20180607 NACHA Conference

Faster Payments Reality in Europe & the Future of Cross Border Payments Observations on ongoing developments

Michael Steinbach CEO equensWorldline and Managing Director Worldline Financial Services

Payments Innovation Alliance 7 June 2018

2 07/06/2018 | © equensWorldline | Payments Innovation Alliance | Geneva GBL Financial Services – ID card Connecting payers and payees via any type of electronic transaction

* pro forma figures 2017

3 07/06/2018 | © equensWorldline | Payments Innovation Alliance | Geneva Faster cross-border Account-to-Account payments

Customer behavior New technologies Payments revenue pools of traditional products under Mobile APIs pressure Cross channel Biometrics New products (e.g. Instant Better User Experience Artificial Intelligence Payments) a “ new normal ” Speed Distributed Ledgers Increase in investment Key budgets : IT (including drivers and Macro trends Digitization, Globalization, Connectivity compliance and security) as enablers main spending domain PSD2 New business models Instant Payments Disintermediation GDPR Competition increase Banks are making eIDAS also w. peer banks strategic partner decisions to unlock new revenue pools New regulation Competition and reduce TCO on back-office

5 07/06/2018 | © equensWorldline | Payments Innovation Alliance | Geneva SWIFT used to be the default For cross border payments

Payer Payer Bank SWIFT Messaging infrastructure Bank Payee Payee Bank Bank

Todays cross-border payments are perceived as high cost, slow and inefficient

6 07/06/2018 | © equensWorldline | Payments Innovation Alliance | Geneva Multiple cross-border payment initiatives Forcing banks to maintain access to various instant payments networks

DLT * Fintech Incremental Instant disruptive service service Payment alternatives offerings renewal ACH services e.g. Ripple e.g. TransferWise e.g. SWIFT gpi e.g. EU and beyond

The new kid on the block * DLT = Distributed Ledger Technology

7 07/06/2018 | © equensWorldline | Payments Innovation Alliance | Geneva Instant ACH payments started domestic EU payments speeding up from days, to D+1, to D+5… seconds

European initiatives towards instant payments Finland - Unbranded

Poland - Express Elixir Greece - IRIS (Extension)

Poland - Blue Cash Latvia - EKS Instant Payments Hungary

Switzerland Sweden - Swish Italy - ZAC Spain - SCT Inst Netherlands SIC

2008 2012 2014 2015 2016 2017 2018 2019

United Kingdom Denmark - MobilePay Spain - Bizum Belgium Portugal Faster Payments Greece - IRIS France - Paylib Romania

Italy - Jiffy Ireland Slovenia - BIPS

EU cross-border instant initiatives: TIPS, RT1 and EACHA Interoperability Framework

Source: Company research and Lipis Advisors

8 07/06/2018 | © equensWorldline | Payments Innovation Alliance | Geneva The challenge of becoming cross-border Requires a full interoperability framework, not just messaging standards

Legal ; interoperability contract Compliance ; Regulatory approval to needs to be in place be obtained

Settlement ; Payment finality Reach ; Insight in participation and needs to be defined reachability to be set up

Risk management ; needs to be Data communication : Network, agreed and performed protocols and security to be aligned

ACH Cross-border Instant Payments cannot only be achieved via an interoperability framework but also via system and scheme consolidation . E.g. the P27 initiative of 7 major Nordic banks aiming to consolidate both scheme and systems

9 07/06/2018 | © equensWorldline | Payments Innovation Alliance | Geneva Resulting in disappearing differentiation Payments processing experience identical for x-border and domestic

Cross-border EU payment Cross-border payments processing experience processing is changing will see major changes, rendering them equal to domestic payments

Standardization Low cost

Commoditization Quick

And now also Instant Efficient

10 07/06/2018 | © equensWorldline | Payments Innovation Alliance | Geneva Network selection depends on use case Short to mid term will not see a global winner-takes-all

DLT 1 ° Many different channels / networks creating high complexity

DLT …

° High running costs SWIFT

° Massive investments required without SWIFT gpi additional revenues

ACH 1 ° Single bank consolidation will lead to sub-scale at best not to competitive scale ACH …

… ° Provided services are non-differentiating

11 07/06/2018 | © equensWorldline | Payments Innovation Alliance | Geneva Banks need customer facing differentiation And lower TCO on non-differentiating back-office and C&S

War on customer relation Open Payment platforms Race for scale and low price Banking transformation Key characteristics Key characteristics ° Threat of disintermediation ° Commoditization rd Customer User Back-office Clearing & ° Need to work with 3 parties: Experience Processing Settlement ° Standardization new revenue models / ° Industrialization streams ° Provide A-class user E.g. Expected required account experiences payments volume to be competitive >20bn trx/yr Need to be extremely agile and excel in innovation

For more information contact:please contact: Michael Steinbach CEO equensWorldline & Managing Director Financial Services Worldline T +49 171 381 7695 E [email protected]

equensWorldline is an expert leader in e-payment services and a registered trademark of Worldline. Confidential information owned by equensWorldline, to be used by the recipient only. This document, or any part of it, may not be reproduced, copied, circulated and/or distributed nor quoted without prior written approval from equensWorldline.