Savantor MarketEye: 17 – 30 November 2014 2011

Savantor Limited 68 Lombard St London EC3V 9LJ This is a high-level industry news and business intelligence update Tel: 0870 734 6250 Fax: 0870 734 6251 bulletin. For further information on any of the items contained within the email: [email protected] bulletin or to discuss the potential impact of these items on your www.savantor.com business, please contact Savantor on [email protected] .

Items in this issue: Savantor’s View ...... 1 Monitise gets £49.2 million boost from Santander, Bank fines for IT failings ...... 1 Telefonica and IBM ...... 3 Discover fires lawsuit alleging anti-competitive practices Products & Initiatives ...... 2 at Visa ...... 4 Twitter lets users add coupons to cards for in-store Danish telcos sell m-payments venture to bank-owned redemption ...... 2 rival ...... 4 Crédit Agricole joins French bank-run e-payments Bank of England appoints Deloitte to probe Chaps service ...... 2 breakdown ...... 4 HSBC rolls out Paym for business customers ...... 2 Visa Inc frets over $10 billion price tag on European Square takes Register worldwide ...... 2 brand ...... 4 Coinbase partners RewardsPay to bring bitcoin RBS and Ulster Bank hit with £56 million fine over IT payments to iTunes and Facebook ...... 3 meltdown ...... 4 Barclays Pingit is just the ticket for First Bus ...... 3 Contactless payments in UK head for mainstream - Post Office launches Twitter donation service for Worldpay ...... 5 Children in Need ...... 3 Snapchat partners Square on P2P payments...... 3 Mobile Money ...... 5 Startup taps Indiegogo for BLE-enabled wallet ...... 5 Market News ...... 3 PayPal launches Pebble smartwatch app ...... 5 adds scale in pre-paid with plans to acquire Ukash 3

Savantor’s View

Bank fines for IT failings In November, RBS were fined £42 million by the Financial Conduct Authority (FCA) because of their IT failings in 2012 and the resultant impact on their customers. This formed part of a total £56 million fine issued jointly with the Prudential Regulation Authority (PRA). Whilst some will no doubt be saying “good, they need to get their house in order”, others, with an arguably more pragmatic perspective, may well be a little bemused. Anyone who has dealt with IT infrastructure, especially on the scale required in the banking sector with its high level of regulation, ever-changing compliance rules and a dynamic service landscape, knows that its success is driven by investment in both existing and new platforms and hardware. Whilst punitive fines are a necessary weapon in a regulator’s armoury and wholly appropriate in the right circumstances – e.g. the well publicised “dodgy dealings” in the City – choosing to deprive an organisation of cash that could be put to better use specifically addressing the problem in question (in whole or in part), to the benefit of their customers, seems to be a questionable result. The FCA directly refute the Bank’s claim that the issues were caused through a chronic lack of investment for a number of years prior, stating that “The RBS Group spends over £1 billion annually to maintain IT infrastructure”. It’s no secret that escalating maintenance costs due to ageing infrastructure inhibit investment, in this case no doubt contributing to the banks failings relating to Principle 3. Given that this has proven to everyone that more investment is required, why deprive the Bank of £42 million now? FCA enforcement fines for 2014 to date have “raised” nearly £1.5 billion heading straight for the Treasury but here, surely, RBS, NatWest and Ulster Bank customers – the people directly affected by the down-time – would benefit from that £42 million being invested in customer-facing services rather than heading off to the Treasury’s pockets. Fines aren’t always the best solution – and a fiercely regulated industry doesn’t necessarily benefit the customer as best it could.

Whilst Savantor Limited (“Savantor”) has used reasonable efforts to obtain information from sources which it believes to be reliable it does not make any representations or give any warranties or guarantees that the information provided or any opinions expressed herein are accurate, reliable or complete and none should be relied upon as statements of fact. In no event, including (without limitation) negligence, and in no circumstances will Savantor be liable for any loss or damage of any kind whatsoever, including (without limitation) any d irect, special indirect or consequential damages, caused by the use of or reliance upon information provided or opinions expr essed herein.

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Products & Initiatives

Twitter lets users add coupons to cards for in-store redemption In its latest foray into the commerce sphere, Twitter is testing a feature that lets users add discounts from advertisers on the social network to their payment cards. When a user sees a Twitter Offer from a company in their timeline, they can add the coupon to their credit or debit card with a few taps and then redeem it in real time by using the card in-store. After the purchase, the cash back savings appear on their card statement within a few days. Once the first offer is linked to a card, the payment information is encrypted and stored to make it easier to claim future deals. People can remove the information from their account at any time. Twitter is already testing a 'buy' button that merchants can embed in tweets so that shoppers are able to make purchases from within the social network. (Source date: 25 November 2014)

Crédit Agricole joins French bank-run e-payments service Paylib, a PayPal-style online payment system set up last year by French banks, is extending its reach thanks to the addition of Crédit Agricole as a member and a deal with MasterCard that will let people use the service abroad. Established by BNP Paribas, Société Générale and La Banque Postale, Paylib lets users link a card and then make payments at participating retailers' websites by entering their email, password and a code generated by a mobile app. In just over a year, the service has been adopted by more than 300,000 of the banks' customers and 700 e-merchants. The addition of Crédit Agricole next year, on the heels of Crédit Mutuel Arkéa, means that Paylib will be available to 40 million French cardholders and more than 30,000 retailers. Meanwhile, the banks are tapping MasterCard's MasterPass acceptance network to enable users to shop at another 60,000 merchants in 13 countries around the world. The deal will also see Paylib and MasterPass jointly promoted to French e-merchants, who will then be able to accept payments from abroad. (Source date: 25 November 2014)

HSBC rolls out Paym for business customers HSBC business customers can now take payments using just a mobile phone number, as the UK bank rolls out the Paym service for Business Internet Banking subscribers. Until now HSBC’s Paym service, which launched in the UK in April this year, has been limited to personal current account holders, but now the bank's 6000,000 online business customers will also be able to sign up to receive payments direct to their accounts. HSBC will offer customers the option of registering up to 50 different mobile numbers to receive payments across their eligible business current accounts. The bank says this will be particularly useful for businesses with larger sales forces. With more banks joining the service in waves, more than 40 million UK bank customers are now able to register for Paym - representing over nine out of ten current accounts. (Source date: 21 November 2014)

Square takes Register worldwide Square is looking to expand beyond North America by making its Register point-of-sale software available to businesses worldwide. The free Android and iOS app gives merchants a cloud-based point- of-sale tool to track sales, and manage items and inventory. Users also get a dashboard for analytics, digital receipts, and access to a marketplace of apps from third parties. Already used by "millions" in the US, Register is now available worldwide, in English, Spanish, French and Japanese, and supports 130 internationally recognised currencies. The move is a first step into international waters for Square, which is still not processing payments or selling its Reader and Stand card acceptance hardware outside of North America. (Source date: 20 November 2014)

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Coinbase partners RewardsPay to bring bitcoin payments to iTunes and Facebook Coinbase has struck a deal with payments platform RewardsPay that enables online shoppers to use bitcoin for purchases at the likes of iTunes and Facebook. RewardsPay's service lets people use the cash rewards they get from credit card companies, hotels, airlines and retailers to make online purchases. Coinbase is taking advantage of the firm's integration with major merchants to expand the pool of sites where people can use bitcoin. The deal opens up sites including iTunes, Facebook, Overstock, Heels.com, World Golf Tour, Club Penguin and Grooveshark to bitcoin users. (Source date: 20 November 2014)

Barclays Pingit is just the ticket for First Bus First Bus has become the first UK nationwide public transport company to offer Barclays Pingit as a mobile payment option. This month saw First Bus complete the roll out of Mobile Ticketing across its operations. Despite having only recently added the Barclays app as a payment option for customers, Pingit's share of mTicketing transactions is approaching seven per cent. Since launching mTicketing in its Aberdeen and Worcester operations in March 2014 First says it is now selling more than 30,000 mTickets a month across the UK. (Source date: 19 November 2014)

Post Office launches Twitter donation service for Children in Need Twitter users can now tweet to donate cash to the UK's Children in Need charity campaign, 'Be a Hero', through a service developed by the Post Office and IMImobile. Users who would like to make a donation need to follow the Post Office (@PostOffice) on Twitter and tweet the hashtag #MakeMeAHero. Tippers then receive a direct message with a URL to a landing page (served within Twitter) through which they can donate £1, £3 or £5. The donation will be debited from the user’s phone bill or pay-as-you-go balance. (Source date: 18 November 2014)

Snapchat partners Square on P2P payments Snapchat has teamed up with Square to enable users to send each other money through the Photo sharing app. Based on Square Cash, Snapcash lets Americans over the age of 18 link a debit card and then send money directly to friends' bank accounts by typing the dollar sign and an amount before hitting a green pay button. (Source date: 17 November 2014)

Market News

Skrill adds scale in pre-paid with plans to acquire Ukash Skrill Group is to acquire Ukash, a UK-based electronic money system that allows users to exchange their cash for a secure code to make payments online. London-based Skrill Group says the acquisition will add scale and reach to its pre-paid unit . Skrill acquired paysafecard in 2013. Much like Ukash, users can buy topped-up paysafecards for shopping online via a network of more than 450,000 distribution outlets across 39 countries. (Source date: 27 November 2014)

Monitise gets £49.2 million boost from Santander, Telefonica and IBM Santander, Telefonica and MasterCard are to invest £49.2 million in Monitise, providing a welcome boost to the London-based mobile money outfit after Visa decided to sell off its stake in the company. Shares in Monitise moved up 14% on the news, as the company re-iterated its guidance to be Ebitda profitable in FY 2016. In September, Monitise posted a full-year Ebitda loss of £31.4 million, up from £19.3 million in 2013 as it struggled through an overhaul of its business model, ditching big upfront license fees in favour of a subscription-based system. That news coincided with an announcement by Visa that it was contemplating a sale of its 5.5% stake in the firm, causing a 25% plunge in Monitise's share price. (Source date: 27 November 2014)

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Discover fires lawsuit alleging anti-competitive practices at Visa Discover has filed a lawsuit accusing rival card scheme Visa of anti-competitve practices in its debit card business. Discover, through its Pulse Network unit, is challenging a Visa rule that requires issuers to use its PIN services rather than those provided by alternative networks, alleging that Visa is engaged in "illegal behavior to fend off competitive threats to its debit network services monopoly". Discover contends that Visa is offering incentives to merchants to route their debit transactions solely over the Visa network, in defiance of a 2010 ruling that allows merchants to choose between one of any two processing networks for their debit transactions. (Source date: 26 November 2014)

Danish telcos sell m-payments venture to bank-owned rival Swipp, a mobile payments service owned by a consortium of Danish banks, has acquired Paii, a rival outfit formed by a group of telcos. Developed by mobile operators TDC, Telenor, Telia and 3, Paii has established itself as the third most popular m-payments service in Denmark, behind Swipp and market leader Mobilepay. The combined venture has now set its sights on overtaking Danske Bank's MobilePay within two years as Denmark's most used mobile app, according to local business paper Børsen Finans. (Source date: 26 November 2014)

Bank of England appoints Deloitte to probe Chaps breakdown The Bank of England has appointed Deloitte to conduct an independent review of the ten-hour breakdown in the operation of the UK's high value payments system, Chaps, last month. The Bank has so far remained tight-lipped about the fault, which saw the deadline for processing payments through the system extended into the evening as it struggled to clear a large backlog. Although it has yet to give a clear explanation, it is understood that the glitch followed a weekend upgrade to change the name of a single bank name, from Northern Bank to Danske Bank, on the Chaps platform. The breakdown in service was a huge embarrassment for the central bank, which has previously lambasted the nation's banks for the failings in their legacy IT infrastructure. (Source date: 24 November 2014)

Visa Inc frets over $10 billion price tag on European brand Visa Inc says that it may have to find $10 billion to fund the acquisition of Visa Europe should European banks exercise their option to sell the business to its US counterpart. The $10 billion price tag has been floated by Visa Inc in an SEC filing, with the company saying that it would need to access third-party financing to meet its obligations under the 285-notice period specified under the contracts. While they share the same brand, Visa Europe and Visa Inc are separate entities, with the US business listed on the New York Stock Exchange. Visa Inc. has a call option to buy shares in the bank-owned European organisation, while Visa Europe's members have a put option to sell them to Visa Inc. In the filing, Visa Inc says an acquisition could also have an adverse impact on the company's operations as it would have to act swiftly to integrate Visa Europe's business and systems into its global operations. (Source date: 24 November 2014)

RBS and Ulster Bank hit with £56 million fine over IT meltdown The Royal Bank of Scotland and its subsidiary Ulster Bank have been hit with a £56 million fine by regulatory authorities over a computer malfunction in 2012 that locked customers out of accounts and knocked out payments processing systems. The IT failure affected over 6.5 million UK customers for several weeks. Today’s fine is the first time the FCA and the Prudential Regulation Authority (PRA) have taken joint enforcement action. The FCA hit the banks with a £42 million fine, while the PRA put a £14 million price tag on the incident. (Source date: 20 November 2014)

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Contactless payments in UK head for mainstream - Worldpay Contactless has shaken off its novelty tag in the UK and is surging towards the mainstream according to Worldpay, which is reporting a 150% rise in volumes over the past six months. The payment processing company says it handled 16.69 million contactless transactions in October compared to just 6.65 million in April this year. In total, Worldpay says it has processed over £1 billion payments using the technology in the last three years. London, which recently introduced contactless payments across all major transport hubs, is setting the pace with just short of half of all contactless transactions taking place within the M25. Other cities are catching up fast however, with contactless transactions increasing by 286.6% in Bristol and 223.3% in Bournemouth between 2013 and 2014. (Source date: 18 November 2014)

Mobile Money

Startup taps Indiegogo for BLE-enabled wallet Half of Silicon Valley may be bidding to make it a relic of the past, but the old fashioned leather wallet is getting a new lease of life through a high-tech makeover. Startup StreetSmart has launched an Indiegogo campaign for its SmartWallet with built-in Bluetooth Low Energy locator, USB sync cable and backup battery station. The BLE locator pairs with a user's smartphone and when the two are out of range saves the last known GPS location and sends a text message. If the phone is lost, the user can sign in to the SmartWallet app on another device and retrieve the location information and press a button on the wallet to ring it. (Source date: 24 November 2014)

PayPal launches Pebble smartwatch app PayPal has built an app for the Pebble smartwatch that lets users check in and pay at retailers on the go. The app lets Pebble wearers find stores and restaurants, check in, order what they want and then pay before they even arrive. The app also sends out payment notifications. PayPal has taken an enthusiastic approach to wearables and already has apps for Android Wear devices and the Samsung Gear range. (Source date: 19 November 2014)

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