Introduction into Online and Mobile Payments Presented by IXOPAY and aye4fin 08 September 2020 Agenda Introduction • What even are online payments and why should they matter to me? • How did Visa and Mastercard develop a multi-billion-dollar business with Zero risk? Insights into new payment initiatives • What are banks doing and what is a ‘super app’? • Do you trust Facebook and What’s App to handle your money? Why Adyen made it and Wirecard did not • Are Adyen and Wirecard just two peas in a pod? • How did Wirecard become the Icarus of the payments industry? Intro to Online and Mobile Payments 2 Introduction The evolution of payments: From true P2P to schemes Forecast What is next for Disruption payments and who will New technologies and be the new players? Advancement capabilities shake up Schemes enable established network Standardization advanced business Same products, new models Stone Age (global) standards First real person to Guarantees person payment Key mechanisms trust Intro to Online and Mobile Payments 3 Introduction Trust and guarantee: The stone age of payments since beginning of all times P2P = Shell 4-Party Banking Infrastructure Buyer Bank Seller Bank Buyer Seller Buyer Seller • Shell payments were used in many regions worldwide • Introduction of cheques and bank accounts to enable and are still in use today more advanced business models • First real person to person payment • B2B, B2P, B2G, and other models were introduced • Key mechanism trust is still the base of all businesses • Guarantees are the foundation of any and all financial today services Intro to Online and Mobile Payments 4 Introduction Different approaches by leading companies: Advancements through new technical capabilities 3-Party Scheme 4-Party Scheme Card Scheme Card Scheme OR Issuer Acquirer Issuer Acquirer Buyer Seller Buyer Seller • Scheme focuses on promoting and securing brand • Scheme manages brand and all operational aspects • Operations will be executed by license partners (Issuer • Scheme remains owner of all business aspects and Acquirer) • Scheme has full credit risk • Scheme has zero credit risk Intro to Online and Mobile Payments 5 Introduction Domination of the customer’s daily life: Disruption in established networks lead to 5-Party Schemes Apple Pay Bluecode Card Scheme Settlement Bank Issuer Acquirer Issuer Acquirer Buyer Seller Buyer App Seller Provider • Focus on direct customer access • Private mobile payment scheme • Issuer and card schemes need to pay for access to • Introducing app provider as new party into the scheme customers • European initiative to innovate payments • Zero credit risk for Apple Pay Intro to Online and Mobile Payments 6 Introduction It started with Shells, but only Apple and Google offered innovation in the past 50 years of payment Key findings PayPal is threatened by local APMs, Visa/MC are challenged by Even existing market leaders are Apple Pay and Facebook and banks are challenged by new market challenged by new initiatives entrants Existing business models will also provide 3 and 4 corner business models still build the core of all applications the core of future business models The one who dominates the customer‘s Apple Pay, Google Pay, WeChat, Facebook and WhatsApp are daily life, will determine how payments dominating the daily life of billions of people making them will be done gate keepers for acceptance of payment systems Let’s look at some of the new payment initiatives! Intro to Online and Mobile Payments 7 Insights into new payment initiatives The market leaders: Rolling out services globally while expanding services in geographic and vertical directions • Launched in 2014 • It is not a separate payment method, but a wallet service • 50+ countries supported in 2020 encrypting card data • Handles more than 5% of global card • All transactions processed are recognized as card transactions transactions not Apple Pay Estimated number of users worldwide (in millions) The secret of success 2018 2020 227 “We have to make things intuitively obvious“ – Steve Jobs • Super easy onboarding 140 • Super Intuitive use 100 100 109 107 + • Global reach 51 39 • Consistent functionality Google Pay Samsung Pay Apple Pay girocards in Germany Source: Juniper Research & Statista Intro to Online and Mobile Payments 8 Insights into new payment initiatives Underrated alternative: Super app Grab captures Southeast Asia and will prepare for further regions to conquer • 77% of transactions via Grab Pay • Launched in 2012 as taxi service • $ 1bn annual revenue run rate • 187 million users, valuated at $ 15bn • 53 million merchants support Grab Pay, with minimum • Available in 8 Southeast Asian countries 100k joining each month Which of the following partners would you love to process Full-service in one app payments with? Transportat Wallets Videos Daily Games Recommen ion Deals ded Food Food Scooters Hotels Split Bills Destinati Traffic ons Source: Payment-Audit.com via LinkedIn The payments feature on WhatsApp is not available in Express Groceries Rewards News Ads Financial this country Services Intro to Online and Mobile Payments 9 Insights into new payment initiatives Digital Currencies are repeating the evolution of payments within few years First DLT-products: Bitcoin = P2P Digital currency issued by central banks Buyer Bank Seller Bank € Buyer Seller Buyer Seller • Bitcoins are used for anonymous P2P payments • Digital currencies replace existing means of payments • Issuing and management of values is unregulated • Issuing and management of currencies is regulated • Key mechanism trust is still the base of all businesses • Several initiatives are on ist way globally with China today being the most advanced Intro to Online and Mobile Payments 10 Insights into new payment initiatives European Banks: Avoiding the crush between digital market leaders and innovative market entrants EPI • Pan European payment scheme European Payment • Provide multichannel solutions Initiative • Reduce dependencies from US and CN SCT INST • EPC Payment scheme • Ambitions address relevant SEPA Instant Credit • Started in 2017 needs Transfer • Available across Europe • Execution does not address market needs • Market relies on leaders and • Add. communication layer RTP innovative products • Enabling additional services Request to Pay • Scheme rules by end of 2020 • Exception: few national initiatives, e.g. iDEAL • Initiative of German Banks #DK • Merge existing services (paydirekt, giropay, Deutsche kwitt) Kreditwirtschaft • Focus on reach in Germany Intro to Online and Mobile Payments 11 Why Adyen made it and Wirecard did not The adyen story: Clear focus combined with long term strategy = 'start again' Success Criteria Growth Future Scenarios • Experience from bibit • Pilot merchant Groupon pushed 1. Global scale merchant acquisition • Team with shared history global growth 2. Vertical expansion into financial • Brand-new inhouse technology • Focus on WC tech startups supply chain • Omni-channel solutions • Offering for all sales channels 3. M&A activities to increase market share • Target multinational merchants • Grown value chain with acquiring licenses in several countries Intro to Online and Mobile Payments 12 Why Adyen made it and Wirecard did not The wirecard story: Ambitious growth combined with M&A activities digital platform for financial commerce Success Criteria Growth Future Scenarios • Experience from ventures • Numerous acquisitions 1. Mini-wirecard in highly • Team desire for high margins • Offerings for all sales channels competitive market • Mediocre technology • Grow value chain with bank and 2. Disappear due to sale of assets • Online merchant acquisition acquiring license 3. Valuable assets build nucleus for new payment champion • Underserved merchants • Operate local subsidiaries Intro to Online and Mobile Payments 13 Why Adyen made it and Wirecard did not Similar offerings and aggressive sales: Considering major differences Growth strategy Organic M&A Sales focus Multinational merchants High margin • Both companies have teams of Technology Inhouse Mix of many platforms very capable and smart people • The company with focus on inhouse tech managed to succed Geographic focus EU, US and ROW EU and ROW (no US) against the M&A and high margin driven competitor Payment experience High Mediocre Risk appetite Low Mediocre and more Intro to Online and Mobile Payments 14 What does all of this mean for the future of payments? Payment is sexy Always have a backup plan Mobile Payment Companies relying on NFC single source strategies Invisible Payment face severe risks when the Contactless Commerce selected partner will go out Super Wallets of business even for a small time All these iniatives and many more will be relevant for us in the future and offer fun and “Also DAX-companies can massive opportunities for fail” user, merchants and providers Intro to Online and Mobile Payments 15 Your Host Thomas Tittelbach: Managing Partner of aye4fin GmbH Profile • International Payment und eCommerce expert with more than 20 years of industry experience • Signigicant leadership experience in the implementation and operation of digitalisation projects • In-depth knowledge of business strategy, product development, project / product management and operation Thomas Tittelbach Experience Managing Partner • Since 2016: CEO and Founder of aye4fin aye4fin GmbH • 2010 – 2015: CEO and Co-Founder of Omba and PAYRETO • 2008 – 2010: Head of Payment Systems at ClickandBuy Im Mediapark 5 • 2000 – 2008: Director of Business Operations at asknet AG 50670 Köln P: +49 (0) 221 975 867 21 M: +49 (0) 160 689 015 1 Education E: [email protected] • Industrial Engineering studies at the Nottingham Trend University (UK) Web: www.aye4fin.com • Business Engineering studies at the University of Applied Sciences Karlsruhe (DE) Web: www.payment-audit.com • Numerous publications, conferences, articles, and speaking committments Intro to Online and Mobile Payments 16 THANK YOU! Should you have any questions, please feel free to contact us. Address aye4fin GmbH Im Mediapark 5 50670 Cologne, Germany Email [email protected] Telephone +49 (0) 221 97586721 Websites www.aye4fin.com www.payment-audit.com Intro to Online and Mobile Payments 17.