stareviewfirst8months

15/04/23 19:38 1

Payments Business Review

19, May 2006

2

Agenda

•Current State of Payments

•Trends

•Market landscape

•Vision, Goals and Strategy

•Key questions

•Next Steps

3

Current State Rick and keith to clean this up

We’ve made tremendous progress in the last 6 months

Still, we can achieve plenty

Highlights• Implemented ACH and echecks• Brought on Neteller Instacash• Global Collect signed

• CC Declines dropped from 43% (2005 ave) down to 34% (May 2006)

• Moneybookers high level economic terms finalized. Integration tbd. Epassporte, Click & Buy, PaySafe Card in the background

• Renegotiation of Gateway, Neteller and Firepay• Secondary WU supplier for diversification (Peru); panama as

back up• Creation of Neteller DAD 24/7 department generate 3000 saves

per month• Cleaning up legal aspects of existing contracts

Lowlights• Role ambiguity between development and payments with respect

to requirements. • Client based architecture precludes real time changes/flexibility• Response method via email is not real time and less intimate• No method to separate real time issues vs. others• Decline rates on 1st time CC users are up 12% over last six

months (31% to 35%) but still low. • Low coverage rate on decline incidents due to lack of manpower

(8 to 12%)• Proactive DAD focus however to a select segment using manual

tools.• Of the decline incidents we handle we save 25-35%; Absolute

success rate in CC’s 66%. Not clear what % would have been saved anyway.

• Reporting to determine true decline activity by payment method or deposit activity (i.e. is echeck incrementally increasing players or is it cannibalizing from CC’s?) is not currently available.

• Lack of consistency in determining what a decline is. Less than 100% confidence on actual declines.

• Project management and marketing activity that is integrated with payments not in place.

• Hostile Banks wrt CC– US: Chase, Citi, MBNA, Capital One

– Canada: Royal Bank of Canada, Bank of Nova Scotia

– Norway, new legislation

– Brazil banks, extremely hostile towards gaming

• ACH – pressure from states

– reputation risk for banks

• US legislation

Certain actions/events are out of control

4

Trends in DepositsTotal Success Rate

40.0%

45.0%

50.0%

55.0%

60.0%

65.0%

70.0%

75.0%

80.0%

J ul-05 Aug-05

Sep-05

Oct-05

Nov-05

Dec-05

J an-06

Feb-06

Mar-06

Apr-06

1st time

Existing

Total

Total Deposits

$0

$10,000,000

$20,000,000

$30,000,000

$40,000,000

$50,000,000

$60,000,000

$70,000,000

$80,000,000

$90,000,000

J ul-05 Aug-05

Sep-05

Oct-05

Nov-05

Dec-05

J an-06

Feb-06

Mar-06

Apr-06

Other

ACH

CC

NT

Total Deposit Dollars - % of total

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%

J ul-05 Aug-05 Sep-05 Oct-05 Nov-05 Dec-05 J an-06 Feb-06 Mar-06 Apr-06

Other

ACH

CC

NT

Total Deposits

-

100,000

200,000

300,000

400,000

500,000

600,000

700,000

800,000

J ul-05 Aug-05

Sep-05

Oct-05

Nov-05

Dec-05

J an-06

Feb-06

Mar-06

Apr-06

Other

ACH

CC

NT

5

Trends – By Payment MethodCC Success Rate - Transactions

20.0%

25.0%

30.0%

35.0%

40.0%

45.0%

50.0%

55.0%

60.0%

65.0%

70.0%


1st time

Existing

Total

CC Deposits

$10,000,000

$12,000,000

$14,000,000

$16,000,000

$18,000,000

$20,000,000

$22,000,000

$24,000,000

$26,000,000


1st time

Existing

CC Deposits % of Total

70%

75%

80%

85%

90%

95%

100%


1st time

Existing

Neteller Success Rate

40.0%

45.0%

50.0%

55.0%

60.0%

65.0%

70.0%

75.0%

80.0%

85.0%


1st time

Existing

Total

Neteller Deposits

$15,000,000

$20,000,000

$25,000,000

$30,000,000

$35,000,000

$40,000,000


1st time

Existing

Neteller Deposits - % of total

70%

75%

80%

85%

90%

95%

100%


1st time

Existing

ACH Success Rate

50.0%

55.0%

60.0%

65.0%

70.0%

75.0%

Dec-05 J an-06 Feb-06 Mar-06 Apr-06

1st time

Existing

Total

ACH Deposits

$0

$1,000,000

$2,000,000

$3,000,000

$4,000,000

$5,000,000

$6,000,000


1st time

Existing

ACH Deposits % of total

70%

75%

80%

85%

90%

95%

100%


1st time

Existing

Credit Cards Neteller ACH

6

Market LandscapeKey CriteriaS PokerStars PartyGaming (partypoker) 888.Com (pacific poker) SportingBet (Paradise) BetandWin

Currencies settled in (deposits or cashouts) Predominately US. Trial in CA (ach), GBP (debit cards), Payout cheques in 7 currencies

AUS, CAD,EUR, GBP, NOK,SEK, USD

Us, uk, ca, euro Aus (in some but not all (NT and FP no)

USD, CDN, EURO, GBP US, CA, EURO, UK Eur,pln,chf,ytl,usd,skk,czk,sit,huf,rub,gbp,dkk,nok,sek

# of languages offered on cashier site English English, French, Spanish, Norwegian, Denmark, Finish, Russian, German

Eng,Ger,Span, Italian,Swed, French, Polish, Greek, Nor, Danish, Catalan Turkish,Czech, Hun,Dutch,Port,Rus,Slov, Croatian and Slovak

# of languages for support English & Spanish (informal)

24/7 Multi Language Call centre 24/7 Multi Language Call Centre Same as abovephone above

8am-12am

# of payment employees 9, 17 including DAD 900 customer support folks. Two groups, poker/tech support and payments

# of payment offerings 13, NT, Instacash, Echecks (CA & US), Visa, MC, Diners, Central Coin, WU Check, Wire transfer, Visa Visa branded debit cards, switch & Solo

23 in total. eChecks, Visa, mc, diners, eppassport, phoneconnect, entropay, money transfer, nt, citadel, fp, bank wire transfer, easybuy, moneybookers

Echecks, deposit by phone, cc(visa, mc, diners, eurocard, FP, visa electron, carte bleue visa)/dc, epassporte, NT, FP, ACTeCASH, wire transfer, instadebit, moneybookers (mb),

Recently start implementing RT Bank Wires and bank transfers in European Countries.

CC (visa and mc), NT, FP, Switch, Maestro debit cards

Visa,mc,diners,nt,mb, banktransfer, freebetcard (prepaid)Many Local Payment Methods in European Countries, RT Bank Wires, and Bank transfers

User Experience (client or web) Client Secure website. Click the cashier link and it takes you to the website

Client, but you link off to the web for most pymt methods

client based cashier system

Secure website. Pretty nice looking

Net Revenue (CY05 & Q106) $212M, $89M $859M, $260M $110M, $39M $50M (Q2E 1/06)

Total trans costs (processing/ Bad Debt, chargebacks)

9.4% 10.1%

Total Deposits $523M $2.7B

Total Cash Outs $210M $1.6B

Decline rate (or success rate) 26%

Support location CR, UK Gibraltar, India Gibraltar, Israel CR Austria

Ratio of deposits by payment mehods CC’s 29.5%; NT 44%; FP 14% ACH 7.5% WU 5%

eChecks (IGM pay) 40%, NT/FP/MB 23%, CC 25%, 12% other (per AR)This are old numbers and rough est.

Some alternative payment; www.dialdirect.net

7

PMPR - Present Day

Payment Method

CC's, WU, NT, FP, Central Coin, Diners, Checks/ Wires

Switch/Solo Echecks (CDN/US) NT/InstaCash, WU CR/Peru, GC CC

Processor SafeCharge, Gateway, Optimal Payments, NT, FP

RBS Global Collect (GC)

Region Mainly NA Still Mainly NA

Started UK with Switch/Solo

Expanded offering in NA

2004 2005 YTD 2006 ROY 2006 2007Calendar Year

8

Vision and GoalsVision:“Enable a seamless and effortless flow of money going both

ways as part of the overall online gaming experience”

Goals:– Reduce the number of declines– Expand payment methods and geographies– Make the cashier experience easy and fun– Use payments as a marketing vehicle– Be the low cost leader in payments– Have the fastest payouts amongst our peer group

Customer Value Proposition:“Reliable, Flexible, Secure and Easy to Use”

9

Reduce the number of declinesCurrent State• Decline Rate improving but still high (no improvement in first time deposits)

– CC: Jan to Oct 2005 average. Current success at 66%• Hostile Banks: 22.3% 52%• Customer Errors: 0.7% 2%• Negative failures: 1.0% 2%• Technical failures: 0.6% 1%• Other 18.2% 43%• Success: 57.2%

– ACH: Average since beginning. Apr success at 72.3%• Failed ID verification: 9.2% 28%• Risk Scoring: 8.5% 26%• Outstanding Collectables: 5.4% 17%• Mismatch Errors: 4.1% 12%• Negative failures: 3.3% 10%• Technical failures: 0.5% 2%• Other: 1.6% 5%• Success: 67.4%

– First time CC deposits:• Immediate approval: 30% in Sep 2005; 35% in Apr 2006• Subsequent rescues: 46% in Sep 2005; 52% in Apr 2006

• Coverage on calls considered low due to current manpower– Current estimates show 8 to 12% DAD coverage– Value of an additional DAD (ACH and CC)

• # of declines x Ave $/deposit = total lost per year– 1,000 x $100 = $100,000 x 365 days = $36,500,000

• Indifference point– fully burdened cost of DAD rep / Gross Margin Rate / Ave $ per deposit = total saves required to incremental cost breakeven

» $40,000/.885/$100 = 452/260 = 1.74 saves per day• Incremental margin per DAD head per day:

– Hours per day x calls per hour = calls per day x success rate = saves per day – breakeven amount = net saves per day x ave $ per deposit = incremental revenue per DAD

» 8 x 2.65 = 21 x 30% = 6.30 – 1.74 = 4.56 x $100 = $456 x .885 = $404 • Incremental gross margin per head per year

– Incremental margin DAD head per day x 260 working days– $404 x 260 = $105,040

• Marketing campaigns broadly focused on acquisition and retention vs. targeted at declines• Data to evaluate payment activity not readably available

10

Reduce the number of DeclinesProposed initiatives

Development Marketing Support Payments Other1. Develop reporting to track/analyze payment activity

1. Create user education section on declines and alternatives

1. Build DAT, Cashier Specialist Teams

1. Develop framework for reporting (description, type, source, common data set, etc)

1. Invest in security to preempt expected increase in bonus. More security = less fraud + less chargebacks.

2. Context sensitive messaging. Build automated response/resolution platform for player declines.

2. Devise switching incentives at the time of decline for 1st deposits

2. Work with Development to continue automating processes/tools

2. Work with processors to increase the level of data/insight regarding decline activity

3. BIN Tool for Scoring Players Banks that allow Gaming and Route accordingly

3. Incentives for Players to use Methods with much greater approval rates prior to attempting Methods with low chance ie: CC’s in the US

3. 24 hour Phone Support for Deposit Assistance

3. Bring in Payment Methods that players can use their credit card’s for,

4. Auto store/populate payment related information for all processors

4. Put in place payment method "open house" or "open chats". Real time sessions to let people discuss payment topics.

4. Evaluate tradeoffs regarding deploying non-indemnified ACH

5. Make sign up process simpler and faster for wallets and ACH

11

Expand Payment Methods & Geographies

Current State• Good coverage in the US but need alternative processing for credit cards

• Need to focus on Europe and Asia• Payment methods are expanding but need to tailor to specific countries

• Processor reliance becoming more balanced but continued eye toward diversification

• Rolling out new processors but there is an opportunity to improve time to market and integration

12

Initial Roadmap

Payment Method

CC's, WU, NT, FP, Central Coin, Diners, Checks/ Wires

Switch/Solo Echecks (CDN/US) NT/InstaCash, WU CR/Peru, GC CC

PaySafe Card, MoneyBookers, GC Direct Debits/Banking Network

Early thoughts: GC Bank Transfer (china), GC RT Bank Transfer (Singapore), Local Bank Transfer, IPay wallet

Processor SafeCharge, Gateway, Optimal Payments, NT, FP

RBS Global Collect (GC)DMT (WU Peru)

Epassporte, Pay Tru Card(?), EntroPay(?), Click and Buy, a back up Echecks, (Citadel, InstaDebit, FirePay, NT), Money Bookers, GC

GC, Envoy, IPayBIBIT

Country & Region

Mainly NA Mainly NA Expanded offering in NA

Europe (UK, Germany, Sweden, Norway, Finland, Denmark, Holland, France) Europe; exploratory review of Asia

Asia and Expanded offering in Europe

2004 2005 YTD 2006 ROY 2006 2007Calendar Year

13


Proposed initiativesDevelopment Marketing Support Payments 1. Development to evaluate processor API’s and cross check with payments team to prioritize processors and countries accordingly

1. Implement regular player satisfaction surveys by key country

1. DAT and CSST to evaluate increased demand

1. Evaluate processor and payment availability in the top 20 countries

2. Build a modular platform or middleware to easily drop in processors and payment methods across the world

2. Develop campaign to evangelize payment methods and geographies….on website, client, press and other external ad means

2. Evaluate language issues (if any)

2. Prioritize processors

3. Fund and receive payments in local currency

3. Create local awareness campaigns for each country and method we roll out

3. Better training and tools for DAD and CSR's to help the players be sucessful depositing or withdrawing

3. Work with development to determine roll out

4. Negotiate deals

14

Processor Direction• Rationalize existing processors

– Drop safecharge, optimal, Diners and Maurice– Find replacement for Maurice. Act as backup for TMI

• Improve economics for each processor• Go after new processors to fill in gaps in payment offering

– Money Bookers, Pay & click, Paypal Europe, Barclays?

Country Coverage Payment Method Relationship

(up or down)

Economics Next Contract Negotiation

Key Changes proposed

RBS/Streamline CC’s Worldwide Switch/Solo Maestro(UK)

V/M, Visa Branded Debit Cards

Switch /Solo, (UK)

Static 3.2% Switch/Solo/Maestro

0.35 pence a transaction

In process 3.2% to 2%

Gateway Global for CC’sUS and Canada for Echecks

CC’s World Wide

ACH in Canada and US

Static/up with ACH, lots of work to do

Our fraud and their fraud are starting to work more closely together

Recently (Oct) renegotiated CC from 3.8% -3%0.30 per approved transaction

Echecks, 5.90% plus .10 per transaction approved or declinedIf a Players has 60 days successful transactions no returns rate 4.50% .10 per transaction approved/declined

In process again Currently offering between 2.65%-2.8% for Credit Cards based on volume, still negotiating

Recently been told by their CEO our reserve will be eliminated for Echecks. waiting for date.

Global Collect 100 Local Payment Methods CC. Debit Cards Local Transfer, Direct Debit,

Many alternative payment methods

New CC’s 1.80%-1.95%

depending on volume

$0.25 approved trx

Direct Debit $0.90(UK, France, Germany, Holland, Spain, Austria, Sweden, Norway, Finland, Demark

Real Time Bank Transfers(Germany, Belgium, Holland, Sweden, Norway, Finland, demark, Austria)Local Bank Wires in 50+Countries

Neteller Global, excluding OFAC countries and Russia

Wallet UP Recently Renegotiated

2.5% regular transfers

4.5% InstaCash

Capped at 4% total in FeesElimination of reserves

Start June Capped at 4% to capped at 3.65%, or InstaCash reduced from 7%-6% analizing data to see with is more cost effective for us with current trends

working on them fulfilling some of our cheques,working on them possible helping with our ACH as redundancyworking on them for a revamped sign up procedure to make it more user friendly for players from our site

FirepaySureFire Credit Cards

Canada and USGlobal

WalletVisa

Standstill 5% In process In process of renegotiating with them, Their offer is

4.5% @ 10mil.mth4 % @ 12million3.5%@ 15millionWorking on having our players able to fund their FirePay Account on our Site and not have to pay a fee to FirePay, Talking to them about helping with our ACH

Central Coin US only (Gateway)

Wallet Cnetral Coin will be terminated by Gateway shortly

2.9%

Safecharge CC’s Down

Western Union World Wide Peru NewCR static

2% of Value with CR

$7 per trx w/Peru

Has been recently done

Trying to Get Peru Reduced

Attempting to move atleast a portion of our Business to Europe

TMI Cheque Issuing WorldWide

Rates depend on country Need to start Rates/Service

Maurice in CA Check IssuingMainly CDN and US

Down $4 per Check (mail) $31 per courier

? Would like to add another supplier

Diners Currently with SafeCharge, global Collect/Gateway offers as well

No volume No player generation

15

Make Cashier Experience Easy & Fun

Current State – Deposit experience simple and elegant, however• Certain payment options not applicable to user based on location thus causing

confusion (central coin, firepay for europe, Echecks for Europe)• Unable to tailor to user needs wants (doesn’t remember my previous deposits,

credit card details, etc)• Unable to set my own deposit limits• Current credit card method is costly for users outside of the US.

– Currently for credit card we only charge in US dollars. ($350k in currency conversion fees per month)

• User experience doesn’t come across as intimate and connected with user • Lack of logical guide for user (i.e. listing most popular method in region)• Help/guidance not readably available or visible (contact info or link to solutions

more than one click away)• Inability to personalize cashier screen (payment methods, deposit limits,

history, currency funding, etc)• Unable to access Cashier from the .com Website

16

Make Cashier Experience Easy & Fun

Proposed initiatives

Development Marketing Support Payments 1. Increase flexibility on client either through faster builds or via conversion from client to web.

1. Update site real time to reflect changes in options or promote specific activities

1. Use cashier screens as a communication vehicle

1. ensure any new gaming products we introduce can easilty be fitted into the payments model

2. Automatically detect the users location (via ip redirect) and behaviour patterns to tailor the cashier experience to the user ("Dynamic Cashier")

2. Cross promote across the .com web site and client and cashier section of the client

2. Put on the cashier screen a quick link to support. Make it visible and easy to connect to. Have the option of phone or email support.

2. Conduct ongoing competitive benchmarking regarding payment methods/promotions

3. Create a "My Cashier" capability. Allow the user to define their payment method choice, language, currency and deposit limits.

3. Have Wallets and other processors make us a priority with respect to player issues

4. Automate WU

17

Payments as a Marketing Vehicle

Current State:• Marketing programs are broad based vs. tailored to payment processors or declines

• Interaction to date with processors has been on streamlining operations and retention versus acquisition

• Informal preference system currently used (i.e. Neteller)

• Support calls are focused on resolving issues vs. opportunity to sell

• Homepage doesn’t promote processors or payment methods. No logos

18

Payments as a Marketing VehicleProposed initiatives:• Marketing/Support

– Develop deposit marketing programs to entice players at time of deposit or other web/client touch points

– Implement real time changes to content as needed. – One of kind promotions with our wallet partners.

• Partners to fund activity where they are new or we are entering a new geography• Create tailored programs to target processors base and drive incremental users

– Put processor promotions on PokerStars website– Put neteller logo on pokerstars tee shirt.– NT will soon have a promotion. “fund with NT and win a mini cooper” we should have them

advertise on our site (currently confidential)

– Build one or two sales propositions into support skit. In order to build this we will need data mining capability.

• Organization/Process– Establish a Payment Product Management team. Focus on Product Planning and

Payments Marketing. Mktg person acts as bridge between mktg and payments– Establish monthly marketing review meetings with marketing dept to ensure

coordination– Establish Processor Partner Management Framework. – Develop tiers and appropriate engagement/promotion activities with processors

19

Low Cost Leader in PaymentsCurrent State:• Total transaction costs (processing + bad debt) at 9.4%. Lower than

Party (10.1%) but still high. – Successful renegotiation of processor economics and clean up legal

documentation a good start.• Indemnification helps protect our downside but not clear how much is

left on the table on two dimensions– Cost by managing our own credit risk– Incremental users by processor restricting the credit “throttle”

• Processor managing to a lower risk profile• Strategy to reduce charge backs and increase approvals is currently

being formulated• We’re making processors successful but not participating in that

success. • We don’t currently interact with user at the time of payout.

– Promote other payment methods– Increasing play

20

Low Cost Leader in Payments

Proposed initiatives:• Reduce total transaction cost to 7%• Need to evaluate tradeoff between cost efficiency and incremental

acquisition• Map out chargeback strategy. Will help as we recruit higher risk

countries• Conduct indemnification tradeoff analysis• We should get processors to share more in the marketing.

– Provide promotions on our site (i.e. use neteller and get $10 bonus…..we get a kickback)

– Market aggressively into wallet members user base.– Position us on their website or advertising. “Preferred partner” section

• Evaluate becoming our own PSP. Deal direct with acquiring banks

• Enable player profiling for non-indemnified ACH• Develop low cost routing framework

21

Fastest Payouts Amongst Peer Group

Current State• Not clear where we rank relative to our peers.• Criteria for evaluating against peer group to be

determined.• Need to determine customer perception

regarding payouts.• Payout evaluation currently manual.

Automated tools in development• Risk scoring currently not applied. Framework

in process• Payout goals exist

– Party goal is 80% of payouts processed within 6 hours.

22

Enhance Cross Group Collaboration

#1 problem from the development team is a lack of detailed, clear, and thought through requirements. Key problem from payments is lack of perceived focus and assistance in creation of requirements from Development.

• Create a payment product management team– Product Planning– Product Marketing– Payments strategy– Competitive Analysis

• Set up weekly or biweekly “war team” meetings– Appoint person from Development, Marketing and Payments– Discuss key topical issues (delays, new events, competition, processor, etc)– Walk through status of roadmap and development activities– Outline processor activities

• Quarterly review with senior management– Walk through product roadmap– Walk through payment marketing programs and results to date– Provide competitive update

23

Next Steps/Recommendations• Strive for the following goals (next 12 and 24 months):

– Reduce Declines: Improve success from 72% to 75%– Expand Payment Methods & Geos: Europe in 2006; Asia in 2007– Make the cashier experience easy and fun: Cashier approval survey (Net Promoter)– Payments as a marketing vehicle: Establish at least two marketing programs– Low cost leader: Reduce from 9.4% to 7%– Fastest speed of payouts: Define criteria and improve by 20%

• Prioritize top 6 development requests and build detailed specs. Suggest 5 are:– 1. Evaluate and prioritize processors and determine impact to the current payment and gaming system– 2. Create reporting to track and analyze payment activity– 3. Build modular platform/middleware– 4. Fund and receive payouts in local currency– 5. Dynamic Cashier– 6. My Cashier

• Going forward come up with framework on how to prioritize remaining/future features– 1. Revenue potential; 2. new acquisition vs. player retention; 3. customer surveys; 4. quality improvements; etc

• Work with Marketing to implement the following 4 payment marketing initiatives– 1. Devise switching incentives at the time of decline for 1st depositors– 2. Player satisfaction surveys– 3. Promotions with processors– 4. Processors to share in marketing effort

• Support to come up with a plan for ramping up DAD and Cashier Specialist team.• Payments to build up Payment Product Management Team• Evaluate whether any new gaming products we introduce can easily be fitted into the payments

model.• Build up competitive benchmarking capability.

24

APPENDIX

25

Payment Development Initiatives1. Evaluate and prioritize processors and determine impact to the

current payment and gaming system2. Create reporting to track and analyze payment activity3. Build modular platform/middleware4. Fund and receive payouts in local currency5. Dynamic Cashier6. My Cashier7. Player profiling for ACH non-indemnification8. BIN tool scoring capability9. Low cost routing of processor activity10. Automate WU11. Faster builds or web based experience12. Quick fixes

1. Context sensitive messaging (auto response/resolution platform)2. Auto store/populate feature

26

Payment Marketing Initiatives1. Devise switching incentives at the time of decline for 1st depositors2. Player satisfaction surveys3. Promotions with processors4. Processors to share in marketing effort5. Proactive switching incentives6. User education

1. Develop campaign to evangelize payment methods and geographies2. Local country awareness campaigns3. Payment “open house”

7. Cross promote payments across .com and client (and visa versa)8. Devise payment marketing program for each customer touch point

(website, support email, pokermgmt, etc)9. Real time changes to the site content. Keep it fresh10. Build sales proposition into support

27

Payments KPI’s

Decline IncidentCoverage

Transaction Activity

Dollars Transactions DeclinesJan-06 Approved Rejected total % rejected Jan-06 Approved Rejected total % rejected per day

Existing 58,962,831 20,584,157 79,546,988 26% Existing 532,331 202,308 734,639 28% 6,526 New 3,222,293 3,595,993 6,818,286 53% New 37,607 42,034 79,641 53% 1,356

62,185,123 24,180,150 86,365,274 28% 569,938 244,342 814,280 30% 7,882 72% 28% 70% 30%

DeclinesFeb-06 Approved Rejected total % rejected Feb-06 Approved Rejected total % rejected per day


63,562,868 24,925,040 88,487,908 28% 598,702 246,946 845,648 29% 8,820 72% 28% 71% 29%

DeclinesMar-06 Approved Rejected total % rejected Mar-06 Approved Rejected total % rejected per day


79,733,054 30,489,115 110,222,169 28% 692,453 277,993 970,446 29% 8,968 72% 28% 71% 29%

DeclinesApr-06 Approved Rejected total % rejected Apr-06 Approved Rejected total % rejected per day

Existing 66,002,105 22,039,424 88,041,529 25% Existing 603,265 199,336 802,601 25% 6,645 New 2,712,049 2,525,430 5,237,479 48% New 29,447 26,436 55,883 47% 881 Total 68,714,154 24,564,854 93,279,008 26% 632,712 225,772 858,484 26% 7,526

74% 26% 74% 26%

Daily unique Self Total Unique Transaction Total Unique ApproxPlayer Attempts correcting Attempts Attempts Player Declines Down toDeclined (ach & CC) save ratio Saveable Per Person 30

Per day 2300 30.00% 1,610 1.6 1,006.25 1,000 Per month 69,000 48,300 30,188 30,000 Per year 828,000 579,600 362,250

An alternative view onCC and ACH Declines

Early days in Payments reporting

Nov-05 Dec-05 Jan-06 Feb-06 Mar-06 Apr-06Average DAD reps per day 5.03 4.84 4.29 4.32 4.52 6.03# of DAD reps 8 9 8 8 7 9Total Decline Incidents 30,000 30,000 30,000 30,000 30,000 30,000 DAD Incidents reported 24519 23473 28177 27227 25107 16874DAD Incidents handled 3617 3315 2197 2359 3464 4551% of DAD incidents handled 15.22% 14.12% 7.80% 8.66% 13.80% 28.09%# of completed deposits 1012 1127 682 821 776 1612players rescued as % of handled 27.84% 34.00% 31.04% 34.80% 22.40% 35.63%players rescued as % of total declines 3.37% 3.76% 2.27% 2.74% 2.59% 5.37%Average # per day (cases per rep) 24.20 21.78 16.60 19.01 20.33 25.38Total Coverage Ratio 12.1% 11.1% 7.3% 7.9% 11.5% 15.2%

28

Key Questions/Open items

• Market Landscape – We need to build up our competitive benchmarking capability in payments. We should know everything that our peer group does in payments space

• Payment KPI’s– The level and accuracy of data needs to improve both internally (declines, incidents) and externally (processor information)– What is

• Reduce the number of declines– We need to better understand the activities/habits of first time depositors and existing players. To date the data does not give us that visibility. In

addition, processor data is too high level into decline habits. • We need to build up our data reporting capability• We need to get the processors to provide greater data on declines. Specifically RBS

– What is the right size, location, shift structure and make up of the support/dad organization to help reduce declines (1st deposits and existing players)– How fast can DAD ramp up (number people, have in place 24 hour telephone support, etc)– What support tools exist today? Support needs to provide an audit on the things that can be automated that will help drive efficiency. Support

Platform– What is the risk return tradeoff regarding un-indemnified ACH?– Should we consider building our own wallet?

• Expand payment methods and Geographies– We need alignment on country prioritization across org. This will drive payment method implementation.– Is support geared up to handle the additional payment activity from int’l countries? – What is the criteria to determine whether or not to provide localized support?

• Make cashier experience easy & fun– How do we rationalize the tradeoffs between flexibility and user experience regarding a secure web based cashier offering?– Will new gaming products we introduce easily fit into the current payment model?

• Payments as a marketing engine– In order to drive sales via support we will need to establish a data mining capability. The goal should be to create a flexible and easily accessible

Customer profile and targeting tool.• Low cost leader in payments

– Long term should we consider becoming a full fledged payment processor? If so what are the business and technical implications• Fastest Payouts

– How do we measure this? Time relative to competition, customer perception or some other metric?• Organization

– We will need to build up the staff to implement needed changes in Development, Marketing and Payments• Other

– For each of the development initiatives listed on page 7, 8 & 9 what are the implications to the Payment system, collectively defined as follows:• A. Client ; B. interface with the database; C. rules/routing table with processors; D. API and protocol integration with processor; and E. Server (backend) code

29

Throw away slides

30

Fastest Payouts in Industry

Proposed initiatives:

• Develop payout scoring system for players

• Automate the payout process. Create direct links to 3rd party verification entities

• Develop criteria to evaluate Payout capability

• Benchmark against peer group

• Create Payout goals

31

Payment Offering Processor When we’ll Launch Dependencies, needs and tradeoffs

Negotiation status

US

Canada

UK

4.

5.

7.

8.

• Evaluate processor and payment availability in the top 20 markets• Prioritize countries and processors• Work with development to determine roadmap• Negotiate deals.


32


Payment Offering Processor When we’ll Launch Dependencies, needs and tradeoffs

Negotiation status

8.

9.

10.

11.

12.

13.

14.

15.

16.

17.

18.

19.

20.

• Next 13

33

Payments KPI’sDeclines are high, however finally identifiable

Jul-05 Aug-05 Sep-05 Oct-05 Nov-05 Dec-05 Jan-06 Feb-06 Mar-06Deposit/Decline ActivityDeposit Attempts (Incidents)Deposit Attempts (Dollars)

Successful Deposits (incidents)Successful Deposits (Dollars)

Declines (Incidents)Declines (Dollars)

Rate of Declines - New RM player incidentsRate of Declines - Existing RM player incidents Total Rate of Declines - Incidents

Total number of saves as a percent of declines (Incidents)

Payment Services Activity (DAT + CST)Total number of incidents handledAverage Incidents per employee per dayAverage cost per incidence

Deposit Assistance Team (DAT) ActivityTotal number of incidents handled by DATAverage Incidents per DAT employee per dayAverage cost per DAT incidence

Cashier Specialist Team (CST) ActivityTotal number of incidents handled by Cashier Specialists Average Incidents per Cashier Specialists per dayAverage cost per CSD incidence

Other% of chargebacks

Fees as a percent of deposits

Fees as a percent of revenue

What steps do we need to take…..

We need to produce reports that were built

Documents

stareviewfirst8months