White label solutions for payment schemes Free your payments

White Paper December 2020 3 Table of contents Free your payments

Free your payments 03 Choice and convenience key to The typical payment process The payment scheme, that acts as the Why would someone create a private label the future of digital payments intermediary between the bank and the merchant, is a critical part of the The digital revolution has transformed or national scheme? 04 payment ecosystem. A payment scheme the way we pay for goods and services. not only facilitates the transaction, it What is a white label scheme? 05 Wearable technologies, digital wallets also defines the rules and procedures and the internet of things enable Creating a payment scheme in-house: Key challenges 07 that govern that transaction. Any issuing consumers to have more freedom and Customer purchase goods or bank or business that signs up to the The benefits of a good white label approach 08 choice to pay for things in the way services and uses a card to pay scheme gains the ability to process that works for them. According to the The EMV standard 10 payments through the scheme but must US Federal Reserve, the average US also agree and adhere to the rules of A new approach to white label schemes: consumer uses 3.6 different payment that scheme, such as processing times methods every month1. This consumer The White Label Alliance 11 and payment processing fees. Payment requirement for choice, convenience and schemes break down into four different Evolving payment standards 13 flexibility has required the payments categories: The founding WLA partners 14 ecosystem to innovate and focus on providing flexible, scalable solutions. The merchant’s aquirer • International schemes G+D’s white label solutions 15 Advances in payment speeds such as processes the transaction These are the schemes that facilitate instant payments, blockchain-powered payments on a global level and are cryptographic security and the growth the ones we are all probably the most of contactless payments following the familiar with: VISA, American Express COVID-19 crisis have enabled these and Mastercard, for example. changes, but in general card payments remain one of the main payment • Regional schemes methods of choice, and still generally Depending on the card type, the These facilitate transactions across follow the same process: relevant payment scheme mediates regions, such as the EU’s SEPA system between the merchant and the or the East African Payment System issuing bank to allow the payment to go through (EAPS) – designed for payments across national lines.

• Domestic schemes These are country-specific implementations of payment standards, such as China’s Union Pay or Russia’s MIR scheme. The bank/credit card provider releases the funds to be • Private label transmitted to the merchant via A scheme owned and branded by one the payment scheme business that sets its own business model, services and rules. There are more than 50 private label issuers worldwide. 4 White label solutions: for payment schemes 5 Why would someone create a private label or national scheme?

Payment card schemes such as VISA, Additional services Lower costs Mastercard and American Express are Global schemes such as VISA Private label or national What is a white label approach? undoubtedly some of the most well- or Mastercard may not offer schemes can be more cost- known brands in the world today. other services that private effective than international However, the private label payment label schemes can provide. For schemes. These savings come White labelling is the provision third-party solution as their own. scheme market is extremely valuable example, national or private from more frugal attitudes of goods or services under the From a payment services perspective, and makes up a significant proportion of label schemes may be able to cost control and less need brand of one company, that have white label solution allows the overall global payments market. In to integrate bill payments for a high profit margin when been created or produced by governments, banks and businesses the United States alone, purchase value for other services into the compared to global schemes another company. The producer to create domestic or private label through private label cards increased to scheme or enable access to which are dependent on the creates their product or service in a payment schemes that meet specific $210 billion USD in 2018, a 3% increase transportation ticketing. stock market. Higher marketing brand-free way, and then licenses needs. These schemes use technologies year on year, and the rest of the world’s As these services are often and sponsorship costs coming another company to release the built by others but are branded by markets reflect a similar story2. However, extremely country or region from these global schemes service. This practice happens for these organizations and are created these schemes are designed to address specific, global schemes often are also a considerable factor both physical hardware, such as for specific markets/territories. A white the entire world’s payment needs and do not wish to provide the in calculating this cost- phone manufacturers producing label approach allows rapid deployment work in particular ways, that are not specific processes needed. effectiveness. devices to be released under the of new schemes without the initial always suitable for every circumstance. branding of network operators, upfront investment or ongoing In addition, certain markets may have Local decision-making Political or socio-economic and software and services, such as operational requirements of a self- specific requirements for political and As global schemes are privately- purposes loyalty management applications for created solution. economic purposes that makes relying on run enterprises, decisions Sometimes, private label retailers, where the retailer brands a global schemes problematic. taken by these schemes may or national schemes are run counter to the interests specifically designed to achieve A business, government or organization of nations or businesses. By a particular social outcome or may choose to produce a private label creating their own payment cultural change. For example, scheme (or national scheme in the case of schemes, these organizations in 2019 the Central Bank governments) for many reasons: can operate their scheme of Egypt, supported by the in the best way for them, Egyptian government, created Independence without having to adhere to Meeza, a national payment This may be a requirement global decisions that could scheme designed to promote for organizations that want be detrimental. For example, the acceptance of non-cash to use different rules or make transaction fees and processing payments throughout the different decisions in the times can be configured country, to increase social payment process. Also, changes to better match the local inclusion5. The scheme issues in the geo-political landscape economy. physical debit and pre-paid may make relying on a global cards, as well as facilitating scheme difficult or dangerous. eCommerce transactions on For example, Russian banks Egyptian websites. were threatened with a cut off from the SWIFT international payment schemes due to the conflict in the Ukraine. This led to Russia developing a competing scheme among sanctioned nations to avoiding reliance on global schemes3.

2 https://www.packagedfacts.com/Private-Label-Credit-Cards-Edition-12443463/ 3 https://uk.reuters.com/article/russia-banks-swift/russia-backs-global-use-of-its-alternative-swift-system-idUKL8N2163BU 5 https://fintech-egypt.com/news/Meeza-E-Payment-Cards-Push-for-Financial-Inclusion-in-Egypt/ 6 White label solutions: for payment schemes 7 Creating a payment scheme in-house: Key challenges

Although creating a private label or Cost Time to market national scheme may offer significant advantages to organizations looking to Although operational savings can be Another consequence of the reduced offer differentiated payment services, the realized over time, implementing a resources that private or national scheme challenges inherent in either upgrading new scheme can be extremely cost and creators face is the longer lead time to existing payment systems or creating a resource intensive. Product and service deliver products or services. With reduced new scheme in-house from scratch should development, infrastructure creation and expertise and resources, new products not be underestimated. The reason deployment, servicing and maintenance, and services can take longer to bring to that global schemes have become so all need to be created and maintained. market. popular is that their reach, influences and Additionally, the entire payment Interfacing with wider ecosystem resources can massively outweigh any the ecosystem will need to be updated to capabilities of any country or business accept a new standard, from merchants Another challenge that private and looking to implement a scheme: to banks. national scheme creators face is the Expertise requirement for their payment services to interact and interface with other schemes Often, creators of new payment schemes and providers. For example, customers will struggle to acquire the expertise to may want to use your scheme to pay innovate or create the depths of services for goods and services from abroad or that they are looking for. Top technical transfer money to non-scheme members. staff and experienced personnel tend To facilitate these options, scheme to gravitate towards larger global tech creators need to develop relationships and companies, so it can be challenging agreements with other scheme providers, for smaller businesses creating private which can take a significant amount of label schemes to attract and retain time, or require significant investment. these key personnel. This can impact these businesses’ ability to create new innovations or approach new challenges, Help is at hand! such as changes to payment regulations or standards. These challenges are significant and can potentially inhibit the creation of new schemes. A white label approach, however, could help scheme owners to avoid the pitfalls of new scheme creation and maintenance. bn 7 $210 Gov.uk Payment value through private label 8 McKinsey schemes in the US market alone in 2018. 9 Forbes 8 White label solutions: for payment schemes 9 The benefits of a good white label approach

Deploying a third-party white label Industry support Time to market payment scheme solution can help Ideally, the white label Adopting a white label scheme creators to enjoy the benefits of a provider’s approach should approach should considerably private label scheme whilst avoiding the have endorsement and support reduce the time to market challenges of setting up such a scheme form industry bodies, standard for any scheme owner. From themselves. There are several white label creators and other market initial deployment to new and scheme providers from global players influencers, to ensure that the evolving services, the draw of a to smaller niche providers for specific scheme adheres to regulations, white label approach should be market requirements. Ideally, if a scheme standards and requirements. that their expertise, resources owner is choosing a white label provider, The ideal white label partner and technology allow rapid that provider should be able to offer the should also endorse an deployment of any scheme or scheme owners the following benefits: approach where all suppliers components of that scheme. and industry players can openly Technology readiness provide their products and There are many potential benefits of and scalability services empowering an open adopting a white label approach to a The main attraction for a white market and economy of scale. national or private label scheme, but not label service is that all the all white label services offer all of these technology and components Interoperability benefits. This is why we, in conjunction that the scheme requires A significant challenge with our partners, created the White have already been created for any scheme owner is Label Alliance. and developed, and just need negotiating interactions with configuring to meet the specific other providers or schemes needs of the new schemes. The to facilitate cross-payments other technological benefit and transfers of funds. A key should be that as technology benefit of working with a improves and evolves, using a white label provider should white label scheme means that be that these relationships the scheme owner can access and processes have all been new technologies as soon as created already. Additionally, they are ready – and support these interactions should be the growth of the scheme as it independently guaranteed becomes adopted. through a third party, such as a testing lab. Interoperability is one of the key measures that scheme owners should use to evaluate the suitability of any white label partner. 65 Estimates indicate that there are approximately 65 private label schemes in use around the world. 10 White label solutions: for payment schemes 11 A new approach to white label schemes: The White Label Alliance

The EMV standard In large part to address the challenges There are multiple operators in the market of creating a private label or national that offer white label payment services, The EMV standard, a payment method payment scheme, in 2019 a partnership but their solutions tend to be based on based on the technological standards for between G+D, IDEMIA and NXP a license agreement with one company, smart payment cards, payment terminal Semiconductors N.V was initiated to create which introduces unwanted dependencies. and ATMs, is a fundamental part of an open, comprehensive and standardized The WLA aims to provide an alternative any payment scheme. EMV, (originally set of components that enable ready-to- approach. The aims of the alliance are to standing for Europay, Mastercard and deploy, interoperable payment schemes provide services that enable: VISA - the three founding companies that which adhere to EMV standards. We call created the standard) cards are chip-based this the White Label Alliance (WLA). The • Wide acceptance smart cards that transformed the payment WLA offers specifications, testing and Banks, retailers, and payment-scheme industry, offering unprecedented security, certification for cards, terminals and providers will have a quick, cost- reductions in fraud and an increase to mobile applications. effective way to deploy an advanced the range of services that can be offered payment method that can be tailored to the market. The EMV standard has The alliance is dedicated to promoting a to their particular situation. Brand become so accepted worldwide that it technology framework that ensures: owners will have full control over the is now fundamental to operating in a ecosystem and its functionality. global market – EMV is the gatekeeper of • Complete technological interoperability. In Q2 2020, 83.1% of all independence. • Independence transactions globally were powered by an Unlike other payment standards, EMV chip6. • Scalability for all technologies and which are issued by international devices, including cards, terminals, financial service providers or use and mobile devices. proprietary third-party protocols, the WLA Payment Standard is owned by • Open markets with significantly the members of the WLA. reduced effort and time-to-market for deployments. • Open and interoperable The certification program associated with the WLA Payment Standard ensures interoperability of devices from different service providers, so deployments can choose from a variety of solutions without being tied to a single provider.

• Future growth Because member companies define the future of the standard, it remains % both easy to scale and easy to evolve. Member companies can address their specific customer expectations more directly, with each new iteration of 8 3 .1 the standard. of transactions in Q2 2020 were powered by EMV standard technologies.

6 https://www.emvco.com/about/deployment-statistics/ 12 White label solutions: for payment schemes 13 continued...

The WLA was founded to serve the payment scheme market, and will be Evolving payments standards initiatives of particular interest to:

• Decision-makers at organizations that There are several key organizations • ECPC: The European Card will potentially use the WLA standard, that oversee the standards that Payment Cooperation (ECPC) is an including banks, local and regional govern the processes that make organization founded to promote brands, regional and national up the payment ecosystem. Any and support the deployment payment schemes, and merchants successful payment scheme should of CPACE ecosystems. (CPACE is using private implementations. ensure that they adhere to these a payment specification.) The standards to make their scheme a specification is EMV compliant • Industry influencers, including success. Here is an overview of a few and designed to be a multi- consulting groups and payment of these essential players: use specification to enable infrastructure organizations, such as transactions across multiple payment processors. • EMVCo. This organization payment technologies and in oversees the chip card standard different markets. • Suppliers and other industry and technology requirements participants, including card and to interface with the majority • European Payments Initiative: terminal manufacturers, system of POS terminals, ATMs and Launched by a consortium of integrators, and service providers who similar services. They also 16 European banks to create a process payments. maintain standards for secure pan-European payment scheme. payments across digital payment This scheme consists of unified services, contactless standards payment card and a digital wallet and Internet of Things-enabled and covering in-store, online and payments. person-to-person payments as well as cash withdrawals.

The structure of the White Label Alliance

The White Label Alliance is specifically organized to encourage member involvement:

Execution Bureau Board Operational (Appointed by the board) support

Working Groups Advisors / Observers *Reporting Invited by the Board/ (No voting rights) upon request

Sponsor Members Associate Members Contributing Members *Assign board members (No voting rights)

General Assembly 14 White label solutions: for payment schemes 15 G+D’s white label solutions

G+D offers a range of flexible, scalable Why choose G+D for white white label solutions that more than label payment schemes G+D white label schemes The founding WLA members meet the needs of any payment in Action: Convego® Pearl scheme owner, no matter how complex As a founding member of the White their requirements. Our solutions are The award-winning Convego® Pearl Label Alliance, and a global leader in based on the standards established solution, from G+D, is a closed- payment technologies, G+D is well placed by the White Label Alliance, and as a loop payment and loyalty program to support the creation of any white label founding member, G+D is committed to management solution designed Giesecke+Devrient (G+D) is an international Group providing security technology payment scheme: upholding the aims of the WLA – open, to enable retailers to own and and headquartered in Munich, Germany. Innovations by G+D make the lives of standardized solutions designed for control both the transaction and billions of people in the digital and physical world more secure. With its products • Expertise: We have years of interoperability and growth. the customer relationship. Created and solutions, G+D is one of the market and technology leaders in payments, experience and knowledge that with a white label approach in mind, connectivity, identities, and digital infrastructures. we can apply to the whole chain of As experts in the mobile security and Convego® Pearl powers the payment payment. payments ecosystem, with over 150 solutions for some of the world’s Established in 1852, the company achieved sales of €2.45 billion in the fiscal year years of payment experience, uniquely largest retail organizations. For 2019 and employs 11,500 people. G+D has a presence in 33 countries. Its customer • Implementation: We can support and covering both the central bank and example, Convego® Pearl has enabled base includes central and commercial banks, mobile network providers, automotive consult with any brand, helping them the commercial banking markets, we one of Asia´s largest energy company manufacturers, health insurance companies, and governments and public to build their own roadmap towards are well placed to offer solutions to to manage their retail payments authorities. Further information can be found at www.gi-de.com/en/ a scheme. the most sophisticated and demanding ecosystem from end-to-end, and as a of applications. We take an open, result to achieve a dramatic increase • Products and services: We offer a standardized approach to development, in both efficiency and revenue. complete range of products and and our solutions take the standards of services that can support the entire The global leader in Augmented Identity, IDEMIA provides a trusted environment the WLA and provide scalable, flexible payment journey. enabling citizens and consumers alike to perform their daily critical activities (such technologies that can support your − Cards as pay, connect, travel and vote), in the physical as well as digital space. Securing scheme. We have a range of card issuance − Issuance solutions our identity has become mission critical in the world we live in today. By standing and mobile payment services that can − Mobile solutions for Augmented Identity, an identity that ensures privacy and trust and guarantees be white labeled and quickly deployed secure, authenticated and verifiable transactions, IDEMIA reinvents the way we think, for issuing banks – ensuring support and produce, use and protect one of our greatest assets – our identity – whether for adoption of your private label scheme. individuals or for objects, whenever and wherever security matters. IDEMIA provides Augmented Identity for international clients from the Financial, Telecom, Identity, Public Security and IoT sectors. With 13,000 employees around the world, IDEMIA serves clients in 180 countries. Learn more at www.idemia.com

NXP Semiconductors N.V. (NASDAQ: NXPI) enables secure connections for a smarter world, advancing solutions that make lives easier, better, and safer. As the world leader in secure connectivity solutions for embedded applications, NXP is driving innovation in the automotive, industrial & IoT, mobile, and communication infrastructure markets. Built on more than 60 years of combined experience and expertise, the company has approximately 30,000 employees in more than 30 countries and posted revenue of $8.88 billion in 2019. Find out more at www.nxp.com Creating confidence Giesecke+Devrient (G+D) is an international Group providing security technology and headquartered in Munich, Germany. Innovations by G+D make the lives of billions of people in the digital and physical world more secure. With its products and solutions, G+D is one of the market and technology leaders in payments, connectivity, identities, and digital infrastructures.

Established in 1852, the company achieved sales of €2.45 billion in the fiscal year 2019 and employs 11,500 people. G+D has a presence in 33 countries. Its customer base includes central and commercial banks, mobile network providers, automotive manufacturers, health insurance companies, and governments and public authorities.

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