PAYMENTS IN POLAND, 2016

Selected pages from the original report

by Inteliace Research December 2016

Version: 16.3 Table of contents

Executive Summary Slide 23: Online merchants & payment methods– case (1/3): Allegro Slide 24: Online merchants & payment methods– case (2/3): RTVEuroAGD 1. Payments and payment infrastructure Slide 25: Online merchants & payment methods– case (3/3): empik.com Slide 1: Consumer markets in Europe, 2014 Slide 2: Card payment volumes in Europe & in Poland (1/2), 2010-2014 3. Key players by segment Slide 3: Card payment volumes in Europe & in Poland (2/2), 2014 Slide 26: schemes (1/2): Slide 4: POS infrastructure evolution in Poland, 2010-2016 Slide 27: Mobile payment schemes (2/2): PeoPay Slide 5: Card payments evolution in Poland, 2010-2016 Slide 28: Digital wallets (1/3): MasterPass Slide 6: Cards/terminals in Poland by functionality, H1 2016 Slide 29: Digital wallets (2/3): VISA Checkout Slide 7: ATM networks in Poland, 2010-2016 Slide 30: Digital wallets (3/3): Android Pay

Slide 8: ATM cash withdrawals in Poland, 2010-2016 Slide 31: Payment aggregators (1/3): PayU Payments Payments Slide 9: Cash in circulation and interest rates in Poland, 2009-2016 Slide 32: Payment aggregators (2/3): Przelewy 24

Slide 10: Cards issued in Poland, 2010-2016, split by technology & brand, 2016 Slide 33: Payment aggregators (3/3): Dotpay in Slide 11: Top payment card issuers in Poland, H1 2016 Slide 34: with hybrid funding: PayPal Poland

Slide 12: Automated Clearing House (ACH) systems in Poland, 2011-2015 , 2016 Slide 13: Key mobile payment schemes in Poland by origin of funds, 2016 Appendix: Directory of firms mentioned in the report Slide 14: Key players in payment applications/wallets in Poland, 2016 Slide 15: Poland - retail payment services landscape, 2016 Slide 16: HCE-NFC users evolution, key banks in HCE NFC, 2015-2016 Slide 17: Key players in specialized mobile payments (parking, public /municipal transportation, regional railways), 2016

2. Retail landscape (merchants) and payment methods Slide 18: Brick&mortar (b&m) vs. online retail landscape, 2015-2016 Slide 19: Key payments methods available in b&m and online retail, 2016 Slide 20: Survey on payment methods in 50 large online stores, 2016 Slide 21: Online POS loans providers in online stores, 2016 Slide 22: Blockchain technology & bitcoin in Poland: Exchanges, bitcoin acquirers, merchants, 2016

2 Inteliace Research The volume of card payments in Poland is expected to exceed 3 billion in 2016

Card payments landscape in Europe, 2014 360 340 Most advanced markets Total annual card 320 xx payments volume, 2014, in billion 300 1.54 280 Advanced 1.57 Sweden

Average annual cardannual Average 260 1.37

paymentspercapita,2014 2.42

240 Payments Payments 220 UK

13.52 in 200 Poland Poland

3.21 0.25 , ,

180 2016

Developed 160 140 0.66 Fast growing CEE markets 8.93 1.48 120 Poland 2016 F 100 Switzerland 0.99 0.19 0.69 Poland 2014 3.2 Poland 2015 80 0.65 0.15 0.18 2.56 60 2.80 4.44 0.50 1.87 40 0.23

2.11 0.37 Early stage Early 20 0.11 Czech Rep. Romania 0.21 0 -6 -4 -2 0 2 4 6 8 10 12 14 16 18 20 22 24 26 28 30 32 34 36 Average annual growth in number of card payments (CAGR), 2010–2014, in %

Source: ECB, SNB, NB, Eurostat, NBP, Inteliace Research 3 Inteliace Research ATM withdrawals increase despite growing role of cashless payments

ATM withdrawals*: Value in PLN billion CAGR (%) 2010-2016F +4 Total 323 330 291 300 306 5 5 +11 264 284 5 Foreign 3 4 4 transactions 3

+4 318 325 280 287 295 301 Domestic 261 transactions • The value of cash Payments

withdrawals continues to in increase, however, at a Poland

2010 2011 2012 2013 2014 2015 2016F ,

decelerating rate. 2016 • At the same time, the ATM withdrawals*: Volume CAGR (%) 2010-2016F volume of cash in billion transactions transactions has stabilized.

Total • The average value of cash 0.77 0.79 0.78 0.75 0.76 +1 0.71 0.75 0.01 Foreign 0.01 0.01 0.01 0.01 0.01 0.01 +9 withdrawals is growing transactions 0.74 0.76 0.78 0.77 0.74 0.75 +1 Domestic 0.70 transactions Number of transactions 2010 2011 2012 2013 2014 2015 2016F has stabilized Average transaction value(PLN) 374 380 379 379 391 431 436

* Card withdrawals with cards issued in Poland. Domestic and foreign transactions included Source: NBP, Inteliace Research 4 Inteliace Research Competition in retail payments in Poland has intensified

Poland - retail payment services landscape, 2016

• PayPal • Visa Checkout* Likely future

positions Many

• PayU • There is already a significant number of

payment applications Payments competing for clients in

Poland. in

• mPay • The key battle that will Poland

decide the future shape of , , Merchant-sponsored Specialized, sector- • SkyCash Poland`s payment market 2016 solutions oriented services • moBilet will likely play out between Few • iKasa • BLIK BLIK (ACH-based model) and various digital wallets • MasterPass (payment cards-based models).

Sources of money / banks / money of Sources • Android Pay • Specialized and merchant/issuer sponsored services are likely to occupy market • Multiple bank proprietary niches. HCE solutions: PKO, BZ WBK, Issuer-sponsored Eurobank, Getin solutions

• PeoPay Single • Ukash • paysafecard

Single Few Many Merchants * For the moment no merchants in Poland accept Visa Checkout. Source: Inteliace Research 5 Inteliace Research While blockchain technology is slowly getting foothold in Poland, payment & merchant applications are still quite rare.

Bitcoin exchanges Bitcoin acquirers ACH transaction volumes (in million tx) Banner Company name Transaction size Remarks Banner Company name Remarks Attracting by innovations / InPay is a local BTC acquirer. BitBay.net Big >1000tx per day flexibility and strong InPay.pl Company offers BTC trading, ATM authentication cash out and mobile top-up. A new service to the market, Service with the highest number bitmarket.pl Big >1000tx per day Bitbe.co planning to be the leading of bid/ask quotes processor for merchants in Poland.

Suspended operations Suspended operations Other foreign processors

bitcurex.com Payments

Fast cash out/cash in in bitmarket24.pl Mid size >100tx per day Poland

Merchants , Offering trading in BTC and LTC. ACH transaction volumes (in million tx) 2016 Bitmaszyna.pl Mid size >100tx per day Exclusive graphical interface • Bitcoin acceptance in Poland is still on a very early stage. It is a niche for passionate rather than an important source of new revenues/clients. New entrant, promotional rates dgtmarket.com Mid size >100tx per day for BTC trading • It can be estimated that there are ca. hundred merchants openly accepting bitcoin in Poland. • Merchants accepting bitcoin are mostly small, local service nevbit.com Small <10tx per day Smaller player businesses, including: catering, transportation, IT/ hardware/ software stores, educational and other services. • Lack of accepting, settlement and security standards as Other: bitfox.pl, btcduke.com, flyingatom.com, Smaller, specialized players simplecoin.pl, Cryptoins.com, Bitstar, 4coins, etc. Small well as still limited number of clients willing to pay with bitcoins prevent a wider application of bitcoin.

• Bitcoin trading is well developed in Poland with multiple exchanges competing for investors. • However, unexpected exchanges failures and suspension of operations is still a threat to bitcoin traders. • There are few dedicated bitcoin processors / merchant acquirers operating in the country. • The number of merchants accepting bitcoin is still very limited.

Source: Polskie Forum Bitcoin, Service providers, Inteliace Research 6 Inteliace Research Mobile payment schemes (1/2): BLIK

Overview Description Background & operations: Company name: Polski Standard Płatności Sp. z o.o. Headquarters: ul. Cypryjska 72, 02-761 Warszawa, Poland • BLIK is a mobile payment scheme developed by the largest bank in Poland – PKO Bank Polski. Scheme has been Scheme name: BLIK initially offered to own clients within the IKO mobile app. However, from the beginning, PKO has been looking for other partners to join the system in order to grow beyond own client base. Main site: http://blikmobile.pl/ Start date: 2014 • Shortly after the launch, five other major banks as well as the incumbent ACH - KIR joined the project. In order to make the project universal and accessible to every interested party, an independent company and system operator – Founding partners: PKO + other 5 banks + ACH (KIR) PSP was created and a new name – BLIK was announced in 2015. In 2016, BLIK was accessed by another partner – Current Partners: Alior bank, Bank Millennium, BZ WBK, ING bank, Getin Noble Bank. mBank, PKO Bank Polski, Getin Bank, Orange Finanse • Since 2016, a significant acceleration in BLIK transactions could be observed, which has been an effect of promotional activities and growing awareness of clients. General type: Universal mobile payment scheme

Payment mechanics: Payments Payments Funding source: Bank account via ACH – KIR (real time settlements) • The key feature of BLIK system are six-digit, single transaction codes generated in the mobile app. Payments in online stores  Functionalities: in

• Codes are entered manually by the client in either: POS terminal, ATM Poland Payments in B&M stores  or at online checkout.

P2P mobile payments  , • After the code has been entered in terminal, the mobile app asks for 2016 ATM cardless cash withdrawals  transaction confirmation. Transaction gets executed if the client confirms it. Alternatively, a one-click process has been developed GSM top-up x where client does not have to confirm every transaction, This however Other (virtual checks, merchant services)  requires adding the merchant by the client to a white list prior to the transaction. • Although BLIK transactions have been growing fast, the current Users: ~2 million users (registered apps as of H1 2016) transaction process, with the need of manually entering the six-digit Merchants: ~157k B&M* stores, 36k online merchants, 14k ATMs, code, and confirming it with a mobile app, working in an online mode, as of H1 2016 prevents a wider adoption of BLIK in traditional stores. Contactless payment cards and HCE NFC payments are far more convenient from Transactions (TTM ending Q2 2016): the perspective of the client. • TX Volume: 2.87 million transactions Recent events and future plans: • TX Value: PLN 710 million • The current BLIK scheme mechanics favours ATM withdrawals and online payments. • Since 2016, PSP has been rumoured to work on contactless BLIK payments in POS terminals. However, property • TX volume by type: (Q2 16): 65% ATM withdrawals, 25% online rights/patents used in POS terminal prevent 3rd party access eliminating card organizations. store payments, 8% b&m store payments, 3% P2P payments. • Since Nov. 2016, one-click payment option in online stores has been introduced by BLIK and Bank Millennium. • BLIK payment option was adopted by PayU and Allegro in Dec. 2016.

*B&M – brick and mortar Source: Company, industry press, interviews, NBP, Inteliace Research 7 Inteliace Research Firms mentioned in the report

Brand/banner Company name Type Address Blue Media Blue Media S.A. ACH Powstańców Warszawy 6, 81-718 Sopot KIR Krajowa Izba Rozliczeniowa S.A. ACH ul. Pileckiego 65, 02-781 Warszawa Elavon Elavon Financial Services acquiring ul. Puławska 17, Warszawa 02-515 Polska ePAY Card ePay Card Sp. z o.o. acquiring ul. Jagiellońska 34, 05-120 Legionowo eService eservice Sp. z o.o. acquiring ul. Jana Olbrachta 94, 01-102 Warszawa Espago PSP Polska Sp. z o.o. acquiring ul. Kanclerska 15 , 60-327 Poznań IT Card IT Card CTP S.A. acquiring ul. Jutrzenki 139, 02-231 Warszawa PaySquare PaySquare SE Spółka Europejska Oddział w Polsce acquiring ul. Puławska 182, 02-670 Warszawa PayTel PayTel SA acquiring ul. Jutrzenki 118, 02-230 Warszawa Pekao CK Centrum Kart S.A acquiring ul. Giełdowa 5, 01-211 Warszawa PEP CRE Polskie ePłatności S.A. acquiring Tajęcina 113, 36-002 Jasionka Planet Pay Planet Pay Sp. z o.o. acquiring ul. Jutrzenki 139, 02-231 Warszawa Polcard First Data Polska S.A. acquiring Al. Jerozolimskie 92, 00-807 Warszawa REVO Raiffeisen EVO Payments International Sp. z o.o. acquiring ul. Jana Olbrachta 94, 01-102 Warszawa SIX Pay SIX Payment Services (Europe) S.A. acquiring Prosta 68, 00-838 Warszawa SumUp SumUp Payments Limited acquiring 32 - 34 Great Marlborough St, W1F 7JB, , UK Topcard TopCard Sp. z o. o. acquiring ul. Starołęcka 7 , 61-361 Poznań Dotpay Dotpay S.A. aggregator ul. Wielicka 72, 30-552 Kraków eCard eCard S.A. aggregator ul. Arkońska 11, Gdańsk 80-387 PayU PayU S.A. aggregator ul.Grunwaldzka 182, 60-166 Poznań Przelewy24 PayPro SA, DialCom24 Sp. z o.o. aggregator ul. Kanclerska 15, 60-327 Poznań

tpay Krajowy Integrator Płatności S.A. aggregator ul. Św. Marcin 73/6, 61-808 Poznań Payments Bitbe.co Ltd Bitbe.co Ltd BTC acquiring 71 Sutton Hall Road, Hounslow, London TW5 0PX, UK InPay InPay S.A. BTC acquiring ul. Mokotowska 1, 00-640 Warszawa 4coins.pl 12 M sp. z o.o. BTC exchange ul. Józefa Kustronia 51, 30-433 Kraków

BitBay.net BitBay Sp. z o.o. BTC exchange ul. Zacisze 2/6, 40-025 Katowice in

bitcurex.com Digital Future LLC Sp. z O.O. BTC exchange ul. Andrzeja Struga 78, 90-557 Łódź Poland bitfox.pl Bitfox sp. z o.o. BTC exchange Os. Wichrowe Wzgórze 25 c, 61- 697 Poznań bitmarket.pl Michau Enterprises Limited BTC exchange Chytron 26, Office 21 , 1075 Nikozja , Cypr

bitmarket24.pl BitMarket24 Sp. z o.o. BTC exchange ul. Św. Filipa 23 /4, 31-150 Kraków ,

Bitmaszyna.pl Androbayt Sp. z o.o. BTC exchange ul. Słowackiego 12, 87-800 Włocławek 2016 Bitstar bitstar sp. z o. o. BTC exchange ul. Włodarzewska 33/5, 02-384 Warszawa btcduke.com BTCDuke sp. z o.o. BTC exchange ul. Pod Krzywą Wieżą 14, 87-100 Toruń Cryptoins.com Cryptoins.com Ltd BTC exchange IH 24 HOLBORN VIADUCT, EC1A 2BN London, UK dgtmarket.com Digital Market Sp. z o.o. BTC exchange ul. Lęborska 3B 80-386 Gdańsk flyingatom.com FlyingAtom Sp. z.o.o. BTC exchange ul. Złota 59, 14 piętro, 00-120 Warszawa nevbit.com Nevonet Sp. z o o BTC exchange ul. Kołłątaja 47/43, 81-333 Gdynia simplecoin.pl Simple Coin s.r.o. BTC exchange Na Maninách 876/7, Praha Holešovice, 170 00, CZ PaySafeCard, Ukash Prepaid Services Company Ltd. cash vouchers 25 Canada Square, London E14 5LQ, UK BZ WBK Bank Zachodni WBK SA HCE-issuer bank Rynek 9/11, 50-950 Wrocław eurobank Euro Bank S.A. HCE-issuer bank ul.Świętego Mikołaja 72, 50-126 Wrocław Getin bank Getin Noble Bank S.A. HCE-issuer bank ul. Przyokopowa 33, 01-208 Warszawa Millennium HCE Bank Millennium SA HCE-issuer bank ul. Stanisława Żaryna 2A, 02-593 Warszawa Pekao HCE Bank Polska Kasa Opieki SA HCE-issuer bank ul.Grzybowska 53/57, 00-950 Warszawa PKO HCE PKO Bank Polski SA HCE-issuer bank ul. Puławska 15, 02-515 Warszawa SGB HCE SGB-Bank S.A. HCE-issuer bank ul. Szarych Szeregów 23A, 60-462 Poznań BLIK Polski Standard Płatności Sp. z o.o. mobile payments ul. Cypryjska 72, 02-761 Warszawa CallPay CallPay Sp. z o.o. mobile payments ul. A. Baraniaka 88 B, 61-131 Poznań iKasa ICP Polska Sp. z o.o. mobile payments ul. Puławska 99a, 02-595 Warszawa moBilet Mobile Traffic DATA Sp. z o.o. mobile payments ul. Drużbickiego 11, 61-693 Poznań mPay mPay S.A. mobile payments ul. Grochowska 21a, 04-186 Warszawa PeoPay Bank Pekao S.A. mobile payments ul. Grzybowska 53/57, 00-950 Warszawa SkyCash SkyCash Poland S.A. mobile payments Rondo ONZ 1 p. 29, 00-124 Warszawa FerPay Ferratum Bank p.l.c. online lending TBC Level 6, 14 High Str. 1551 Sliema, Homepay Homepay Sp. z o.o. SMS premium ul. Grzybowska 87, 00-844 Warszawa HotPay Leaders sp. z o.o. sp. k. SMS premium ul. Wadowicka 8a, 30-415 Kraków JustPay.pl Digital Virgo S.A. SMS premium ul. Inflancka 4, 00-189 SimPay.pl Simpay Krzysztof Wojdak SMS premium ul. Lęborska 3b, 80-386 Gdańsk uPaid wallet uPaid Sp. z o.o. wallets ul. Hłaski 10 A, 01-689 Warszawa Android Pay Android Pay wallets n/a MasterPass MasterPass wallets n/a PayPal PayPal wallets n/a Skrill Skrill wallets n/a Visa Checkout Visa Checkout wallets n/a

Source: Inteliace Research 8 Inteliace Research About this report About Inteliace Research

This report has been prepared using Inteliace Research Inteliace Research is an independent and privately owned proprietary research and publicly available sources, research firm based in the heart of Eastern Europe in including: financial reports, press publications, industry Warsaw / Poland. magazines, directories, financial databases and expert opinions. Our company specializes in value-added research services and tailored business intelligence solutions. Views presented in this report reflect solely the independent and unbiased opinion of Inteliace Research Through our customized research services we help our

and authors. clients to better understand their customers, competitors Payments

and overall market dynamics. in

Whilst all care has been taken in compiling information in Poland

this report, Inteliace Research is not responsible for any The lead researcher and founder of Inteliace Research is , , loss, damage, expense or claim, howsoever arising, Marcin Mazurek. 2016 suffered as a result of reliance on the data contained within this report. Our contact details: Inteliace Research This report is copyrighted. Any distribution, storage, ul. Foksal 17b/31, Warszawa, Poland replication and usage is restricted to Inteliace Research Tel. +48 22 408 66 20, clients only. In case of any doubt please contact us at: Tel. (m) +48 502 512 178 [email protected] Fax. +48 22 349 21 40 mail: [email protected] http://www.inteliace.com/

9 Inteliace Research RECENT PUBLICATIONS BY INTELIACE RESEARCH

BANK OUTLETS DENSITY IN POLAND (3/3) GĘSTOŚĆ SIECI PLACÓWEK BANKOWYCH W POLSCE (3/3) Our Recent Documents:

Number of outlets per 1 million inhabitants, by county „powiat”, 2011 Liczba placówek bankowych na 1 milion mieszkańców, wg. powiatów, 2011r.

Minimum: 126 BAZA PLACÓWEK BAZA BANKOWYCH PLACÓWEK W I POLSCE STATYSTYKA POWIATÓW,

Mediana 2016 Payments Median (443) Number of bank outlets per 1 million inhabitants varies a lot on county level

Na poziomie powiatów gęstość placówek • February - Mortgage Lending in Poland ’16

jest bardzo zróżnicowana

in

379 powiatów powiatów 379

2011 • May - Banking Market in Poland ’16 Poland

Maximum: 947 • May - Bank outlets database ’16 , , • June - Insurance Market in Poland ’16 2016 100 200 300 400 500 600 700 800 900 1000 1 Źródło/Source : Inteliace Research Inteliace Research • August - Top 200 CEE banks ’16 BANK OUTLETS DENSITY IN POLAND (1/3) GĘSTOŚĆ SIECI PLACÓWEK BANKOWYCH W POLSCE (1/3) • September - Investment Funds and Asset Mgmt. ’16 Number of bank outlets per 1000 sq km, by region, 2011 Liczba placówek na 1000 km2 powierzchni wg. województw, 2011r.

GE MONEY BANK – OVERVIEW BAZA PLACÓWEK BANKOWYCH W POLSCE I STATYSTYKAPOWIATÓW,

Średnia / Average As of March 2006 CAGR** 59 = 58 History & Background Concept Description Results 28 37 Timeline Target Clients Assets PLN billion 10.9 28 • In 1995, GE group purchased a small regional 56 The Southern and Central Poland have • Affluent individuals and professionals bank: „Solidarność Chase D.T. Bank”. Bank was 8.3 9.1 and many other ... the largest density of bank outlets rebranded soon to GE Capital Bank. looking for mortgage. Valuing quick 7.4 processing and flexibility, sometimes not 75 • In 1998, GE group purchased another small bank 35 59 (PAMBank)and converted it to a mortgage fulfilling lending criteria set by other Południowa oraz centralna Polska są specialist: GE Bank Mieszkaniowy banks (for example job contract or own funds level) 2003 2004 2005 66 najgęściej pokryte siecią placówek • In 2004, GE group acquired POS lending Market specialist :Chrobry with a network of ~1000 POS. • Mass market clients looking for simple bankowych na km2 share Chrobry was renamed to: Dobry Kredyt and quick consumer loans 1.6 1.6 1.7 67 38 (%) • In 2004 , a used car dealers network was created 44 under the GEpard brand, being the main channel Products 52 176 for car loans2011 sales Only lending products on offer: Loans • As of Jan. 2005, all GE activities in Poland were • mortgage PLN billion 14.2 consolidated under one roof: GE Capital bank Liczba/Number • refinancing loan 48 8.6 88 • credit cards 6.6 7.6 >60 Channels • installment loans 40-60 • GE money bank - 48 branches • cash loans • GEpard, ~200 used car dealers • car loans < 40 • Dobry Kredyt consumer finance – 12 2003 2004 2005 outlets and ~1000 POS Net Profit • Expander - 33 branches - financial 51.2 products distributor* PLN billion 1 • Top notch risk management and collection 0.30 0.32 • High performing sales staff Other 0.14 Źródło/Source: Inteliace Research Inteliace Research Shareholders • Fast loan processing and flexibility 1 • High margins • Control over distributors (GEpard, Expander, 2003 2004 2005 General Electric Dobry Kredyt) 99 Company • Advanced cross-selling between segments ROE (%) 20.4 26.7 22.8

* Although Expander is distributing products from various banks, GE offer / for example mortgage/ is reported to be favoured ** Compound Annual Growth Rate Source: Inteliace Analysis Inteliace Research

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