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• PSE – Visa eCommerce Acquirer Day – Landscape Review v1© 2015 Payment Systems Europe Limited

European Market Developments

22nd March 2016

eCommerce Acquirer Day

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1. Market Structure

2. Payment Types

3. Account Access

4. Market Consolidation

5. Merchant Landscape

6. In-store devices

7. Partnership Model

Topics for Discussion

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Although Europe generated 5bn transactions in 2014, and €380bn in spend,

70% of the market is concentrated in the top 5 markets

eCommerce market context

Source: PSE Consulting Analysis 2015

1. Market Structure

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ONLINE SPENDING

GERMANY

4

Key Market Behaviour Differences

ONLINE SPENDING

UNITED KINGDOM

15%

Source: PSE Consulting Analysis 2015

63%

2. Payment Types

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The Regulatory Tidal Wave

European CommissionEuropean Banking

Authority

4th

An

ti-Mo

ne

y

La

un

de

ring D

irective

MIF

Re

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latio

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Da

ta P

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ctio

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Re

gu

latio

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Gu

ide

line

s o

n In

tern

et

Pa

yme

nts

Se

cu

rity

Pa

yme

nt A

cco

un

t Acce

ss

Sta

nd

ard

s

Pa

yme

nt A

cco

un

ts

Dire

ctive

2n

dP

aym

en

t Se

rvic

es

Dire

ctive

UK Regulators

Op

en

Da

ta In

itiative

Pa

yme

nt S

erv

ice

s

Re

gu

lato

r

3. Account Access

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EACHA is to lead taskforce to develop the SCT-instant Payment Scheme

Taskforce deliverables

• The ECB has requested EACHA (The European Automated Clearing House Association) to lead a taskforce to

deliver a set of business requirements for a SCT-instant Payment Scheme (“SCT-Inst”).

• EACHA will go on to deliver an Interoperability Framework in November 2016.

Background

• While national instant payment solutions have been successfully launched in a few SEPA countries (e.g.

Denmark, Poland, Sweden and the UK), there is currently no pan-European scheme enabling instant payments

in euro.

• To drive the harmonisation of electronic payments in Europe, the EC, ECB, and EPC have been working on the

concept of a pan-European instant payment solution based on the SEPA Credit Transfer. The project is

currently focussed on the formation of the taskforce. The ‘go live’ date is set for November 2017.

• EBA Clearing and SIA have already announced they are working to deliver a pan-European infrastructure

solution compliant with the SCTInst Scheme.

• These technical standards will complement the EBA’s framework which underpins the PSD2’s legal access to

account initiative, and may accelerate the growth of payment intermediaries

ACH – Credit Transfers3. Account Access

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Payment initiation services example

The consumer clicks check-out in the website, and selects the credit

transfer scheme button e.g. Sofort (rather than Visa/MC/ PayPal)

The consumer then selects their account servicing payment service

provider (typically a bank) from a dropdown list, or types in their name

The consumer then enters their payment service provider credentials,

including their passwords and is authenticated

The scheme then creates a credit transfer order and inserts the

payee’s details. This automated process avoids any mistyping

The consumer authorises the payment with their account servicing

payment service provider

The scheme alerts the merchant/payee that the funds have been authorised

The credit transfer scheme then settles with the merchant/payee

according to the local clearing cycle – typically the next day

Check-Out

Select PSP

Authenticate

Create

Authorise

Alert

Settle

1

2

3

4

5

6

7

3. Account Access

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Larger payment players are increasingly seeking to control the whole value chain,

but this could impact speed of innovation, and customer focus

Value Chain Consolidation

Point of Interaction Processing Settlement

Hardware Software GatewayBilling and

SettlementAccount Mgt Risk

• Pricing for dedicated

payments hardware and

software have been

commoditising heavily

• Players have tried to move

into gateway and on-risk

acquiring services

• Margins on gateway

connectivity and account

processing have been

eroded

• Processors have sought

to move into on-risk

services

• Larger acquirers have

been concerned about the

loss of control of the POI,

• They have been

purchasing gateways to

support both their eComm

and F2F ambitions

4. Market Consolidation

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There have been a spate of gateway M&A in Europe as traditional payments

players have sought to enter the fast growing gateway market

Gateway Consolidation

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4. Market Consolidation

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Twitter, Facebook and Google all now enable purchases within search is seen as

a move to address growing search and compete more effectively with Amazon

Buy Buttons5. Merchant Landscape

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Consumers are comparing more, online and in-store, using peer review and web

recommendations. This is increasingly part of the new consumer payments

journey

Channel Usage

80%use the internet regularly

21%use mobiles to compare prices in store

25%seek advice before they buy from friends

and family

45%have reserved products online for collection

in stores in the past year

20%are keen to receive mobile coupons whilst

shopping

56%

Online shoppers say special discounts are

the strongest influencer in returning to a

shopping cart50%higher spend using a tablet rather than a

smartphone

#1: Delivery Costreason for abandoning online shopping

carts

55%of all time spent in online retail occurred on

a mobile device

10.4sources used to research before they buy

20%want apps that help them navigate stores

6. In-Store Devices

Source: Various online data sources 2015

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The in-store merchant devices is increasingly another version of the web check-

out experience, often on similar hardware

In-Store Devices

Clover

Casio Handpoint

Miura

Magtek

Apple iPad

Smart

phones

6. In-Store Devices

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In an increasingly complex online environment, success is driven by integrating

with a wide variety of distribution partners. Each needs to be proactively

managed through dedicated support channel

Integrated Partner Management7. Partner Management

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Thank YouChris Jones & Luke Purser