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From Concept to Reality !
Annual Global Payment Summit 2008UNISYS
(St.Paul-de-Vence)16 May 2008
NV EUROPEAN PAYMENT SOLUTIONS SA
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SEPA for cards: will it really be this ? ®
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Actual market players
Debit Cards(“pay now”)
PrepaidCards(“paybefore”)
EuropeItalySpainFranceGermanyTheNetherlands
Belgium
Credit Cards(“pay later”):
revolvingcredit cards
Credit Cards(“pay later”):chargedcards
EuropeEuropeEuropeFranceEuropeEuropeEurope
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Potential evolution ?...
Debit cards:imposedevolution ?!
Debit Cards(“pay now”)
PrepaidCards(“paybefore”)
EuropeItalySpainFranceGermanyTheNetherlands
Belgium
Credit Cards(“pay later”):
revolvingcredit cards
Credit Cards(“pay later”):chargedcards
EuropeEuropeEuropeFranceEuropeEuropeEurope
X X X X XX X X X XXX
X
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Strong price divergence in Europe...
Most expensive schemes attract most issuers (banks).However, there is no card payment business without ... payments,which are generated by the merchants: merchants have a huge leverage potential !
Actually, schemes are driven by issuing banks, not by retailers !
in the UK, 6 weeks after the migration of Switch to Maestro, there was a 67% increase ofthe cost/transaction...
(Mio €)
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Assumption: retailer with 100 Mio debit card transactions
* *: Maestro rate for SEPA as published on the MasterCard website until April 2007
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(1) Higher rates/cardtransaction imposed bybanks & associatedexisting payment schemes
(2) Important increase ofgeneral costs for themerchants, while they onlyhave small margins
(3) No other choice formerchants to recover thisnew costs by an increase oftheir products/services
(4) Finally, consumers willsupport the charge of theincreased benefits of banks& associated existingpayment schemes...
®... with unfair consequences !
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consumermerchant
“Do you also have the impression to be ripped off when customers pay with a payment card ?...”
Why are merchants sohesitant about cards ?Because of the highcost/transaction !!!
Dissatisfaction among merchants
IKEA : “Where’s the Ryanair of the payment sector ? ” Jan Molema, IKEA, Controllers Magazine 18.3.2007
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1. COST REDUCTION: Fast transaction speed(“time is money”: no queues at the check-outs)
What do merchants really want regarding payment cards ?
2. COST REDUCTION: Guaranteed payment (no risk nor collecting problems)
3. COST SAVINGS: Lower transaction cost (no unreasonable fees vs cost of cash)
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The Pan-European market is getting bigger each year :
o Europe : 23 billion debit card transactions/year (estimates 2007)
o Annual growth : expected up to 2012 : ± 9%/year(source : World Payment Report 2007;due to increased and stringent control on credit, debit transactions replace alsomore and more credit transactions)
Electronic payments evolution
Electronic payments are not yet the major payment methodin Europe, but increase continuously : favourable market potential.
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- Most Western European payments are still cash :France 60% (+ cheques)
Germany 78%
- Even more in Central Europe & Eastern Europe.
- EC (European Commission) estimates payments costs are2-3% of GDP, of which two thirds are related to cash;
> 65% of the costs of cash are supported by the banks.
Electronic payments are a driver in the efforts of banksto reduce the costs of cash, and can generate considerable “savings” for them.
“War on cash”
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• Merchants are convinced of the necessity of a cheaper alternative scheme• Market is opening up due to the new European rules (PSD + SEPA)• European authorities favour the emergence of an European Pan-European payment scheme• EC-DG Comp has considered the MasterCard cross border interchange fee system as illegal• Electronic payments are a driver in the efforts of banks to reduce the important costs of cash• European market still essentially cash but electronic payments increase continuously• Technology is no longer an issue• Banks & retailers to decide in the coming months which new solutions they will implement
PayFair arrives with a perfect alternative solution, at a perfect moment !
®Window of opportunity !
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The EuropeanFair Solution !!
What PayFair wants to become
1. “The” European payment scheme, 2. recognized as “the Ryanair of the payment schemes”.
• Governance:– Balanced between banks and merchants
• Offering:– Card issuer can be different from the Current Account Bank– Accessible to Merchants:
• Issuing and branding• Loyalty
– Differentiated payment services• On-line to bank authorisation with guarantee• Merchant authorisation without guarantee (optional insurance available)
• Pricing:– Transparent, low cost, fixed rate/transaction, in line with best ‘legacy’
schemes (no ‘interchange’ fees !)• Standards:
– SEPA Cards Framework compatible– High level security (CHIP & PIN, ...)
– Ability for new technologies (contactless, M- & E-payments, ...)
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Business Model Principles
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payment guarantee bybank when on-linepayment authorization
on-line or off-linepayment authorization:merchant’s choice
payfair issued byretailers and bybanks
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payment guarantee bybank when on-linepayment authorization
on-line or off-linepayment authorization:merchant’s choice
payfair issued byretailers on PLC2
payment risk for merchant,(but optional paymentguarantee insurance)
off-linepayment authorization
payfair issued byretailers on PLC1
Deployment plan: a 3 stage approach
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PayFair Merchants : the win/win combination !
Added value for the merchants:a “merchant oriented” payment scheme
PayFair provides guaranteed & instant payment to the merchant (whenonline) and gives total control on payment costs to the retailer (choicebetween online/off-line)
Productivity gain : combining loyalty + payment functions on same card(see also project “PAYFAIR & SAVE”)
PayFair is a “disruptive” innovation : the key role of the merchants isacknowledged for the first time (open governance)
Advantages for marketing purposes: early adopters will enhance loyalty /new marketing tool
The new scheme will have a low but fair cost/transaction ratio Advantages of cash displacement (cheaper, less risk,...)
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A new scheme promoted by merchants: more rewards for the consumer Universal acceptance: in all stores + public commodities all over Europe Cheaper solution (no price inflation) Combines loyalty & payment : less queues at the checkouts and less
cards in the wallet Debit > Credit More security Lower need of cash (no hassle of coins): no more queuing at ATM’s
Not another extra card for the consumer but a real alternative paymentfeature which also provides them with a genuine benefit, for allpayments, anywhere, anytime !
PayFair Consumers : the win/win combination!
Added value for the consumers: a “consumer friendly” payment scheme
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As debit card turns into a commodity, no longer a core salesproduct for banks outsourcing is an opportunity
Innovative banks will take the opportunity to answer paymentauthorizations initiated from “non- banks” at reasonable cost
PayFair offers the banks the choice for a different or additionalpayment scheme, which gives them more bargaining power andincreased independence with respect to the two dominant marketplayers
The scheme is preferred by the merchants (important bank customers)
PayFair is the perfect answer to a requirement set by the EU &ECB for an alternative European payment scheme
Added value for the banks: a real opportunity !
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PayFair, with the support of the merchants, will give aboost towards electronic payments, away from cash
Banks might see a short term reduction of revenues dueto the absence of any ‘ad valorem’ fee for the PayFairscheme, but … this will be more than compensated bythe surge in electronic payments and as a result the cashdisplacement
Fee/trx but total # trx Total fee for the banks Operational costs Interest revenue
PayFair Banks : the win/win combination !
What’s in for the banks ?
(trx= transaction)
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Already formal support from important retailers/petrolcompany’s + federations and consumer organisations
Serious interest from major European banks
Welcomed by European authorities (ECB & EC)
Support & Interest
Already great support from important retailers and petrolcompany’s, and more “majors” announced to “join the club”.
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Funding: under control, usual formalities in final process Management Team: experienced and complementary
Ex Carrefour, MasterCard, FDR, Banksys, Fortis, ICT, Visa, Capital One From B, NL, D, F,...
Rules & Regulations: ready, review ongoing Pilots: ready to start quickly
Different retailers OK to cooperate; goal : Q4/2008 Processing in cooperation with well known operators
RFI: Different offers benchmarked RFP: responses actually analyzed
PayFair to be launched first in France, Germany, Benelux start in Q1/2009, to be followed by Spain & Italy (goal: cover entire SEPA)
Roll-out Planning
Technical construction and operations/pilot can start in very nearfuture (Q3/2008), to be “ready to market” from Q1/2009 onwards.
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Jaap M. Duhne
Account 210-123456-89
Client 000000001 3515Card 1234 5678 9012 3456 0 N02Expires end 12/10
Front sideSome “samples” of potential lay-outs
Jaap M. Duhne310 1234567 89R 5802 F02/11
Card 1234 5678 9012 3456 7
Jaap M. Duhne
Account 210-123456-89
Client 000000001 3515Card 1234 5678 9012 3456 0N02Expires end 12/10
Jaap M. DuhneIBAN BE66 2100 1234 5678R 5802 F 12/11
Card 1234 5678 9012 3456 7
EasyPACK
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ID 1234567890
PACKEasy
Fortis Bank nv / Fortis Banque sa GEMALTO
Copyright
Back side lay-out ®
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• Critical Mass– Acceptance coverage: starting with large Retailers & Petroleum companies– Issuing coverage: starting with major PLC, issuing by banks to follow quickly
• Time: minimal impact on stakeholders - Using existing infrastructure & standards whenever possible
(processors, retailers and banks)
• Support of stakeholders & authorities- Consumer organisations
- Merchants- European & national authorities- Banks
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Key Success Factors
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Thank you for your attention, interest and support !EUROPEAN PAYMENT SOLUTIONS NV-SAAtrium Park, Koloniënstraat 11, 1000 Brusselswww.payfair.euDominique [email protected]: +32 475 61 61 43
Q & A
1234 5678 9012 3456 789 0 Europa von Benelux ABCD EFGH IJKLM EXP: 12-2012
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