sharing insights a new way of thinking customers want From payments to value creation Payments 3.0 Laura Cioli, CartaSi Equens magazine 05 June 2014

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1 sharing insights Equens magazine 05 June 2014 Payments 3.0 a new way of thinking Laura Cioli, CartaSi customers want convenience omni-channel From payments to value creation

2 Editorial Payments 3.0: shaping the future In this issue of EQ Magazine, we would like to take you on a journey through time. What does the future hold for payments? What means of payment will we use to pay for our shopping in 2020? And what does this mean for your and our role in the payments industry? In short, what will Payments 3.0 have to offer? One thing we know for sure is that the future calls for new ideas, a good deal of nerve, and letting go. This is the only way we can establish new points of departure and develop a new view of payments. For Equens, Payments 3.0 means looking beyond the traditional role of a transaction processor. We will, of course, continue to process transactions in a secure and reliable way, but we want to take a broader view. In addition to future developments and the changing needs of banks, we are considering the needs of consumers and retailers. Payments 3.0 calls for empathy: thinking along with the client about matters such as convenience and ease of payment Contents 4 Payments 3.0: making the transition 7 Innovative smart payment platform Challenges are ahead in the payments industry. This industry needs to change dramatically. 8 Who is the winner? Fifty years of plastic 11 One stop shop for retailers A perfect example of payments Will SEPA be the driver of innovation? EQ Magazine takes us on a journey to the new markets of e-commerce and m-commerce. Along the way, we visit Sweden, whose real-time payment system is a good example of how to meet the needs of consumers and retailers. Additionally, we explore related fields and show you how the payments industry can make a valuable contribution to the development of e-identity. Our aim is to think out of the box and explore a world in which banks will use an open system whose account information is also available to other parties Innovations are only succesful when customers benefit 19 From payments to value creation 22 E-ID: New opportunities for all The Netherlands opts for a multi-device strategy 26 Is there a future for SDD B2B? Mandate management In this issue of EQ Magazine, we abandon all entrenched ideas. We hope to inspire you to view the world from an open perspective, so that you too can help shape the future of payments. Equens SE Marketing & Communications 4 colophon Why Banks should embrace an open future 30 How will we do our shopping in 2020? What should businesses do to keep up with developments in e- and m-commerce between now and Equens All rights reserved. Neither this publication nor any part of it may be reproduced, stored in a retrieval system, or transmitted in any form by any means, electronic, mechanical, photocopying, recording or otherwise, without prior permission of Equens. EQ Management Equens SE Esmée Burger Marita van Doorn Stephanie van Gageldonk Annemieke Lambregts Editors SPJ Financiële Communicatie Siebrand van der Ploeg Yvette Sprado Communicatie Translation TechText bv Concept and design Caplan Fridie van Loon Myrthe Bergboer Photography Jurriaan Huting Janita Sassen Illustrations Myrthe Bergboer istockphoto Cover photo Laura Cioli - Cartasi The secret to sustained success as a service provider is to understand both the manifest and the hidden needs of the new world. 32 One million users and still counting real-time payments in Sweden 34 Key figures Equens 2 3

3 by Michael Steinbach, CEO of Equens SE Payments 3.0: Making the transition The fast growth of e- and m-commerce is causing a fundamental change in the payments industry. Because the end-user is now the primary focus, payment transactions in themselves are becoming a secondary priority. Convenience and ease-of-use are the ultimate goal. This has led to a change in the traditional business model for the payments industry, where it is predominantly banks who offer payment services to consumers and merchants, and where there is a direct, one-on-one, bank2client relationship. Disintermediation lies in ambush. To meet this challenge, the traditional payments industry needs to change fundamentally. This implies that leading traditional service providers like Equens need to start thinking differently about innovation in order to turn threats into opportunities. PSPs have been breaking up the traditional banking relationships For the time being, the situation in the B2B segment the wholesale business is looking fairly stable. Here, the one-on-one relationships between corporate clients and banks remain strong. Naturally, however, there is increasing competition between banks, who are striving to enhance their liquidity and cash management service offerings. Although SEPA is a key factor in this increased competition between banks in the wholesale business, to date it has not led to any fundamental innovations or widespread reconsideration of the number of banking relationships. Corporates have so far focused predominantly on compliance, but changes can be expected in the near future. Meanwhile, the ongoing standardisation will lead to further centralisation of financial activities and a reduction in the number of banking relationships. Shopping via any channel The main challenge lies in the B2C segment, the retail business. Here, use of mobile devices integrating shopping, loyalty, supply chains and payment functionality is clearly on the rise. Shopping can be done 24/7, via any channel. Thus far, the traditional service providers, namely the banks, have played a relatively modest role in e- and m-payments, thereby exposing themselves to the risk of disintermediation. Meanwhile, payment service providers (PSPs) like Adyen, Amazon Payments, ebay s PayPal, Ingenico s Ogone and Deutsche Telekom s ClickandBuy have shot up like mushrooms and are expanding their client base rapidly. In doing so, they Michael Steinbach 5

4 Consumers expect their payments to be processed both securely and reliably have been breaking up the traditional direct banking relationships and offering their services directly to the banks clients: consumers and merchants. Unburdened by extensive legacy, new players in this virtual world can afford to apply completely new ways of thinking to innovations. This trend is reinforced by regulatory developments like the upcoming legal requirement for access to account, under which banks will have to deliver specific client information to third parties such as PSPs, making the service offering of PSPs even more attractive. Sensitivity of security issues PSPs are well aware of the fact that payments in themselves have become a second priority, and that offering value is now imperative. In terms of where to shop and make their purchases, virtual consumers don t look for a particular payment scheme; they pick the shop, web portal or website which is the most convenient and easy to use. The payment itself is made at the end of the process, and consumers expect their payments to be processed both securely and reliably at no extra cost! Accordingly, this needs to be a standard part of the service offering. The sensitivity of the security issue always emerges in the event of attempted fraud, when it immediately becomes a major news, publically known within seconds via social media. This is a strong point of departure for the traditional service providers banks and payment processors alike who securely and reliably process billions of transactions. After all, notwithstanding the various criticisms, banks are widely considered to be the most reliable parties when it comes to money. 3.0 way of thinking The secret to sustained success as a service provider which is what a bank is, after all is to understand both the manifest and the hidden needs of the new world. Demand for convenience and ease-of-use, and the need for a secure and reliable environment, have changed how banks and Equens do their business, making the transition from the traditional to the new, virtual world. At Equens, we want to continue to fulfil our supportive role in the payments value chain, and thereby maintain our professional way of working. We also want to broaden our scope to meet the demands of the virtual world and, in addition to the more general side of our processing activities, investigate areas not directly or solely related to payments. For instance, we are already actively involved in non-payment activities like e-identity. In our role as a processor and integrator, we are open to new ideas and ready to collaborate on initiatives. Accordingly, our new Payments 3.0 way of thinking covers both the payments and the non-payments value chain. At the same time, as an established card and payment processor, we are still part of the traditional trusted, well-regulated financial infrastructure. ICBPI launches Innovative Smart Payment platform In the midst of the grace period between the official SEPA end date of 1 February and the real end date of 1 August, the migration of SEPA Credit Transfers in Italy is 95% complete, while SEPA Direct Debits are at around 55%. Nevertheless, it has been commonly agreed in the Italian banking community that the migration of SDDs will also be completed by the end of May, asserts Domenico Santececca, Vice Chief Executive Officer of ICBPI. To support this view, and in line with its innovation strategy, ICBPI has implemented the Smart Payment initiative, a new SEPA (SCT and SDD) payment platform. In early May, the situation in Italy was not very different from the rest of Europe, although it was slightly ahead with SCTs and lagging behind with SDDs. At the European level, the migration of SCTs was 92% complete, whereas SDDs were at approximately 72%. However, ICBPI is pulling out all the stops to ensure a switch from domestic formats to SEPA formats and, in doing so, ensure Italian compliance by 1 August. We asked Domenico Santececca about the progress being made. Where does ICBPI stand three months after the official end date, and what innovative services are you offering? ICBPI already defined its SEPA strategies in 2012, and we have been focusing on our organisation and operations in order to limit the impact of the migration and ensure a high value proposition. We are Direct Bank For the Banks participating directly in the ACH that exclusively use the ICBPI technical infrastructure to securely send and receive SEPA messages to/from the CSM and the tracing and resending of the files if the latter are not received from the CSM or the Client Banks. doing this in four ways: firstly, by comprehensively managing clearing and settlement components; secondly, by offering greater convenience than our competitors; thirdly, by offering lower rates, as we have maintained our existing pricing despite offering a considerably enriched product package; and last but not least, we have added innovative features by implementing the Smart Payment initiative, a new SEPA (SCT and SDD) payment platform. With this platform, we are able to offer our clients full SEPA reachability and innovative features for value-added services and lower migration costs. Could you explain a little more about these specific features? Sure. Our new Smart Payment platform offers several connectivity, settlement and VAS features that will make our clients lives easier. Firstly, it offers the connectivity service for client banks The ICBPI Smart Payment platform Intermediation service ICBPI Access system Gateway Direct Bank with ICBPI access system For the Banks participating directly in the CSM that, in addition to using the ICBPI technical infrastructure to send/receive SEPA messages, make use of services to completely process SEPA messages in terms of normalisation, diagnostics, reachability checks, message tracing and transaction warehousing. participating directly in the CSM, like ACH ICBPI/ICCREA and EBA, for example. The second feature is the connectivity and settlement service for client banks participating indirectly in the CSM. Thirdly, it offers value-added services, such as Tracking, Treasury Positioning, File Resubmission and Reconciliation Reports. What role did Equens play in implementing the Smart Payment platform? Taking into consideration its strategic role as Europe s largest payment processor, Equens played a key role in the aforementioned projects. SEPA also helped strengthen the partnership with ICBPI that was initiated in 2008 with the aim of creating synergies between two operators with a high level of expertise in domestic and international payment services and systems. Indirect Bank of ICBPI For the Banks recognised by the CSM as Indirect Banks of ICBPI that, in addition to using the services already provided by the Direct Bank service, also make use of the ICBPI for the daily settlement of transactions. 6 7

5 1887 From idea to plastic card ( ) Author Edward Bellamy uses the term credit card in his book Looking Backward (1887). Fifty years of plastic Who is the winner? John Biggins, a Brooklyn banker, introduces the first bank credit card under the name Charg-It. Several initiatives in the United States; local petrol stations start using cards that could be considered a precursor to the credit card. Diners Club introduces a card accepted by several retail outlets and companies, the so-called closed loop system. American Express introduces a card that is accepted worldwide. In 1961, Diners Club introduced the first plastic credit card. This signalled a revolution in the world of payments. In the United States, credit cards were and have remained an enormous success. Although initially hesitant, Europe eventually embraced the card as well. The introduction of the debit card meant serious competition for the credit card. Fifty years of plastic. Who is the winner? We asked Andy Makkinje, Executive Adviser to the Board of Equens. Credit card prototype up for auction at Sotheby s In December 2012, Sotheby s put a unique piece of financial history up for auction: a well-used cardboard credit card. This item had been the prototype of the magnetic strip credit card, and had been in the possession of Jerome Svigals, head of the IBM research teams that created the card, for fifty years. Lower processing costs and less risk have always been the main drivers for innovation in payments. Giro collection forms, authorisations and standing orders were the first secure and efficient alternatives to cash payments. Pointof-sale payments also changed, first in the sixties, with credit cards, and later with the introduction of the debit card. Credit card glamour In 1961, the first plastic credit card was introduced in the market. Initially, it was mostly something for the rich and famous a glamour product out of reach for most people. This changed in the seventies, when ordinary people also began carrying credit cards, if only for use during holidays. However, the number of credit card transactions in Europe remained limited. What s more, now that debit cards offer an increasing range of options such as paying online, which was the major advantage of a credit card they have also become a means of payment for more exclusive purchases. Makkinje: Credit cards are used very differently in Europe and the United States. In America, credit cards are an important means of borrowing money. This is not the case in Europe, although credit card usage does differ between European countries. For instance, in Italy credit cards are used more than in the Netherlands and Germany. Now that European legislation stipulates that banks may charge only 0.3% for a credit card payment, instead of the previous 1%, the product is becoming less attractive for banks in Europe. The expectation is that they will increasingly focus on further developing debit cards. There is still a market for credit card payments, especially for people who travel a lot. But in general, credit card usage is decreasing IBM is the first to experiment with a credit card with a magnetic strip. Diners Club introduces the first plastic credit card. The down-to-earth debit card The debit card has less of a history. It was introduced after the credit card, the first pilot programme being initiated by the Bank of Delaware in the United States in At that time, we were already familiar with plastic cards, so that was nothing new. However, consumers initially did not embrace debit cards, especially where point-ofsale payments were concerned. In the Netherlands, it was not until one of the large supermarket chains and a fuel company began offering debit card payments at their points of sale that consumers truly adopted them. So the advent of debit cards was not exactly a revolution. In the meantime, however, a silent revolution was taking 8 9

6 place behind the scenes, because as soon as consumers started paying by debit card en masse, things started happening fast. According to Andy Makkinje, debit cards are the future: Credit cards were always something of a niche product in the payments market. In Europe, the debit card has very much taken the lead. Europeans are practical people: they want to know exactly how much money they have on their account at all times. We are not used to managing credit accounts. I don t see the debit card disappearing in the next few decennia instead, I think there will be many more new possibilities. Contactless payments are becoming increasingly popular, and integration with mobile telephones is just around the corner. Also, functionality for refunding money, called Refund +, has recently been introduced in the Netherlands. In 2020, I think the use of credit cards will keep declining, whereas the use of debit cards will increase. In Europe, the debit card is the winner and it always has been. Fighting the black economy Industries where undeclared funds were common were not very pleased with the advent of the debit card. But when consumers became accustomed to being able to pay for almost everything with their debit cards, these industries had to move with the times. In this way, the debit card has played an important role in fighting the black economy. Karl Marx looks down on MasterCard In the city of Chemnitz, located in the former East Germany, customers of one bank could choose an image to be printed on the credit card. Even in 2012, a large portion of the city s population chose an image of Karl Marx. His photo is positioned in such a way that he appears to be looking at the MasterCard logo. Chemnitz has the reputation of being a socialist city, whose center boasts a seven-metre-high bust of Marx. One-stop shop for retailers A perfect example of payments 3.0 Retailers are operating in multiple channels: in the domestic and foreign markets, e-commerce and m-commerce, debit and credit. What they need is a one-stop shop where all payment flows meet. What they need is Payments 3.0. Huib Klarenbeek, Managing Director of PaySquare SE, shares his view of the changing payments market that is the point of departure for retailers. Still thinking in terms of systems PaySquare sees opportunities, but thinks it is important to focus on the differences. The keyword should be integration rather than standardisation. This is a fresh approach in a market that thinks standardisation is the solution for everything. Huib thinks it is a logical step in client orientation. The focus should not be on the system, but on the client s needs. Huib Klarenbeek: payment flows from the various sales channels into a single summary. This is what client orientation is about. Retailers want to manage payment flows Consumers want to be able to shop 24/7, in shops and online, using any available means of payment. Whilst consumers notice little difference, the differences for retailers are considerable. Huib Klarenbeek: We need to think from the perspective of the client. Consumers want a simplification of the current multitude of means of payment. White-label acquiring for bank An approach focused on integration is also beneficial for banks. Thanks to the integration of montrada, PaySquare is able to offer banks white-label acquiring for a broader range of cards. The merger with montrada has broadened an already highly extensive range of credit card licences. We are still accustomed to thinking in terms of the products and services of the payments industry, for example the difference between payments and cards. I believe that, from the perspective of the user the consumer these differences will ultimately disappear. We need to think from the perspective of the client, which is not going to be easy. Consumers want a simplification of the current multitude of means of payment. Retailers want a system that merges For each flow, retailers have to manage a separate channel, which is complicated. We think it is important for retailers to be able to control all of these channels, from both a distribution and payments perspective. Reconciliation will bring the two together. Ideally, all flows should be merged by Equens. That is the situation we are aiming for, but we have not yet achieved it. We should keep this in mind while we are developing our e-commerce and m-commerce service offering. For businesses operating in more than one country, the situation is even more complex. The differences between countries are considerable. We need to be aware that each country has its own payment systems, its own payment preferences, and its own processing methods. We cannot simply impose a standard. This is another reason why integration of payment flows is the most client-oriented solution

7 Will SEPA be the driver for innovation? As an expert payment processing partner, Equens is committed to understanding the market and the needs of our clients and their customers. This led to our initiative to investigate the needs and expectations of the corporate customers of our bank clients. To ensure objectivity and benefit from external expertise, Equens teamed up with Ernst & Young (EY). Equens and EY collected input from European corporates in order to discuss their challenges, expectations and experiences in connection with the SEPA migration. The objective was to gain an understanding of their future needs and expectations, and share this information with the outside world. The research was performed by means of an online survey, followed by qualitative interviews with several European corporates. This article presents the preliminary findings from the survey and interviews. Standardised reconciliation information Businesses require standardised messages in which invoicing data can be integrated for the purpose of automated reconciliation. The SEPA XML standard was introduced for this purpose, but the differences between the domestic versions of XML are stalling development. (E-)mandate management Both corporates and governments require an effective mandate management system in order to be able to process SDDs as efficiently as possible, preferably STP (straight-through processing). This requires mandate information to enter the payment chain at the earliest possible stage. For example, mandates could be made available to all stakeholders electronically on a central hosting system. E-invoicing Better use of SEPA standards may give e-invoicing a boost. The differences between the many, usually small, providers in the various countries is slowing down e-invoicing initiatives. Real-time payments For instant services such as the topping up of prepaid mobile contracts, corporate real-time payments will lead to better service and lower costs. Depending on requirements, several implementation options are possible, such as notification only, payment guarantees by means of clearing, or immediate liquidity availability through settlement. What has been achieved so far As the SEPA deadline is approaching, it is time to assess where we stand and what has been achieved so far. The promises of SEPA to corporates were clear: to increase competition between banks, leading to lower costs and higher efficiency; to simplify administrative processes and systems; and to pay throughout Europe with less banks and bank accounts. Unfortunately, these promises have not yet been fulfilled. To most companies, the implementation of SEPA may have appeared primarily compliance-driven. Only a few large international enterprises considered it a step in the right direction, towards centralised and standardised processes a transition they had already started making. They, too, have yet to fully benefit from the advantages of SEPA. Improving the payments channel If the promises of SEPA towards corporates are to be fulfilled, a number of improvements will have to be made. The point of departure for this is better standardisation or, where this is lacking, the integration of the different interpretations of the SEPA standard that currently coexist. Then, through the introduction of a number of additional services, SEPA s promises can gradually become reality. The fact that SEPA has failed at this point may be the biggest single hindrance to innovative breakthroughs. Furthermore, businesses require innovation because it is a prerequisite for the development of new, widely available services. Several integrators now specialise in bridging the gap between the different standards. In doing so, they are facilitating the development of comprehensive solutions for corporates and their clients. A few obvious solutions are listed below: When will SEPA promises for corporates be fulfilled? not fulfilled fulfilled What does it take to fulfill or even exceed them? Pay throughout Europe with less banks and bank accounts Simplified administrative processes and systems Competition leads to lower costs and higher efficiency Comply 2. Improve 3. Benefit Project control No consolidation of accounts Limited standardization SDD brings new challenges No innovations Standard reconciliation E-mandates Multi stakeholder mandate management E-invoicing Real time payments Payment supports corporate s proposition / customer profile Risk management /Supply chain financing Omni-payments Bank as trusted partner 12 13

8 Omni-channel Merchants are faced with the challenge of keeping payments both manageable and user-friendly, in physical as well as virtual shops that are open 24/7, where customers will want to order, collect, return and pay for items in all kinds of ways. An omni-channel solution, or single transparent payment channel, provides merchants with a clear overview and efficient administrative options. In addition, 24/7 service provision also for payments is guaranteed. Benefits: finance meets business Once SEPA s promises have been fulfilled and new, widely available services have been introduced, we can all start to truly benefit. B2C: Enhancing the retail customer s experience There are many opportunities to create value in the payment chain with marketing support. Some large retailers have been using payment data to enhance their relationship with their customers for some time. In this case, however, it s all about the relationship between individual merchants and their customers. Until now, privacy concerns have been the main impediment to such use of payment data from multiple sources. The revised Payment Services Directive (PSD2) contains proposals for enabling access to payment accounts. Together with the right privacy legislation, this could clear the way for the development of apps that facilitate direct communication between merchants and consumers. (See also the article From payments to value creation elsewhere in this edition of EQ Magazine). B2B: Risk management and supply chain financing In the B2B market, more efficient use of payment data can improve the relationship between businesses and between businesses and their banks. Currently, a bank only becomes aware of payment transaction when the originator submits it for processing. If parties were to agree to share their payment data at an earlier stage, this would create possibilities for improved risk management and supply chain financing/working capital financing. Who will provide true added value? With such innovations, payments will become more than merely a commodity whose price needs to be as low as possible. The current stage will determine who will ultimately be able to offer true added value: the integrators (PSPs, service agencies) or the established financial parties (banking service providers and their shared services partners, such as payment processors). More details and arguments to support these visions of the future will be provided in a soonto-be-published whitepaper by Equens and EY. This paper will also contain the results of a series of interviews with European corporates

9 Laura Cioli, Chief Executive Officer at CartaSi: Innovations are only successful when customers benefit I think that developing services that are technologically at the forefront is important, but it is absolutely necessary that these services offer customers real benefits, says Laura Cioli, Chief Executive Officer at CartaSi, summarising CartaSi s innovation philosophy. In relation to electronic payments, these benefits are convenience and the availability of tools that support the interaction between the consumer and the merchant and/or bank. Secure transactions are just a sine qua non. Mobile payments are no longer an experiment, but a widespread reality Innovation philosophy? When we talk about the future, we never have complete certainty. At CartaSi, we therefore have to be open and willing to experiment in areas where our stakeholders expect us to. At the moment, it is important for us to operate in the channels that are most popular with our customers, and where technology offers new opportunities. In this sense, innovations linked to mobile phones are particularly relevant for us. In Italy, more than 20 million of the approximately 50 million mobile phones are smartphones. Applying technology to such a widespread device makes it possible to make new payment methods available to a large number of people, and offer them tools that facilitate transactions that change shopping experiences. Mobile payments are no longer an experiment, but a widespread reality. Promising areas for innovation? Mobile phones and the web are the two channels that people expect innovative solutions from. When it comes to payments, the web offers many opportunities for new services. I am not only talking about e-commerce or smart commerce, which are definitely interesting areas where we see opportunities for ourselves. At CartaSi, we are also keen on developing web-based services our cardholders and merchants can benefit from, because Laura Cioli 17

10 these new services enhance convenience in daily life. Take consulting your card account, tracking your recent transactions, setting up your bank statements online, and recharging your mobile, for example all services that make life easier and are changing consumer habits. Developing an omni-channel proposition From payments to value creation CartaSi is part of the Gruppo ICBPI, and the Italian market leader in card services. Annually, the company processes more than 2 billion card transactions. It has 13 million credit cards (plus prepaid cards) and 29 million debit cards in circulation, and is connected to 600,000 merchants. In addition, CartaSi supports its client banks with products and services that enable them to do business via innovative channels like e-commerce, NFC, and mobile and contactless payments. Products and services? We are investing in payments via smartphones. In this area, we have already developed several services with leading telecommunications companies; others will be introduced in the future. We are also focusing on the web channel, which has already enabled us to offer the services listed above. In the next few months, we will make considerable investments with the aim of offering webbased payment solutions. Another product we believe in is the mobile POS: this is a device that, thanks to wireless connectivity, can be connected to a smartphone, and thus becomes a true and proper POS, capable of accepting payments. This is a useful service for the self-employed, and for people who manage small mobile enterprises, like doctors, craftsmen and street vendors. We are also investing in contactless solutions, because we believe they are a convenient and secure alternative for cash. For us, the social networks are indispensable in keeping us close to our customers. How to live innovation? Innovation isn t really possible if you are not willing to employ a new approach in your organisation. That s why we live innovation in a positive way on a daily basis, above all positioning ourselves as true and proper partners of our customers. Innovation also means change. It is therefore imperative that we re-examine choices we made in the past. Naturally, we also need to experiment with the most promising development, with an attitude of wanting to learn from our mistakes. We also try to distinguish ourselves from our competitors in the way we communicate with our stakeholders. The goal we have set for ourselves is to through innovation position ourselves as a system brand, as the Italian payments specialist and the leading player in making Italy a smart country. We now also have an additional tool to help us achieve this goal: social media. CartaSi only recently established itself on Facebook, LinkedIn and Twitter. This allows us to expand our ability to communicate with card holders, tradespeople, banks and the business community, and utilise the assets that make us stand out from the crowd. Retailers nowadays have to manage a complex ecosystem. Customers buy in their shop, or online, or via the call center. They collect their goods themselves, or have them delivered at home. After that, they might want to return an item to the shop and do some more shopping there. Because of the multiple touchpoints involved, gathering the necessary information to create a proper overview of the customers, their behaviour and preferences is no easy task. Many years ago, a shopkeeper would actually know all of their customers, but in today s mass economy of self-service supermarkets and online stores this is impossible. Technology for connecting the data from the physical and the virtual world can be helpful, but it remains a difficult task with which retailers could use some help. For this reason, Equens is developing an omni-channel solution that provides added value to retailers, enabling them to extend their offering to cater to a wider range of consumers, enhance the customer experience and, in doing so, grow their business. We re not only thinking about payments, but also about data and value, says Mike Jones, financial innovations expert and adviser to Equens Board of Directors. What we are about to start delivering to retailers will help them to interact differently with their customers and assist them in managing their business. The retail sector is very much aware of the fact that consumers are at the heart of the ecosystem, and many payment service providers (PSPs) with a major digital presence are now assessing how to wrap the consumer experience around this. They are changing the way payments are used and very close to becoming the primary innovative force in this domain. It s therefore only logical that Equens should want to position itself among them. Draw customers back to the store We want to come up with a solution that works in the virtual world, but also very much in the physical world, adds Tom Nijenhuis, Head of Strategy & Corporate Development at Equens. Something that hasn t been created before. In the virtual domain, we have seen PSPs very successfully claim a role for themselves in e- and m-commerce. This is creating demand for omni-channel solutions. PSPs are utilising their strong virtual position to achieve this, but are facing competition from parties that are physically strongly positioned. Equens already has a strong position in the physical world, but we now need to make the omni-channel step. Obviously, a retailer needs to be able to make payments securely, but we are also able to provide them with other functionalities that will help 18 19

11 them draw their customers back to their store. We want to strengthen our innovative capabilities by partnering with people who are already successfully deploying the technology that is used in the virtual world. We won t be a first mover, but a close follower, leveraging on other peoples experiences and mistakes. We re not only thinking about payments, but also about data and value Sensitive about the use of data Our solution will help retailers to develop a better understanding of their customers, but without frightening their customers with a big-brother phantom, stresses Jones. Being a European company and knowing how sensitive our home markets are about the use of data, we understand that this is a very fine line. Our proposition will drive value as a capability that we extend to the retail sector. We can add value as a processor and a payments company, in the name of the bank or on our own. Enhancing customer experience Compared to large retailers with their legacy, it s interesting to see that smaller retailers and other shopkeepers are in a more advantageous position because adopting smartphone or tablet-based technology is much easier for them, Jones observes. Let me give an example: Click n collect. It s four o clock on a Saturday afternoon, and you have planned to go to a football match. Suddenly, the weather forecast worsens and you have no raincoat. But there is a shop where you know you can find one. Via your smartphone, you look up whether the product is available in your size. It is! You then place the order, make the payment, get the confirmation, confirm the collection time and send your photo with it. At the store, the raincoat is picked and packed, your photo and name are linked with the order and shown to the staff. Ten minutes before closing time, you run in and are greeted: Hello, Mike. Here s your jacket! You enjoy a rich user experience, thanks to integrated channels and good stock control, which even a small retailer can deliver. Another example: a restaurant has built the capability for its guests to make a reservation online. You can send information concerning how many people you will be coming with, at what time, and where you would like to sit. Again, it enables you to send your photo with the reservation. In addition, the restaurateur has stored some information from your previous visits, and knows you have a nut allergy. They also know that you haven t been in for some time, so they wonder whether you were satisfied. Whatever the situation, they have every reason to give you a special experience this time! Changing paradigm Jones: These are just two examples of the changing paradigm of interaction between retailers and customers, adding value on both sides. Also, nobody feels that data is being abused. On the one hand, this data has nothing to do with payments, but on the other, it has everything to do with payments, because payments are at the core of all this. Nobody wants to pay for payments, but every retailer has budgets for maintaining customer relationships and marketing. Nijenhuis: If you take this story to a CFO, he will realise this is going to improve his bottom line. So our proposition is a real value proposition! 20 Tom Nijenhuis & Mike Jones

12 The Netherlands opts for a multi-device strategy eid: new opportunities for all The Dutch government intends to replace the current digital login system, DigiD, with a new system: eid. This comes as a result of DigiD s failure to meet the government s high security requirements. Additionally, the government has a preference for a multi-device strategy, whereby citizens can log in to government websites using a variety of devices, such as their mobile phone, debit card or a special login card. This way, logging in to a government website is just as easy as logging in to a web shop or, for instance, the website of an insurer or sports club. Equens sees opportunities in this area, both at the domestic and European level, not only for consumers, but also for suppliers of online services and the government itself, because this subject, which is currently in the headlines in the Netherlands, is also an issue in other European countries. Nobody wants yet another ID card in their wallet Continued digitisation of government services Ronald Plasterk, Minister of the Interior and Kingdom Relations of the Netherlands, announced last year that the cabinet intends to have an operational electronic identity system by 2015, and that national government bodies will be fully digital by The minister advocates digital government services for matters such as applications for permits, citizen involvement, and communication concerning tax, benefits and allowances. Handling these matters digitally will create annual savings of between 300 and 350 million euros. Whilst this is a lot of money, successful implementation is dependent on the safeguarding of citizens security and privacy. With this multi-device strategy, the government intends to make its websites more user-friendly for consumers. Citizens demand privacy and security The government has expressed its wish to allow all citizens of the Netherlands to use a means of authentication of their choice to log in to government websites, websites of insurers and sports clubs, and web shops and social media. Some websites, such as Facebook, offer the option of logging in using other devices. However, this method has proved unpopular among consumers (only 1.6% are in favour), with 60 percent wanting to be able to reuse existing login methods to log in to third-party websites. For instance, these consumers would like to be able to Inge de Ruijter 23

13 What do consumers want? Consumers want a new means of logging in. Research shows that 40% want to log in via an independent agency, while 60% would prefer existing login methods to be reused. It is clear that consumers are often careless when using their login details. use their debit card to log in to the website of the Tax and Customs Administration or an insurer, or a web shop. It is important to consumers that they retain control over their personal details, and are able to decide what information is made available to the other party. Issues that have emerged recently concerning the privacy of citizens have highlighted the importance of this matter. Naturally, personal details need to be properly protected in order to minimise the risk of identity theft. How can the online party be certain that you are the person you claim to be? Marlies van Elst, General Manager of Market Management at Equens: A lot is happening in Europe in this respect. European regulations are forcing us to switch to Stork 3, a security level that requires a face-toface ID check when an identification document is issued. Banks, but also notaries and lawyers, are already using this process. Thanks to Stork 3, the authentication of a person s identity will be more thorough. Not only for government agencies eid serves a number of different interests: the government s need for a secure means of authentication for citizens; the consumers need for a solution for the everincreasing number of usernames and passwords, as well as the reuse of existing login methods; and the demand from organisations such as web shops, travel agencies and insurers for an easy and reliable login method. Online identification is currently the responsibility of all organisations that offer online services. For some time, web shops have been looking for a univocal method of identification for consumers. They want logging in to be as easy as possible in order to facilitate easy shopping and payment. This enhanced convenience will lead to more online transactions. In this way, eid lowers the threshold for consumers, while the risk is reduced considerably for web shops. Van Elst: Choosing devices that can be used by the government, as well as by businesses, will increase ease of use. Shopping 2020, the action programme in the Netherlands which is based on a vision of the future of online shopping, shows that there is high demand among consumers and suppliers for greater ease of use with online payments. see any reason why this model could not be implemented in the Netherlands. Collaboration for commercial opportunities The ambitions of the government to handle more matters digitally calls for a platform that supports this. In the Netherlands, initial steps have already been taken. De Ruijter: An eid system platform has been initiated. Private parties such as the Chamber of Commerce and the Dutch Association of Insurers, as well as public parties such as ministries, are involved, as is Equens. Cooperation is essential in order to create broad support for the provisioning of digital services and ensure a successful roll-out and acceptance of eid. Collaboration on an eid system has already been approved by the signing of a letter of intent. Equens believes there are opportunities for banks and other parties that issue means of identification, as well as for the Equens organisation as a broker. Van Elst: We have extensive experience as an intermediary for message flows. To us, it makes no difference whether a message is a payment or something else. Inge de Ruijter adds: As a payment processor, we are familiar with the required verification methods, we have the necessary relationships in place with retailers and banks, and we are used to thinking and acting on the basis of rules and Storage of passwords and login names I memorise all of my login details and passwords. 52% I write them down somewhere. The internet browser I use stores these details for me. 11% 31% Cooperation is essential in order to create broad support. The solution can be realised fairly easily and quickly. regulations. Delivering Stork level 3 authentication is no problem for us. Equens therefore believes it can assist the market with the introduction of eid, both in and outside of the Netherlands. Equens has a large market share in Europe, and eid needs a player with sufficient scale to facilitate successful implementation of a standard. We are used to working within a framework of agreements, and have many years of experience in authenticating large transaction volumes, for cards as well as online payments. Equens is therefore a viable party for marketing eid. eid in other European countries Belgium and Germany introduced an e-identity card. According to Inge de Ruijter, Product Manager at Equens Business Center Cards, the adoption rate has been low: It was yet another card in your wallet that cannot be used for any other purpose. In Scandinavian countries, a bankid is used for electronic identification, and has proved highly popular. The bankid is issued after the holder of the debit card has identified themself by means of a passport or a driving licence, de Ruijter explains. This ensures that the bankid is issued to the right person, making it an ideal device for use in an eid system. I don t I use a separate password program on my computer. I keep an unsecured list on my computer. Other, namely: 9% 6% 5% GFK 2013 Hoe shopt de consument in november 2013 Marlies van Elst 24 25

14 Mandate Management Is there a future for SDD B2B? Businesses are struggling with the transition to SEPA Direct Debit (SDD), especially in the B2B market. For corporates, choosing the B2B scheme seems to be the best option. However, whilst suppliers are enthusiastic, the clients are reluctant. Or should they choose the Core scheme, which is easier to migrate to, easier to manage but comes with the uncertainties of a longer revocation term? And what about mandate management? Given the varying paces at which SEPA is implemented throughout Europe, local solutions would seem the most obvious way to go. But the ultimate goal, complete harmonisation, should not be forgotten. The B2B scheme is an excellent product for businesses, because it offers certain risk mitigators, says Paul Geerts, Associate Director of Financial Services at KPMG Advisory in Amsterdam. However, local companies are reluctant to use it because of the complex and lengthy implementation, and because debtors are uncomfortable with the idea of giving out blank cheques without the option of revoking them. European businesses are also reluctant to use it, as in spite of the international standard, there are simply too many differences between the various countries. Impending marginalisation of SDD B2B Geerts: In some countries, business direct debits were widely used, but this is decreasing rapidly. SDD B2B runs the risk of becoming a marginalised product because businesses are switching to SDD Core en masse. But with the revocation term of 56 days, the businesses will be running new risks. Of course, they are free to use SDD Core; however, we would advise businesses to assess which clients are high-risk, and demand that they use SDD B2B in order to effectively manage the debtor risks. Mandate information as part of core data Most debtors have arranged their SDD mandate management themselves, despite the fact that there are several service providers that offer high-quality solutions. Geerts: The majority of businesses feel that mandate information is part of their core data. This might change in the future with the introduction of e-mandates. Geerts does see considerable demand for an e-mandate solution that would facilitate easy online mandate checks and routing of the mandate forms: In this digital era, it seems odd that we are still legally required to use wet signatures. That feels like a step backwards, especially with SDD B2B where most debtor banks require a paper version of the mandate. Widely supported solution Regarding what it would take to realise a single e-mandate solution, Paul Geerts makes two specific suggestions: Develop a service that is supported by the market, including debtors. I would call upon banks to be open to ideas, and not only consider their own circumstances. Second, it is important to develop a long-term European solution. Given the varying paces at which SEPA is implemented throughout Europe, local solutions would seem the most obvious way to go. But the ultimate goal, complete harmonisation, should not be forgotten. International businesses are justifiably concerned The latter issue is a serious cause for concern at international corporations. Geerts: They re not convinced it s going to work and rightly so. The European legislation and rulebooks leave too much room for national tastes and interpretation by individual banks. This is detrimental disastrous for international enterprises. For now, SEPA has the dubious reputation of not having set a real standard. It s high time for us to jointly work towards a truly unified solution. Paul Geerts 27

15 Why banks should embrace an open future The fight in online payments is not lost to anybody, but all players face significant opportunities that should now be addressed There is a history of success of open versus closed systems in industries such as IT and telecoms. It is now the banks turn to open up. Open access to bank accounts has the potential to lead to an explosion of potentially disruptive innovation, competition and new services. New revenue streams will evolve and the banks themselves could even be the main beneficiaries from this dynamic development. Yet banks need to position themselves proactively in this new environment. Dr Michael G. Salmony is Executive Adviser at Equens. He represents national geographies, banking consortia and international industry sectors within such bodies as the European Commission, the European Payments Council and the European Association of Cooperative Banks. From the latest regulation it is a legal requirement that the banks open payment accounts to third parties. One can now wait and pray - or actively embrace and shape this change. Since it is better to disrupt yourself rather than letting others disrupt you, we propose new Controlled Access to Payment Services (CAPS) to ensure that the new third parties enter our space in a safe, secure, regulated and fair way using a standard interface. The recent PSD2 regulation proposal provides some of the necessary prerequisites of such an approach. The fight is not lost to anybody Looking into the current e- and m-commerce space, we already see strong alternative payment solutions such as PayPal or Amazon Payments. Indeed, with view of the success of PayPal some already think the fight in online is lost. However, despite 15 years of active market development, good growth rates and huge media attention, PayPal s processed volume still only represents under 0.05% of global non-cash transactions and is thus really putting no dent at all into banks business. The fight in online payments is thus not lost to anybody, but all players especially banks face significant opportunities that should now be addressed. New actors in the payment space The PSD2 defines new actors in the payment space, the third party providers ( TPPs ), that are to offer payment information and initiation services to consumers and merchants and includes these TPPs in its regulatory scope. These TPPs will thus need to become licensed and registered and underlie security and consumer protection requirements similar to banks. This is an important step towards a safe and level playing field in payments and will thus put an end to unregulated and potentially insecure third party models in the market. In general, the PSD is now extended to cover all transactions made through IT devices (mobile, internet etc.) which were previously exempted. All this is good for everybody. Controlled Access If bank accounts and online payment services are to be opened up to third parties, this must happen in a controlled, secure, trusted, safe and fair way. Especially in payments one particularly critical issue is security: no consumer or bank would endorse a situation where unregulated third parties would be granted uncontrolled access to users accounts. This is why CAPS is needed, in contrast to current practices where the users full online banking credentials are passed on to third parties allowing them potentially full access to everything on the account. Third parties need to be certified and regulated. There needs to be a common legal framework which TPPs, banks and merchants adhere to, in order to clarify the liability partitions and ensure a seamlessly joined up system with user communication, dispute resolution etcetera. The system needs to be secure, handling access to accounts in a controlled way with authentication being given only for very specific accesses. Transactions need to be entirely controlled by consumers to avoid a situation where consumer account data is exploited without permission. And last but not least, there needs to be a fee attractive enough for all parties to provide the infrastructure, develop innovative services and provide customer support. The future is already happening Although controlled access to payment accounts by third parties may sound very disruptive and futuristic, there are already some examples from the payments industry that today demonstrate this potential of open innovation. PayPal already has opened its system via APIs to several hundred partners and is known to be in talks with Google, Facebook and large internet and mobile players to allow their services to be linked to PayPal. Even some banks are already actively opening up to third parties. A regulated and open system across all banks such as CAPS will then allow for secure and convenient use across Europe. Consumers could simply get a screen like Approve 24 for 2 tickets to Hamlet at Court Theatre on 24 Jan 2014 at 8 pm?, click Pay, and that s it (subject to bank authentication) regardless where they are buying and where their bank is. And there are many more services one can think of (identity check, age verification, automated form filling etc.) that provide valuable services to merchants and solve many problems in current e- and m-commerce. A wealth of opportunities Contrast this direct communication between the user and his bank with the current situation: overlay services building on bank infrastructure has led to a very layered online payments landscape. Several overlay service layers have driven a wedge between the consumer and the bank, sometimes easing the way consumers pay, but often confusing them with multiple virtual accounts, wallets, passwords etcetera. They use banks infrastructures, KYC and security mechanisms etcetera mostly without contracting a bank and without paying for these assets. Banks are thus clearly being disintermediated in online payments and need to act. Providing a standardised controlled access to the bank account can help reduce the multiple layers and provide new value to both banks and alternative providers. The value creation potential is seen across the board. Merchants have been looking forward to this and demanding it unequivocally. Consumers need not pass their banking credentials or card details on to merchants any more, the amazing resilience of cash even in modern economies can be reduced and many advantages more. Given that we already witness over 300 e-payment mechanisms in Europe today, innovation and competition will likely explode thanks to CAPS in the years to come. New revenue streams will evolve and, given the past history of open systems, it can be expected that banks may be the main beneficiaries from this dynamic environment if they position themselves in a timely and proactive manner. Extract from the article by Dr. Michael Salmony in JPSS Journal of Payments Strategy & Systems, Vol 8 No 2, May 2014 Systems, Vol 8 No 2, May

16 How will we do our shopping in 2020? Trend 6: Conversion of channels There is no e-commerce or m-commerce, but only the customer s wish to buy a product from any location. People can switch between channels (the actual shop, the web shop or their phone) as the need arises, forcing the retailer to capture the payments across all channels.. This amongst other things affects the delivery of goods: ordering online and collection from the shop. It s hard to predict how payments will be handled in For one, we have no idea what technology we will have available by then. So, is it at all possible to outline the advancements that will have been made by 2020 based on current trends? It s never fact, but we take a kind of snapshot of the future in order to determine the direction we re moving in, says Eric van Vuuren, Business Developer at Equens, explaining the Dutch research project Shopping2020. In this report, we examine what businesses need to do to keep up with developments in m-commerce and e-commerce between now and Shopping2020 involves 460 specialists divided between nineteen expert groups who address the question How will consumers do their physical and online shopping in 2020, and what action needs to be taken to enable the B2C business to respond accordingly, both domestically and internationally? Each expert group outlines its vision of shopping in the future on the Shopping2020 website. Eric van Vuuren represented Equens in the Transactions group, which has published a sub-report entitled How Do the Dutch Pay in According to the Transaction expert group, people in the Netherlands currently pay either by debit card or in cash in almost all shops. At present, ideal is the most popular means of payment for online transactions. Eric van Vuuren: E- and m-commerce offers more possibilities than we are currently using. The internet connection ratio is high and the infrastructure is good. The majority of people have an internet connection, but we are lagging behind the rest of Europe when it comes to the average amount spent on line. The preconditions for generating more e-commerce and m-commerce are in place, but how do we make the most of it? It helps to know the direction in which the market is moving. In order to assess the different aspects of payments in 2020, the Transaction expert group has identified nine current trends that are affecting the development of payments in retail. Trend 1: Digital identity Currently, the buyer s identity is requested and authenticated multiple times during an online transaction, which is a nuisance to the buyer. It would be much simpler if an individual was identified once only by means of a digital identity check. Trend 2: Mobile shopping Mobile phones have become a part of everyday life. They are used as a portal to the internet, where purchases can be made. An example of a new trend is showrooming: people visit a shop to view a product, which they then buy on the internet using their phone. Trend 3: Digital wallets Storing payment credentials or currencies in a Digital Wallet (such as PayPal or Equens Snel en Simpel Betalen ) is currently used as a way to disconnect the initiation of a payment from the actual means of payment. This allows the payment to be woven into the overall shopping experience better and creating a lower threshold for payments. Trend 4: Changing point-of-sale (POS) interaction This trend also builds on trend 3: when an individual wants to pay with an innovative means of payment, the checkout needs to be compatible. It must be able to read the NFC chip or be equipped with a fingerprint scanning terminal. Trend 5: Changing checkout Automation is changing the in-store interaction. The introduction of smart devices (such as tablets) at shops is changing the role of the checkout. Instead of using an expensive checkout system, sales agents can get close to the consumer and do cross and upselling. Also stock levels of a particular product in the warehouse can be checked and ordered for the customer directly from the tablet. This way, retailers can sell a product even if it is not available at their shop. Trend 7: Consumers in control Compared to the current developments, this is a countertrend that is seeing large amounts of data disclosed for the sole benefit of convenience. A lot of customer data is distributed on the internet, giving rise to a desire to control personal data. The buyer wants to determine what data they disclose to whom and how it is used. There is an increased awareness of privacy. Trend 8: Peer-to-peer (P2P) payments Traditionally, payments are handled using a four-corner model: the buyer, the seller, the buyer s bank, and the seller s bank. New models use a three-corner model or decentralised trust networks, reducing the number of links in the chain and thereby lowering the costs. Payment services are no longer restricted to the traditional parties. Examples are Bitcoin and Ripple. Trend 9: Increased regulation New regulations implemented by the European Commission are increasingly focusing on supporting innovation. In the proposed new Payment Services Directive, third parties (non-banks) are permitted to offer informational and transactional services to end-users (consumers and retailers). This means that trusted banking services may be linked to the innovative power of new players. For more information, see the article Why Banks Should Embrace an Open Future in this magazine. Together, the nine trends form the point of departure for four scenarios that outline the handling of payments in Scenario 1: In Control Buyers value their privacy and want to control what data is provided to whom and when. They will choose the payment option that meets their needs at a particular time. Scenario 2: Consumer-Driven Of the many payment options available, the consumer chooses the one that offers the best ease of use. Having to share personal data is not a problem if it simplifies the shopping process. Scenario 3: Back to the Trust Consumers have full control over their data and the way it is used, and are satisfied with a limited number of payment means that facilitate this. Scenario 4: Big Brands, Big Data Consumers trust a limited set of payment providers with their data in order to provide ease of use when paying.. Download the report How Do the Dutch Pay in 2020 from: The expert group thinks the fourth scenario is the most likely on the longer run. Currently, the market is dominated by a small group of financial institutions. High investments and the introduction of new technologies are creating a high threshold for new entrants. Current developments in the field of ease of payment and use of personal data in retail make this the most likely scenario. Eric van Vuuren: In this scenario, consumers are looking for ease of use being offered by trusted providers of payment services, thereby also ensuring a safeguarded system which is reliable and secure

17 Real-time payments in Sweden One million users and still counting Real time is real time, according to Bankgirot, the clearing house responsible for the introduction of a real-time payment platform in Sweden. Real-time payment refers to the money leaving one account in real time, appearing on the other account at the same time, being settled in real time, and then processed on the account statement in real time. The first service to be connected to the real-time payment platform was Swish, an app owned by six Swedish banks, allowing consumers to make real-time payments using their mobile phone. The app is popular, with one million users and still counting. Carina Olsson, CIO of Bankgirot, tells EQ Magazine about the importance and future of real-time payments. Why is paying in real time so important? Sweden s central bank, the Riksbank, has declared its intention for Sweden to be a cashless society by Real-time payments are one way of achieving this goal. Equally important is the increasing pace of society in general. Payments have to keep up with that pace. The new generation wants to receive the money in their account straight away. For banks, real-time payments are an important service when it comes to preserving customer satisfaction. They are also vital in reducing costs, as cash is expensive for banks. Swish only came onto the market in November 2012, and already one million people have downloaded the app. Why has it become so popular so quickly? With real-time payments, we have delivered a solution for small commerce between individuals. For sellers, they eliminate the issue of having to sell their goods first and then wait for the money, while purchasers no longer have to pay first and worry about when the goods will be delivered. Everything is done at the same time. The service is not limited to small amounts, either. For example, I sold my car using the Swish application. Which new services do you expect will connect to Swish in the near future? After the summer, Swish will be introducing a consumer-to-business solution for real-time payments. This new solution will enable consumers to make payments to small businesses and organisations, like charity organisations. The real-time payment platform will be available 24/7/365, and with its generic setup it will be able to provide access across various bank payment channels, such as internet, mobile and telephone banking, and at bank branches. Are you developing real-time payment services for business-to-business as well? I m confident new services will be developed in the future, as the advantages are numerous. However, as yet no specific plans have been made for B2B. We have to keep in mind the higher complexity of systems and the major differences between ERP (enterprise resource planning) systems, which require a more complex solution. The UK already has a real-time payment platform. Other countries are considering it. How about developing a European platform? Rules and regulation differ, systems differ, and even the wishes of consumers and businesses can vary from country to country. It would be too difficult an undertaking. I think it would be more realistic for countries to develop their own platform and then connect to each other s systems. Carina Olssen The new real-time payment platform will be available 24/7/365, and it will be able to provide access across various bank payment channels: internet, mobile and telephone banking, and bank branches About Bankgirot Bankgirot is the only clearing house for mass payments in Sweden. It has a central role in the Swedish payment infrastructure. Every hour, more than 125,000 transactions flow between payers and payees. Bankgirot s operations were founded in 1959, and today the company employs approximately 240 people. Bankgirot is owned by SEB, Swedbank, Handelsbanken, Nordea, Danske Bank, Skandiabanken and Länsförsäkringar Bank

18 Equens Key Figures 2013 Payment services Catering for all payment processing services SEPA services including Value Added Services, e.g. Corporate Payment Services Interbank (CSM) and intrabank (BPO) payment processing Global Payment Services based on International Payments Framework (IPF) Cards services Equens SE - Leading the market for future proof payment and card solutions Flexible acquiring services for POS and ATM Complete range of switching, clearing and issuing services including facility management and life cycle Prepaid card services, a secure and cashless payment solution Brand-independent and EMV-compliant Next-generation payments Biometric payments Contactless payments E-commerce payments M-commerce payments Subsidiaries (all fully owned) PaySquare SE provides a complete solution for terminal delivery and maintenance, card acceptance and network services for domestic and international brands (Girocard, ELV, Maestro, V PAY, MasterCard, Visa, JCB, UnionPay, Discover and Diners Club). The company is headquartered in Utrecht, The Netherlands, and has additional local branches in Frankfurt, Germany, and Warsaw, Poland. In the Netherlands: InterEGI B.V. issues Prepaid Chipknip cards in the Netherlands. In Germany: DZ Service GmbH is a service provider for payment transactions and document processing. Providing transaction and business process outsourcing services to more than 400 banks, DZ Service is one of the major service providers in this segment. Equens is one of the largest payment processors in Europe. With an annual processing volume of billions of payments, POS and ATM transactions, we currently have a European market share of more than 12.5% payment and card solutions. The European payments market is rapidly evolving. This results in considerable challenges for banks and financial institutions in terms of compliance, increased complexity and cost pressure. We recognise these market demands, and are fully geared to support our clients in the challenges they are facing. We provide a modular portfolio consisting of a complete service range for payments and cards, e.g. issuing and acquiring processing, clearing and settlement, as well as solutions for mobile, contactless and biometric payments. The development of a Single Euro Payments Area (SEPA) calls for payment and card processors with a pan-european vision. With offices in five countries the Netherlands, Germany, Italy, Finland and the United Kingdom Equens understands European and local market needs better than anyone. We offer European market coverage and have clients and partnerships in multiple European countries. Our strategy is geared towards further growth and economies of scale, with the aim of providing sustainable financial benefits to our clients now and in the future. Key Figures 2013 Transaction volumes (in billions) Number of payments processed: 10.6 Number of ATM and POS transactions: 4.7 ATMs, POS terminals and Card base ATMs connected to the Equens network as of 31 December ,600 POS terminals connected to the Equens network as of 31 December ,000 Credit and debit cards under management as of 31 December million Consolidated key figures in thousands of euro Revenue 355,099 Results from operating activities 12,838 Net profit from continuing operations 9,331 Total assets as of 31 December ,135 Total equity as of 31 December ,400 Staff (full-time equivalents in absolute numbers as on 31 December 2013) 1,495 E T +31 (0)

19 smart sourcing Outsourcing the right processes at the right time Organising your business efficiently means using your resources in the most profitable way. Thus: outsourcing activities that are not part of your core business. Your card and payment processing could certainly be part of this strategy. The question is: which parts can best be outsourced? In what pace? And to whom? Obviously, you want to rely on a trustworthy partner with a proven track record. Equens can advise and support you in this process. With over forty years of experience in the cards and payments industry, a complete service portfolio, expertise in the interbank and intrabank environment, local and European expertise and clients throughout Europe, we can be that smart sourcing partner. Smart sourcing: where your needs and our expertise in payment processing meet. Sound solutions, solid results

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