnesses the power of the aggregate data to deliver intelligence and insight for millions of merchant locations and thousands of card issuers in 36 countries.

For more information, visit www.firstdata.com.

About FIS

FIS is one of the world's top-ranked technology providers to the banking industry. With more than 30,000 experts in 100 countries, FIS delivers the most comprehensive range of solutions for the broadest range of financial markets, all with a singular focus: helping you succeed. Every FIS solution has the strength you need for profitability today, and the power to help you manage whatever comes next.

For more information, visit www.fisglobal.com.

About MasterCard

As a leading global payments company, MasterCard Worldwide prides itself on being at the heart of commerce, helping to make life easier and more efficient for everyone, everywhere. MasterCard serves as a franchisor, processor and advisor to the payments industry, and makes commerce happen by providing a critical economic link among financial institutions, governments, businesses, merchants, and cardholders worldwide. In 2009, $2.5 trillion in gross dollar volume was generated on its products by consumers around the world. Powered by the MasterCard Worldwide Network - the fastest payment processing network in the world - MasterCard processes over 22 billion transactions each year, has the capacity to handle 140 million transactions per hour, with an average network response time of 140 milliseconds and with 99.99 percent reliability. MasterCard advances global commerce through its family of brands, including MasterCard®, Maestro®, and Cirrus®; its suite of core products such as credit, debit, and prepaid; and its innovative platforms and functionalities, such as MasterCard PayPasTM and MasterCard inControlTM. MasterCard serves consumers, governments, and businesses in more than 210 countries and territories. For more information, please visit us at www.mastercard.com. Follow us on Twitter: @mastercardnews.

About PULSE

PULSE, a Discover Financial Services (NYSE: DFS) company, is a leading debit/ATM network, serving more than 4,400 banks, credit unions and savings institutions across the United States. The network links cardholders with ATMs and POS terminals at retail locations nationwide. Through its global ATM network, PULSE provides worldwide cash access for Diners Club and Discover cardholders through hundreds of thousands of ATM locations. The company is also a source of electronic payments research and is committed to providing its participants with education on emerging products, services and trends in the payments industry.

For more information, visit www.pulsenetwork.com.

About U.S. Bancorp

U.S. Bancorp (NYSE: USB), with $283 billion in assets as of June 30, 2010, is the parent company of U.S. Bank, the fifth largest commercial bank in the United States. The company operates 3,002 banking offices in 24 states and 5,309 ATMs and provides a comprehensive line of banking, brokerage, insurance, investment, mortgage, trust and payment services products to consumers, businesses and institutions.

For more information, visit U.S. Bancorp on the web at www.usbank.com.

About BAI

BAI is the financial services industry's partner for breakthrough information and intelligence needed to innovate and stay relevant in an evolving marketplace. For more than 80 years, BAI has focused on advancing the industry by offering unbiased education and research. In addition, we facilitate ongoing industry dialogue through a robust network of financial services professionals, thought leaders, newsmakers, and solutions experts. BAI connects industry members to each other and to the knowledge vital to their success. Our offerings are as diverse as the industry, and include premier events such as BAI Retail Delivery Conference & Expo, ground-breaking research and performance metrics, professional learning and development programs, and in-depth editorial coverage through BAI Banking Strategies. All of our products and services are developed with one objective in mind - to provide the industry with effective and innovative ways to connect, learn and grow. Visit www.BAI.org for more information.

BAI is Bank Administration Institute and BAI Center.

About Hitachi Consulting Corporation

Building the Market Responsive Company®

As Hitachi, Ltd.'s (NYSE: HIT) global consulting company, with operations in the United States, Europe and Asia, Hitachi Consulting is a recognized leader in delivering proven business and IT strategies and solutions to Global 2000 companies across many industries. With a balanced view of strategy, people, process and technology, we work with companies to understand their unique business needs, and to develop and implement practical business strategies and technology solutions. From business strategy development through application deployment, our consultants are committed to helping clients quickly realize measurable business value and achieve sustainable ROI.

Hitachi Consulting's client base includes 25 percent of the Global 100 as well as many leading mid-market companies. We offer a client-focused, collaborative approach and transfer knowledge throughout each engagement.

For more information, call 1.877.664.0010 or visit www.hitachiconsulting.com.

About Hitachi, Ltd.

Hitachi, Ltd., (NYSE: HIT / TSE: 6501), headquartered in Tokyo, Japan, is a leading global electronics company with approximately 360,000 employees worldwide. Fiscal 2009 (ended March 31, 2010) consolidated revenues totaled 8,968 billion yen ($96.4 billion). Hitachi will focus more than ever on the Social Innovation Business, which includes information and telecommunication systems, power systems, environmental, industrial and transportation systems, and social and urban systems, as well as the sophisticated materials and key devices that support them. For more information on Hitachi, please visit the company's website at http://www.hitachi.com.

About Harris Interactive

Harris Interactive is one of the world's leading custom market research firms, leveraging research, technology, and business acumen to transform relevant insight into actionable foresight. Known widely for the Harris Poll and for pioneering innovative research methodologies, Harris offers expertise in a wide range of industries including healthcare, technology, public affairs, energy, telecommunications, financial services, insurance, media, retail, restaurant, and consumer package goods. Serving clients in over 215 countries and territories through our North American, European, and Asian offices and a network of independent market research firms, Harris specializes in delivering research solutions that help us - and our clients - stay ahead of what's next. For more information, please visit www.harrisinteractive.com.

For more information, please contact:

Kim Lynch

Devonshire Marketing

kim[at]devonshiremarketing[dot]com

Tel: 0870 7000 166

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