PowerPoint Presentation

Merchant Acquiringin the age of Digital Commerce

26-Feb-17Copyright 2016. All rights reserved.2

Global e-Commerce is Going thru the Roof!E-commerce$1.316 trillionworldwide 2014

China & USA are leaders 55% of global Internet retail sales

26-Feb-17Copyright 2016. All rights reserved.3 Providing Boundless OpportunitiesCross-border e-Commerce sales reached $300 billion 25% is global cross bordere-commerce

Growing in excess of 45% YoY

US, UK and Chinaare the most attractivee-commercecross-border destinations

Globalization of e-commerce presents a MASSIVE revenue opportunity for EVERYONE who can give MERCHANTS quick access to INTERNATIONAL markets

So How can PSPs maximize this opportunity despite PRESSURES from every direction?26-Feb-17Copyright 2016. All rights reserved.4

Globalization and the PSP

Merchants want it all. Now. 26-Feb-17Copyright 2016. All rights reserved.5Payment ServiceProvider

IncreasingMerchantDemand

PSPs must provide merchantswith innovation:Quality: reliable, secure platform; high conversion ratesCost: least-cost-routing, domestic processing, transparent pricingSources: cross-channel devicesMarkets: domestic, intra regional and inter regionalKnowledge: regional, compliance & legislationTools: billing, accounting, logistics, reconciliation, BI

26-Feb-17Copyright 2016. All rights reserved.6Back-Office is a NightmarePSPs are expected to handle

Multiple IntegrationsReportingSettlementReconciliation Multiple Legacy PlatformsFraud ServicesCustomer Service

Complex Reality of Going Global26-Feb-17Copyright 2016. All rights reserved.730 Countries

PSP50 AcquirerContracts50 BackendIntegrations35 Front-endIntegrations20 Types ofHardware

Front End(authorisation) IntegrationSupportand account management

Reportingharmonisation

On-boardingand KYC cost

Back Office(funding andsettlement)integration

45-150Kper acquirer6-10 weeks30-40Kper acquirerper year20-100Kper acquirerper year2-15Kper retailerper acquirer30-60 days350-500Kper acquirer6-12 monthsHIGH Up-Front Costs Multiple Acquirer Integrations26-Feb-17Copyright 2016. All rights reserved.15

Source: Consult Hyperion 2015

The iceberg shows different costs for an acquirer integration and the difference in the costs depends on the model of processing, efficiency etc.

So if a Retailer or a PSP wants to cover more than one market they have to integrate to multiple acquires.

Thus they need to multiply the costs on the iceberg by how many acquirers they need and it can run into seven digits in some cases. 8

New Entrants Flooding the Market26-Feb-17Copyright 2016. All rights reserved.9

POS TerminalsBillingAccountinge-Com Solution ProvidersBanksCardSchemesLogisticsPSPPayment Service Provider

PSPs Deliver Revenue & EBITDA Growth26-Feb-17Copyright 2016. All rights reserved.10Source: Innovalue, Payments universe historical operational metrics as of April 15th 2014

0%10%20%30%40%50%60%70%Revenue Growth CY12-13EBITDA margin CY12EBITDA margin CY13

9.8%10.0%22.1%10.1%11.4%19.2%28.9%9. 6%32.1%60.0%4.2%20.8%28.0%18. 6%30.0%61.5%Acceptance Processing PSP/ Online Payments Issuing / Prepaid Schemes

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but PSPs are Facing Dilemmas How to Maintain & Expand Profitability when competition is heating up?

How to go Global Quickly& Cost-Effectively?

How to respond to Merchant Demands without going broke?26-Feb-17Copyright 2016. All rights reserved.11

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Traditional Banks Less Relevant New entrants and smaller merchant acquirers steal merchants away from traditional bank acquirers

If a traditional acquirer can't deliver, PSPs will quickly find an acquirerthat can.

Simple as that.

26-Feb-17Copyright 2016. All rights reserved.12Source: ETA, Goldman Sachs Global Investment Research 2015

as they Begin Outsourcing Acquiring Services26-Feb-17Copyright 2016. All rights reserved.13Top 40 European traditional banks that provided inhouse acquiring shrank from 71% to 58%

Acquiring is non-core: aim to offer the service, but not to be the actual provider

Not interested in investment in product and platform capabilities

Europes leading traditional banks switch their customers to external partners that provide acquiring services

PSPs are moving away from traditional banks, towards partners whose core business is merchant acquiring

Source: Innovalue 2015

20102015By NumberOf BanksBy TotalAssetsIn-house Partnering Referral

I may not have the answer, but Ill find it,I may not have the time, but Ill make it.

26-Feb-17Copyright 2015. All rights reserved.3Client Advocacy

Thank You26-Feb-17Copyright 2016. All rights reserved.15

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