Worldline - Registration Document 2016

Business Industry andmarket overview

Themain parties involved in a typical credit or debit card transaction include The card issuer: Generally, but not necessarily, banks issue ● debit, credit or prepaid cards to individuals or corporations to be used as a payment method in face-to-face (card present) or remote (card not present) environments. The process of issuing and managing the cards and the process of authorizing, clearing and settling the payments is complex. As a result many issuers outsource part or all of these activities to so-called third party issuer processors such as Worldline; The merchant: Merchants are any party which sells good ● and/or services in exchange for payment. Merchants need a mechanism that enables their acceptance of card payments (online to face-to-face); processing providers provide merchants with the means (POS terminals, mobile POS (mPOS) terminals, online payment gateways) to collect and transmit card data and receive payment authorizations in stores, online and via mobile devices. Some of these also provide merchant with acceptance-related services beyond core processing functions, such as enhanced reporting, loyalty programs, advertising services, quality surveys using payment terminals, dynamic currency conversion (DCC) services, etc.; The Merchant Services Provider: Payment acceptance ● Bancontact/Mister Cash, etc.) network and a merchant account. Commercial acquirers receive funds from issuing banks and deposit the proceeds, net of a “merchant service charge,” into the merchant’s account. Acquirers may or may not also provide Merchant Services as described above. Like issuers, many acquirers outsource part or all of their activities to “third party acquirer processors”. Such processors will typically route transaction data received The Commercial Acquirer: Acquirers are banks or payment ● from merchants’ physical or online payment gateways with a view to obtaining payment authorizations via the credit and debit card scheme networks, known as “front-end” processing, and then ensuring that each transaction is appropriately cleared and settled into the merchant’s bank account, known as “back-end” processing. Worldline, which is the largest commercial acquirer in Belgium, expanded its Commercial Acquiring activities into the Netherlands, Luxembourg, and Slovakia. The completed acquisition of Paysquare brings Worldline strong positions in merchant services in The Netherland, in Germany and to a lesser extent in Poland. Additionally, the acquisition of the merchant portfolio of Komercni banka and the accompanying strategic alliance signed with this bank gives Worldline a significant presence in the Czech Republic; institutions that provide merchants with access to the card scheme (e.g., Visa, MasterCard, Carte Bleue,

and clearing houses for their respective card brands. Card schemes include both international brands such as Visa and MasterCard, and domestic schemes such as Carte Bancaire in France or Bancontact Mister Cash in Belgium; between all of its member banks, typically through a separate batch payment system, which set card scheme network rules and interchange fees and act as custodians Clearing is a process through which a card issuing bank ● exchanges transaction information with a processing bank. It occurs simultaneously with the settlement. The acquirer or merchant service provider will connect the merchant card acceptance system to card scheme. The clearing Settlement is the exchange of funds between a card issuer ● and an acquiring bank to complete a cleared transaction and the reimbursement of a merchant for the amount of each card sale that has been submitted into the network. All credits and debits of a given bank are summed up and the net amount is transferred in a lump sum to the bank’s account with the respective scheme network (in the case of an acquirer) or from the bank’s account (in the case of an issuer). RevenueModel – Interchange Fees and Service Fees In a typical card based payment transaction, most of the key “core” players deduct their service fees from the gross amount originally charged by the merchant for the good or service. By way of a simplified illustration, in a € 100 “off-us” credit transaction using (i.e., a transaction in which the commercial acquirer is not the same institution as the issuing bank) Visa or MasterCard with an interchange fee of 0.30% and a card scheme processing fee of € 0.05 per transaction: the issuing bank would immediately withdraw € 100 from ● the cardholder’s available balance and a debit of € 100 would appear on the cardholder’s monthly statement at the end of the month; the issuing bank would then transfer € 99.70 to the card ● scheme, having deducted the interchange fee of 0.30%. If the issuing bank outsources Issuing Processing services, it might separately pay the issuing processor, for example, € 0.03 of the € 0.30 fee; commercial acquirer; the card scheme would then transfer € 99.70 to the ● Card schemes: Card schemes settle card transactions ● Clearing and settlement system: ● messages contain data on the validity of the payment, but no funds are transferred,

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Worldline 2016 Registration Document