Worldline - Registration Document 2016

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Operation and financial review Overview

9.1

Overview

Introduction

9.1.1

The activities of the Group are presented in Section 6.5 of the Registration Document.

Principal Factors Affecting the Group’s Revenue and Profitability

9.1.2

9.1.2.1

Payment Services Industry

periods and expects pricing pressure from banks to continue to increase due to the changes to interchange fees. fees. The Group has experienced pricing pressure in recent See Section 6.9, “Regulation” and Section 6.2, “Industry and Market Overview”; costs. They will also seek to add new value added services to generate new fees to offset the reduction in interchange from interchange decrease, will increasingly consider outsourcing their payment processing services to reduce Technology changes. Mobility and big data technology are ● creating new payment methods and new business models. hub services (such as the integrated WIPE platform the These developments have the potential to drive additional growth in transaction numbers. Similarly, payment service Group is developing) are becoming more and more important in order to adapt existing systems to new clients and consumer behavior. The Group believes that the reduction in interchange fees will progressively encourage more merchants to accept credit and debit cards for small payments, thus driving additional growth in the number of driven by their effects on the Group’s merchant and banking transactions. In addition, the Group believes that issuing banks, which will see the amount of revenue they receive payment methods and models, which may create new outsourcing opportunities from banks whose near-term transaction volume is not sufficient to support investment in redesigning their own systems; electronic payments that the Group believes will generate increased transaction volumes. Because these new services offer opportunities for fee structures that differ from the electronic payment methods such as Online Banking enabled Payments (OBeP) and person-to-person electronic wallets are creating new non-card based methods for traditional credit card interchange fee system, they may also lead to further pressure on prices, which may in turn further outweighs the effect of any associated price decreases; fuel volume growth. The net impact on the Group will depend on whether the effect of increased volume Emergence of new electronic payment methods. New ●

Dynamics

The payment services industry is currently undergoing a period of significant change in response to changing consumer habits, new technology and regulatory developments. Trends in the payment services industry can have a significant impact on the underlying performance of the Group’s business. As further described in Section 6.2, key trends include the following: substantial portion of its revenue from the processing of payment transactions charged primarily on either a per Transaction Volume Growth. The Group generates a ● transaction or volume basis (based on a percentage of transaction value). These kinds of transactions are growing significantly as consumers gradually shift from cash to non-cash payments, driven by a number of factors including transactions using mobile devices, government initiatives to increased acceptance of non-cash payments by merchants in stores, growth in e-Commerce transactions and encourage non-cash payments and other factors. A.T. Kearney estimates that non-cash transactions in the European Union grew at a compound annual growth rate of 6% over the past 10 years. A.T. Kearney forecasts that the Market Overview” of this Registration Document; CAGR will grow to 7% between 2020 and 2015 to reach 238 billion transactions. See Section 6.2, “Industry and access European markets other than those of the originating member state in which they have a license (Visa/MasterCard) to issue payment cards or undertake have significantly decreased interchange fees and are expected to increase the ability of payment institutions to Commercial Acquiring activities. Because the Group records its revenue net of interchange fees paid to issuing banks, and does not itself act as an issuing bank, the effects of the reduction of interchange fees on the Group’s revenue will be indirect rather than direct. In the medium to long term the impact of these changes on the Group’s revenue will be Regulatory changes. Recent regulatory changes in Europe ●

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Worldline 2016 Registration Document