Worldline - Registration Document 2016

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Business Industry andmarket overview

6.2.2.3

Key developments in technology will sustain the growth of electronic payments

To respond to these issues, an increasing number of banks and payment service providers are investing in fully-redesigned, integrated end-to-end platforms that cover the full range of payment processing and related functions, with the ability to share payment information throughout the system. These integrated new platforms are expected to enable new services, speed time to market, and create new economies of scale that allow payment service providers with the new platforms to offer more and improved services at lower costs and across geographies. According to a Capgemini/RBS study, while both large and small banks recognize the benefits of redesigning their systems, the significant costs and complexity involved in a redesign are difficult to justify for firms without smaller transaction volumes. This may create additional outsourcing opportunities for payment processing firms that can offer payment service hub enabled services on an outsourced basis. Banks in Europe are facing a range of regulatory changes that have the potential to create new outsourcing opportunities for payment service providers and to drive increased demand for value added services to create new revenue opportunities. Some of the more significant regulatory changes underway in Europe include, in particular: Regulatory changes are expected to significantly decrease interchange fees. enforced in Europe, by which interchange fees are capped at 0.2% of the transaction value for consumer debit cards and at 0.3% for consumer credit cards and by which transparency and competition in the card market are improved, as further described in Section 6.9. Since December 9, 2015, Interchange Fee Regulation (or “IFR”) is At constant volumes, the reduction in interchange fees reduces mechanically the revenue of card issuing banks. This may create new opportunities for outsourcing, as banks reexamine their business models and look for ways to lower their costs. At the same time, it may create opportunities for providers of value added services (such as fraud detection services or card-linked offers) that banks can provide to their customers as new sources of revenue to replace the loss of the interchange fee. At the same time, by reducing the cost of accepting non-cash payments, the reduction in interchange fee is expected to encourage more merchants to accept card-based payments and to do so for lower transaction amounts. This is expected to help drive additional non-cash transaction volume. Regulatory changes in the payment sector are expected to create new opportunities 6.2.2.4

Tomorrow, smart watches will be a one-stop-shop handy device for identification, to open a hotel door, to receive contextual messages/notifications or to easily pay services or goods. Coupled with the right privacy protections, mobile devices will offer retailers opportunities to collect, on an opt-in basis, a vast amount of contextual data about consumers that can then be analyzed and shared with other brands to offer consumers (ideally in real-time) compelling targeted and personalized offers or products and services. The data collected by mobile sensors will also lead to the rise of “quantified self”, meaning services relying on self-evaluation of behavior for providing advices or services around health, insurance, nutrition, and many other domains. Blockchain is a distributed ledger, and it used in all Bitcoin transactions. Blockchain has many applications beyond cryptocurrencies. According to Capgemini World Payments Report 2015, it has the potential to improve the efficiency of financial transactions worldwide and to transform the global financial network. Each blockchain network is based on a unique cryptographic algorithm and protocol that allows secure and direct digital transfers of value and assets (such as money, contracts, and stocks, etc.) via open or closed networks that are backed by exchanges. While traditional ledgers are owned and maintained by one institution and access is restricted, a blockchain is hosted on a worldwide peer-to-peer network of computers. A key feature of blockchain technology is the distributed ledger, which enables the participatory model of the blockchain. Banks could adopt this technology to replace some existing payments infrastructures. Indeed payments have been identified by EBA as one of the use case of crypotechnologies. Existing platforms for payment services processing have developed over time, generally as iterations of a series of platforms, each designed to handle only specific parts of the payment services value chain. This “silo” approach results in inefficiencies (lack of standardization, redundant or conflicting features, higher maintenance costs, longer waiting periods for introducing new products to the market, etc.) and lost opportunities to share and make use of data generated in one part of the value chain with applications in other parts of the value chain. According to a Capgemini/RBS study, the current payment engines and infrastructure used by most banks do not meet today’s requirements in terms of functionality, capacity and flexibility, leaving banks at risk of customer erosion in the face of innovative offerings by non-banking firms that rely on new technology.

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Worldline 2016 Registration Document