ZOOM INTO PAYMENTS Read the cartography, be an explorer! October 2016 DSF Introduction FinTech, namely the payment financial technologies, is a necessity in consumers’ daily life and a buzzword among different sectors nowadays: the processing of payment flows involves different types of players in the payment value chain, closely relevant to E- commerce, banking services, insurance, credits, mobile, etc. This booming industry was also helped by legislative changes (PSD1 and PSD2), which led to an explosion in the number of its actors. Indeed, this industry keeps changing, shifting rapidly to a more and more complete and integrated offer, which is also more complicated to handle technically. This was obviously was a huge opportunity for new actors to enter the market. Without a clear understanding of the complexities, it’s hard to get out of struggle. Therefore, we decided to sort out all the players in the coopeting industry, the relations of the whole value chain, and various functionalities of each type of solution providers. 1 | P a g e © Limonetik, 2016. All right reserved Methodology To make this cartography mapping file and to be more abundant with useful information to assist your business, we chose 3 ways to obtain and categorize information, for the companies and professionals involved in this survey, please refer to appendix: 1. 1st hand research, based on the non-confidential information and contents from sales department. 2. 2nd-hand desk research, including customer insights institution, media of payment sector, etc 3. As a one-stop payment solution PaaS, among all the players of e-retailers and payment sectors, we also contribute with our professional knowledge about payment industry into this cartography mapping document. 2 | P a g e © Limonetik, 2016. All rights reserved FIN TECH MAPPING CARTOGRAPHY (MAIN PART) 3 | P a g e © Limonetik, 2016. All rights reserved Table of contents The Payment sector: A booming industry .................................................................................. 5 PSD1 & 2: A key factor in the development of payment services .......................................... 5 What is it about? .................................................................................................................... 5 New banking institutions created by the legislative changes ................................................ 7 History of online payments: From Tech to FinTech ............................................................... 8 The value added for merchants .............................................................................................. 8 Marketplaces: An extra level of complexity............................................................................ 9 Main Services & Functionalities of online payments ............................................................... 10 1. Pay in ............................................................................................................................. 10 2. Collect & Reconciliate.................................................................................................... 11 3. Pay out ........................................................................................................................... 13 Payment actors: A Coopetitive industry ............................................................................... 14 Payment Service Providers .................................................................................................... 15 Acquirers ............................................................................................................................... 16 A specific form of acquirers: Alternative payment methods ................................................ 17 Directory of the Payment industry ........................................................................................... 22 1. Payment solution providers & acquirers....................................................................... 22 2. Marketplace SaaS/Payment technical solution providers ............................................ 28 3. Alternative payment methods ...................................................................................... 30 About Limonetik ....................................................................................................................... 38 Apprendix ................................................................................................................................. 39 4 | P a g e © Limonetik, 2016. All rights reserved The Payment sector: A booming industry PSD1 & 2: A key factor in the development of payment services What is it about? The PSD1 is the European legislation voted by the ACPR that regulates the collecting of money on behalf of third party. It paves the way for new actors to revolutionize the market, and redesigns the role of the marketplaces in the value chain. This new legislation pushes the intervention of new banking institutions (issuers of electric money, payment institutions) to collect, process and dispatch the funds from sales. This initiative leads to an increase of the competition by encouraging the emergence of new bank-like actors, and offers a better protection of consumers’ data by capturing interchange commissions. The PSD1 also intends to make the payments safer by protecting customers’ data. Indeed, it is a great opportunity for banks to collaborate with the FinTech sector, and it also opens a door for non-banking actors to enter the market and encourages them to offer value-added services to set their company apart from competitors. At the same time, it limits interchange commissions for bank card payments, which used to be paid by the final customer. The PSD2 is about regulating the role of the new actors & services brought by the PSD1, making the payments even safer, and allowing new types of bank-like services to enter the market. 5 | P a g e © Limonetik, 2016. All rights reserved Indeed, the PSD2 revolutionize the access to bank accounts information: it brings in payment initiation services and account information services. This mainly means that it is possible for the consumer to have an access to their accounts information and to initiate payments without the mediation of banks. The PDS2 drives competition and fosters innovation by reducing entry barriers for new payment service providers and online account information service providers. It will enable PSPs to launch innovative, safe and easy-to-use digital payment services and to provide consumers and retailers with effective, convenient and secure payment methods in the European Union. The PSD1 & 2 are obviously about improving the user’s experience, making it safer and cheaper. It also makes it possible for new banking and non-banking actors to enter and revolutionize the market increasing the competition and bringing in new types of services. 6 | P a g e © Limonetik, 2016. All rights reserved New banking institutions created by the legislative changes The PSD1 & 2 encouraged the emergence of new actors to play the acquiring part in the payment process. That’s why it’s important to distinguish the banks from the issuers of electronic money and from the payment institutions. They can all play the same part but at different levels according to their accreditation. Banks It is the highest banking institution – the only one allowed to grant credits. They conduct operations such as receipt of funds, credit operations, and banking payment services. They also offer side services like money exchange, financial investments, buying and selling financial products and so on… Issuers of electronic money These establishments have the second highest banking accreditation. They can issue electronic money, make it available for the public, and manage it. They can also conduct payment services operations. Their main characteristic is that they’re authorized to stock money. Payment institutions It’s the lowest banking aggregation. Payment institutions provide payment services such as executing operations initiated by card, transfer or debit. They are also allowed to transfer funds, collect money on behalf of third parties, give access to payment instruments, manage accounts, and guarantee the execution of payment operations. Unlike issuers of electronic money, that can’t stock the money: they collect it and dispatch it right away. 7 | P a g e © Limonetik, 2016. All rights reserved History of online payments: From Tech to FinTech The value added for merchants A few years ago, it was really complicated for a seller to accept payments, and even harder for alternative payment methods. Indeed, the merchant had to open an account for each payment method he wanted to include, and negotiate the commission fees with each one of them. The payment solution provider (PSP), who processes the payments and the acquiring bank were two separated entities, with different functions and costs. The multiplicity of intermediaries (PSP – acquiring institution – payment method) made the payment part really unclear. Then, the banks partnered with PSPs to offer a bundle solution, which included both the acquisition and the processing part. This alternative was taking one intermediary out of the paying process, but was mostly working for bank cards and a few other payment methods. Bundle With the new legislations imposed by the DSP1 and 2, the PSPs had to include Issuers of With the new legislations imposed by the PSD1 and 2, the PSPs had to include Issuers of Electric Money