© Internal Consulting Group 2015 KAR 017 – Future of Global Payments COMMERCIAL IN CONFIDENCE Knowledge Area Review (KAR 017) The Future & Implications.

© Internal Consulting Group 2015 KAR 017 – Future of Global Payments COMMERCIAL IN CONFIDENCE Knowledge Area Review (KAR 017) The Future & Implications of the Evolving Payments System A Review of Increasingly Interoperable Worldwide Payments November 2014

© Internal Consulting Group 2015 KAR 017 – Future of Global Payments COMMERCIAL IN CONFIDENCE 2 Confidentiality Our clients’ industries are extremely competitive. The confidentiality of companies’ plans and data is obviously critical. ICG will protect the confidentiality of all such client information. Similarly, management consulting is a competitive business. We view our approaches and insights as proprietary and therefore look to our clients to protect ICG’s interests in our proposals, presentations, methodologies and analytical techniques. Under no circumstances should this material be shared with any third party without the explicit written permission of ICG. Disclaimer ICG has made good faith efforts to ensure that this material is a high-quality publication. However, ICG does not warrant completeness or accuracy, and does not warrant that use of the material ICG’s provisioning service will be uninterrupted or error-free, or that the results obtained will be useful or will satisfy the user's requirements. ICG does not endorse the reputations or opinions of any third party source represented in this material. Copyright Notice While third party materials have been referenced and analysed in this material, the content represents the original work of ICG's personnel. This work is subject to copyright. ICG is the legal copyright holder. No person may reproduce this material without the explicit written permission of ICG. Use of the copyright material in any other form, and in any medium whatsoever, requires the prior agreement in writing of the copyright holder. The user is allowed ‘fair use’ of the copyright material for non-commercial, educational, instructional, and scientific purposes by authorised users.

© Internal Consulting Group 2015 KAR 017 – Future of Global Payments COMMERCIAL IN CONFIDENCE Introduction 3 This document provides a synthesis of available public domain information regarding the Global Payments System (GPS), its future and the implications of that. It is intended to provide a comprehensive overview of the current state and issues across the globe. The authors have summarized the information collected in a manner to provide the reader with a logical flow, and have referenced source material in each case. We have also provided insight through rudimentary analysis, representing information that we have collected to show relationships and improve the value of the raw information collected. Our objective is to provide a broad view of the global payments environment and its implication on the key stakeholders in its various jurisdictions as catalyst and support to internal dialogue and in developing a shared perspective on the future and how to respond to its ongoing evolution and expected changes. To do so, we broke the issue down into six component parts: 1.How has the GPS evolved over the past 10 years? 2.How are social, economic and geopolitical factors influencing regulatory change? 3.How are customer expectations and competition changing? 4.What are the innovations and key trends? 5.What effect does the changing GPS have on risk management? 6.What are the key considerations for stakeholders and different governance models? Our research suggests that, as the global economy shifts toward greater retail spending, consumers will be a key driver in payments innovation across the entire value chain (i.e., pre-payment, payment and post-payment). We will see significant innovation in the payments world in the next 10 years. Increasingly payments will not be separate activities (i.e., the payment), but more and more form a part of a larger ‘commercial’ transaction that is laden with harvestable commercial information and potentially multiple currencies.

© Internal Consulting Group 2015 KAR 017 – Future of Global Payments COMMERCIAL IN CONFIDENCE Six Key Themes Have Emerged as Key Drivers of Change in the Global Payments System 4 Innovation in the Payments Sphere Evolution & Key Concepts Customer & Competition Emerging economies Channels & Segmentation Accessibility & Simplicity Customer touch points (front end) Legacy environments Control Frameworks Operating Models Safety (Trust), Security & Reliability Risk Management Risk appetite Variation by Jurisdiction Source: ICG Analysis Value-Add Services Reform initiatives Regulation Disruption of Payments Value Chain Growth & economic benefit Cross border payments Understanding the evolving payments world, and recognising its implications will best position stakeholders, including governing & facilitating organisations embrace change Competition Banks & non-Banks Operational & Commercial Risk Utility services Investment & Incentives Learning from SEPA Role of key stakeholders (self v external) Standardisation Extra territorial Collaboration through Partnership Shadow payments 123 4 56 Pace & nature of change Technology (cloud, big data) Definition of GPS Governance New & emerging Risks Social, Economic, Geopolitical

© Internal Consulting Group 2015 KAR 017 – Future of Global Payments COMMERCIAL IN CONFIDENCE 5 SectionComponentDescription 1Executive Summary Overview of our research and findings 2The Global Payments System Overview of the Global Payments System, its evolution and key implications for stakeholders 2a Evolution & Key Concepts: How has the global payments system evolved over the past 10 years? For each different dimension The key thinking from consulting firms, journals and academia as to what constitutes best practice Examples of this best practice across different firms and industries 2b Regulation: How are social, economic and geopolitical factors influencing regulatory change? 2c Customer & Competition: How are customer expectations and competition changing? 2d Innovation in Payments: What are the innovations and key trends? 2e Risk Management: What effect does the changing GPS have on risk management? 2e Governance: What are the key considerations for stakeholders and different governance models? 3Knowledge Sources Relevant published materials for further reading The Future of the Payments System – Table of Contents

© Internal Consulting Group 2015 KAR 017 – Future of Global Payments COMMERCIAL IN CONFIDENCE Executive Summary 6 As the global increase in retail spending fuels global growth of Gross Domestic Product (GDP), consumers have become a key driver in payments innovation across the entire value chain (i.e., pre-payment, payment and post- payment). Increasingly payments aren’t separate activities, but more and more form a part of a transaction that is laden with commercial information and multiple currencies. Two key developments to watch: the introduction of an increasing number (and with some, risk) of new payment types, and the harvesting of value from information embedded in them. An increasing range of payment alternatives: The available range of global payment alternatives is growing at a fast and rapidly accelerating rate. Continued growth will occur in consumer payment choice from predominantly cash or cheque (and perhaps credit card) to now multiple choices (cash, cheque, credit and charge cards, contactless and mobile payments, virtual payments and an array of consumer and business apps with embedded payment elements). As a consequence: Progressively, consumers will drive innovation and expect payment method fit for personal circumstance Merchants will risk alienating customers if they don’t offer multiple payment acceptance options (with cost of doing so) Merchants and banks will attempt to steer customers towards differential price payment choices and transaction routing. This may have only a temporary impact Implication of information and payments: The power and potential of payments information, and enabling technologies, will encourage new players into the payments industry, many with large consumer franchises that can be effectively leveraged, directly or as a pipeline (e.g., to date: large retailers, e-infrastructure operators, TESCO, Walmart, Google, Amazon, Apple). The shift to consumer information leverage on payments margins, plus the decreasing cost of payments’ “rails”, will create a different profit perspective, and invite increasing disruption to traditional business models. …. Executive Summary (2)

© Internal Consulting Group 2015 KAR 017 – Future of Global Payments COMMERCIAL IN CONFIDENCE Executive Summary (2) 7 Source: ICG Analysis Plenty of Disruption: There will be a huge growth in the number of disruptors to established players and payment infrastructure (e.g., Dwolla, Google Wallet, Apple Pay, Square, MCX, Bitcoin, etc.). This presents two key dilemmas: A risk of established players struggling to respond and losing share of wallet to these new ’upstarts’ The need for regulatory action to engage with and ensure adequate regulation of the new entrants Growth in Real-Time Payments: Additionally, growth in real time payments (e.g., UK Faster Payments) will have additional consequences: Faster settlement encourages emerging payment types (e.g. payment mobile to mobile) Intra-day settlement represents a two edged sword with benefits to some, but also challenges and risks New payment types are unlikely to carry the attractive float of traditional payment types, a real impact on P&L International Implications: As does the impact of free trade, the payments environment will require increased infrastructure to support the internationalisation of brands and related retail and wholesale trade: Cross-border standards, risk management, fraud mitigation Internationalisation of payments brands and mechanisms – and the impact on evolving economies Mitigation of regional payments profit pools Industry reaction will be fragmented within traditional cohort groups, new alliances between risk managers and consumer franchise owners, consumer franchise owners becoming banks, and an uncertain regulatory environment attempting to deal with change in risk and industry structure. Increased balkanisation will be observed. There is no doubt, the future of the payments environment will be exciting, if not challenging for all stakeholders.

© Internal Consulting Group 2015 KAR 017 – Future of Global Payments COMMERCIAL IN CONFIDENCE 8 Definitions What do we mean by the “Global Payments System” and select concepts? An efficient, secure and reliable payment system reduces cost of exchanging goods and services. Moreover, it is an essential tool for the effective implementation of monetary policy, and for the smooth functioning of the money and capital markets (in a global payments system). 1 Payment systems sit at the heart of the economy. They are the mechanisms that allow money to flow continually among and between households and businesses. Leading providers shaping the path to 2020 must appreciate the scope and breadth of the payments business, encompassing retail, commercial, public-sector and cross-border activity including: trade, capital and investment flows, retail transactions, public sector transactions (including tax payments) and cross- border remittances. 2 Traditionally a payment has been defined as: Compensation, discharge or performance of an obligation, or reimbursement, by giving over something that is of satisfactory value to its recipient, such as money 3dischargeperformanceobligation reimbursementvaluerecipientmoney As the payments system continues to evolve – the content of that core payment transaction itself is evolving – part of a the ‘payments platform’. More and more, the payment includes additional (and often sophisticated) information supplemental to the traditional value component for use by the recipient. Source: (1) World Bank, Payment System Outlook, 2013; (2) BNY Mellon Global Payments 2020:Transformation and Convergence, 2014, p39; (3) http://www.businessdictionary.com/definition/payment.html#ixzz3IOjs9bT7; ICG Analysis

© Internal Consulting Group 2015 KAR 017 – Future of Global Payments COMMERCIAL IN CONFIDENCE Taxonomy of Global Payments System (GPS) Payment systems sit at the heart of the economy. They are the mechanisms that allow money to flow continually among and between households and businesses. 9 Source: Adapted from Celent, Taxonomy of Payments, ICG Analysis ATM/ABM cash or other transaction Cheque or other bill of exchange Dividend declared Commuter transport fare Correspondent banking Domestic & International trade and other remittances Foreign or domestic aid Foreign exchange Grant or subsidy payment Intra and intergovernmental payments Invoice payment Loan disbursement Lease, loan or interest payment Purchase asset Purchase securities Purchase services Refund requested Retail goods / services purchase Returns/Corrections Salary & wages Taxation refund or payment Customer Driven Requirements

© Internal Consulting Group 2015 KAR 017 – Future of Global Payments COMMERCIAL IN CONFIDENCE Payments Evolution Disruptions are numerous as Digital Technologies, Regulation, Intensifying Competition and New Market Entrants Shift Economic Models. Banks must act to gain market leadership. 11 Although the next ten years should bring substantial growth in the payments and transaction-banking businesses, banks will grapple with a host of forces that will require them to sharpen their capabilities. ‘Never in the history of the payments business has there been a time of such disruption and opportunity across regions. Payments players, depending on their strategic decisions over the next ten years, will have much to lose or gain.’ 1 Globally, the payments business generated $US 425 billion in transaction revenues in 2013, $336 billion in account-related revenues, and $248 billion in net interest income and fees related to credit cards. The total represents roughly one-quarter of all banking revenues globally. Banks handled $410 trillion in noncash transactions in 2013, more than five times the amount of Global GDP. Value of noncash transactions will reach an estimated $780 trillion by 2023, a CAGR of 7 per cent Payments revenues will reach an estimated $2.1 trillion, a CAGR of 8 per cent. In the past decade, five major trends have changed the global payments landscape; (1) Penetration of payments market by non-bank payment service providers (2) Increased fragmentation of the payments value chain (3)Challenges to business models caused by regulatory and industry dynamics (4) Barriers to a full and successful SEPA migration and (5) Payments growing in importance and reaching board level attention. 2 In order to succeed banks must broadly take three actions: (1) Approach payments as a platform, not simply as a product (2) Identify the key initiatives that warrant investment; and (3) Pursue multiple paths in order to gain both broader experience and new customer insights. Source: (1) Boston Consulting Group Banks’ Payments Businesses are Facing New and Tall Challenges; CG analysis; Note (i) Stefan Dab, BCG; (2) Capgemini Global Payments Report, 2014 pg 48

© Internal Consulting Group 2015 KAR 017 – Future of Global Payments COMMERCIAL IN CONFIDENCE 12 Source: BCG Global Payments, 2014, pg 6 Global Payments revenues will reach an estimated US $2.1 trillion, a CAGR of 8% Revenue growth in Retail Payments will vary by region Growth in Payments Payments activity is increasing in all regions. However, there is a clear distinction between mature and emerging economies. Historically, the extent of existing underlying payments infrastructure is widely acknowledged as critical however, this dependency is not constraining growth in retail payments through non-bank payment service providers.

© Internal Consulting Group 2015 KAR 017 – Future of Global Payments COMMERCIAL IN CONFIDENCE RegionPerspectives EuropeFour transformational forces are affecting the European payments landscape: heterogeneous growth patterns, digital innovation, evolving merchant payments needs, and widespread M&A activity. In addition, regulation continues to take a toll. The cap on interchange rates will have a significant negative impact on issuer economics in Europe, with issuers standing to lose roughly €8 billion per year (beginning in 2015) out of a pool of €60 billion in card revenues. In addition, revenue challenges facing issuing banks will require them to sharpen their pricing models on both current accounts and payments transactions as part of a broader effort to reshape their strategic priorities North AmericaAfter years of being battered by regulatory measures, retail payments revenues in North America (i.e., US and Canada) rebounded to $222 billion in 2013, up 4 percent from 2012, representing 30 percent of global retail payments revenues. Transaction revenues accounted for $104 billion, credit-card net interest income and fees accounted for $93 billion, and demand-deposit products represented $25 billion. Retail payments revenues in North America are expected to reach $323 billion in 2023, with account revenues showing the strongest growth (six percent annually), followed by transactional revenues (5 percent). The principle opportunities for banks lie in two areas: leveraging new digital technologies to deepen customer relationships by way of the checking or demand deposit account (DDA), and forging new and innovative strategies in credit cards. 13 Source: BCG: Banks’ Payments Businesses are Facing New and Tall Challenges Retail Payments by Region Growth in payments and transaction banking is driving stiff competition among not only traditional players, but new entrants as well.

© Internal Consulting Group 2015 KAR 017 – Future of Global Payments COMMERCIAL IN CONFIDENCE RegionPerspectives AustraliaOne of the most developed and dynamic payment systems in the world. Also one of the most highly banked, with an estimated 99 per cent of persons over the age of 15 having an account with a formal financial institution, 79 per cent with a debit card and 64 per cent with a credit card. Not surprisingly, Australia is among the top countries in terms of the adoption of electronic and card-based payments. RDEsDespite the high-growth environment and the fact that the payments business is still very profitable in most Regional Developing Economies (RDE) – featuring substantial margins for acquirers, issues and card schemes – the outlook is not all blue skies. Prospects for incumbent players are clouded by falling interest rates, declining merchant deposit rates and interchange (in response to regulatory pressure), and the emergence of new competitors. One way that banks and other payment institutions can fight back is by redoubling their efforts to increase customer engagement, achieved by motivating customers to direct-deposit their pay checks and to routinely use their bank’s noncash payments products, especially cards. Whereas previously people did not have a way to participate in the banking system in many developing nations, systems such as GCash in the Philippines and M- Pesa in Kenya offer everyday electronic payment capabilities to millions of people previously excluded. 14 Source: BCG: Banks’ Payments Businesses are Facing New and Tall Challenges; APCA Submission to the Financial System Inquiry, Mar 2014 and Rfi Evolution of Cash 2014 pg 16 Retail Payments by Region (2) Growth in payments and transaction banking is driving stiff competition among not only traditional players, but new entrants as well

© Internal Consulting Group 2015 KAR 017 – Future of Global Payments COMMERCIAL IN CONFIDENCE Wholesale Payments Growth in payments and transaction banking is driving stiff competition among not only traditional players, but new entrants as well. To retain their role as key players, Commercial banks will need to respond quickly enough and with compelling value propositions. 2 RegionPerspectives GlobalWholesale transaction banking is expected to outperform retail payments over the next ten years across all markets, a 9 percent compound annual revenue growth (compared to 7 percent in retail), including small-business credit and debit cards. Of the projected $345 billion in revenue growth, emerging markets will account for about 72 percent (a CAGR of 11%, compared with 6 percent for mature markets). In order to move forward effectively, wholesale transaction banks need to focus on several areas; achieving sustainable regulatory compliance, seizing the working- capital opportunity, and capturing growth in RDEs. In addition pricing is an underleveraged silver bullet for boosting top-line growth Middle EastThe GCC continues to be a remittance and trade finance hub, representing 8-10% of trade flows worldwide. Combined payments and trade finance revenues exceed USD$50 Billion – approximately equal to India’s total payments revenues and exceeds the combined payments revenues of central and eastern Europe. 3 AsiaThe variation between markets in this region is most pronounced and best illustrated by the emerging economy of Myanmar and growth economies of Vietnam and Indonesia. The influence of two markets: China and India have greatest influence. In an October 2014 report, RMB Payments (value sent and received) represented 2.74% (excl China & HK) of all international payments. This is a 1.22% increase over the previous year. When China & HK are included in the October 2014 figures, RMB Payments rise to over 97% of payment value. 4 15 Source: (1) BCG: Banks’ Payments Businesses are Facing New and Tall Challenges (2) BNY Mellon Global Payments 2020: Transformation and Convergence 2014, p1 (3) McKinsey/SWIFT – Sibos 2013 pg 5 (4) SWIFT Renminbi Tracker, Oct, 2014

© Internal Consulting Group 2015 KAR 017 – Future of Global Payments COMMERCIAL IN CONFIDENCE Payments System Evolution Payments types have expanded dramatically over time, with traditional products then ceding to new innovations at key transition points – key question: what’s next? …180019001970 1980 1990200020102020+ Cash withdrawal OTC (1820s) Cheques (1900s) American Express (1960) Debit Card Bill Payment (1997) M’Card/VISA (1990) EFTPOS (1988) Direct Entry ATM On-Us (1967) Off-Us (1988) EFTPOS Cash Out (1988) Direct Debit (1994) Direct Credit (1994) Source: ICG/RBA and Focused Outcomes Consulting Note:1. Volumes prior to 2000 are Focused Outcomes estimates only as there are no reliable industry numbers available. Payment Product Evolution – an Australian example BankAmericard/ Visa (1965) Master Charge/ MasterCard (1969) Credit Card (1960) BitCoin (2009) Virtual (2009) Estimated 100% of volume by decade MICR (1959) Transition Points ? 16

© Internal Consulting Group 2015 KAR 017 – Future of Global Payments COMMERCIAL IN CONFIDENCE The Pace of Payment System Evolution The traditional evolution brought many new ideas, but the pace of change in the past 10 years has been accelerating with a clear global trend toward faster payment (money in recipients account in ‘near-time’). 17 Source: ICG Analysis, Accenture Future of Payments: Convergence, Competition & Collaboration 2014 p3 The introduction of MICR encoding and the automation of cheque processing Introduction of the Credit Card (1960) The introduction of ATMs (UK 1967, US 1969, AU 1974) Debit Cards (1988) Direct Debit (1994) Internet Banking (1997) PayPal (1998) Chip & PIN (2003) iDeal (2005) Giropay (2006) Contact-less Credit Cards (2007) Faster Payments (2008) Facebook Payments,(2011) Contactless Debit Cards (2009) ? Google Wallet (2011) PayPal Wallet (2011) Bitcoin (2009) 20001990 2010 1980 1950 Rapid acceleration in the pace of innovation Periodic innovation

© Internal Consulting Group 2015 KAR 017 – Future of Global Payments COMMERCIAL IN CONFIDENCE The Role of Identity and Information in Payment System Evolution Through advances in technology, payments evolution is also driving a change in the Information and Identity associated with the transaction. This is a sea-change from simply providing visibility on transaction status and payment flows and creates new opportunities (CRM & marketing) and risks (data privacy and security). 18 Source: ICG Analysis (2) Citi Payments Prospectus, Market Insights, 2013 (3) Capgemini World Payments Report, 2014 pg 48 A majority of delegates at an international bank’s recent global client conferences, indicated the best way to deliver increased visibility of payment information would be through a comprehensive reporting platform accessible over the internet. Such a platform should include: payments related reporting information on balances and liquidity aspects of the FI’s activities with its clearing bank analytics and trends of payment activity and total flows. 2 By leveraging different data models, firms may move from a Compliance-centric approach to one of differentiation. 3 SignatureMagnetic StripCard & PIN User name & Password Near-Field Communication Cardholder Present Cardholder Not Present BiometricsWhat next? Driver & Perspective Analysis for Payments Information Technology is Changing the form of Identity used to make payments

© Internal Consulting Group 2015 KAR 017 – Future of Global Payments COMMERCIAL IN CONFIDENCE 19 Payments Industry Evolution Snapshot of timeline from 2005 to today’s predictions Source: Capgemini World Payments Report 2014, p48 YearProduct MixKey Regulatory and Industry InitiativesInnovation 2020/ Future Convergence in ‘e’ and ‘m’ payments New product mix KRIIs cross impacts in the industry Crowd funding and P2P lending Changed role of market participants Changed product mix Shift of power to emerging markets 2014 KRIIs update: Regulation is having significant impact on all aspects of data, forcing firms to think about their approach towards data management Innovation in payments processing: payments processing faces external and internal challenges Legacy processors need a long- term vision for back office transformation Making progress in corroborative space is critical 2010 SEPA and PSD: implementation progress status Increasing financial system regulation: BASEL III and the new liquidity framework; AML/ATF Transformation of the payments value chain: new entrants are gaining ground in the more open B2B, B2C, and C2C payments spaces Partnerships and sourcing enable banks’ revenue-focused initiatives Payments Hubs will allow banks to achieve more with less 2005 Making payments in Europe more efficient: payments are a priority on the banks’ boardroom agenda, as a lifeline between banks and their clients The effects of SEPA on payments revenues: our model indicates that EU12 bank payments revenue could be cut by €13-29 billion below base line 2010 revenue projections Banks must address two strategic issues simultaneously: banks need to rethink their commercial strategies and find ways to generate new business in the open Eurozone payments market

© Internal Consulting Group 2015 KAR 017 – Future of Global Payments COMMERCIAL IN CONFIDENCE 20 RFI’s Payments Evolutionary Index measures how evolved or advanced each market is in regard to the transformation of its payment systems. Source: (1) BCG Global Payments 2014, pg 7 (2) RFI Global Payments Evolutionary Study 2014, p6 Pioneers: expect a lot of change and experimentation, with cutting edge developments Poised for Change: expect to see rapid evolution in specific sectors of payments market Laggards: expect these markets to be furthest behind in terms of customer readiness Payments Industry Evolution Never in the history of the payments industry has there been a time of such disruption and opportunity across regions. Payments players, depending on their strategic decisions over the next ten years, will have much to lose or gain. 1 Unlike the Eurozone the Middle East, Africa and Asia do not yet have regional entities with accountability and influence over payments infrastructure. Growing economies and markets with less scale are faced with a similar conundrum – how best to meet the needs of their respective jurisdictions, remain connected to larger and more influential markets to capitalise on standardisation and innovation. It may be insightful to reflect on the leapfrogging of smaller regional developing economies through adoption of mobile technology outside traditional payments infrastructure and market initiatives in Asia: internationalisation of the Chinese Renminbi is driving development of payment infrastructure (processing hubs) and the establishment of Asia Infrastructure Investment Bank. Payments Evolutionary Index 2

© Internal Consulting Group 2015 KAR 017 – Future of Global Payments COMMERCIAL IN CONFIDENCE 21 The Pace of Change Map has been developed taking into account three electronic payments factors 1 : Current behaviour: consumers current usage of cash and cheques Consumers’ preferences: Consumers interest in using electronic payments generally Receptivity to change: The rate at which consumers are switching toward or away from electronic payments Source: RFI Global Payments Evolutionary Study 2014, p9 Payments Industry Evolution The adoption of electronic payments varies considerably by region. Pace of Change – Electronic Payments

© Internal Consulting Group 2015 KAR 017 – Future of Global Payments COMMERCIAL IN CONFIDENCE Share and Mix of Payment Types While the volume of payments is forecast to remain flat into the next decade, the mix of payments will continue to evolve as cash gives way to debit card transactions 22 Source: Accenture Future of Payments: Convergence, Competition & Collaboration, 2014 p3 – extract from UK Payments Council

© Internal Consulting Group 2015 KAR 017 – Future of Global Payments COMMERCIAL IN CONFIDENCE 23 e- and m- Payments Stories are Converging m-payments are expected to grow by 60.8% while e-payments will decelerate to 15.9% per annum e payment is a subset of an e-commerce transaction to include electronic payment for buying and selling goods or services offered through the Internet.e-payments transactions are migrating towards m-payments due to increased use of tablets and smartphones As the total number of e- and m- payments increases, we believe the shift indicates a convergence between the two modes Drivers of e-payment growth include the EU’s PSDII, migration of retail brands to the on-line marketplace, global legislation to improve on-line security Increased level of e-commerce will fuel e-payments Source: Capgemini, World Payments Report, pp 12-13; Techtarget.com m-payment (mobile payment) is a point-of-sale payment made through a mobile device, such as a cellular telephone, a smartphone, or a personal digital assistant (PDA). The graphic above clearly illustrates the rapid and accelerating growth of transactions facilitated by non-banks m-payments are expected to grow annually by 60.8% through 2015 This anticipated rise in m-payments has encouraged banks to launch their own smartphone and tablet apps as well as dedicated mobile sites in order to gain competitive advantage Number of Global m-Commerce transactions (USD Billion) 2011-2015 Number of Global e-Commerce transactions (USD Billion) 2011-2015

© Internal Consulting Group 2015 KAR 017 – Future of Global Payments COMMERCIAL IN CONFIDENCE 24 Non-Cash Growth Non-cash transactions are increasing led by two regions: Emerging Asia and Central Europe Middle East Africa (CEMEA). Convergence, as well as the penetration of online and mobile technologies coupled with the rise of faster payment schemes will drive the global non-cash payments industry in the short term Source: Capgemini, World Payments Report, pg 15 Number of Worldwide Non-Cash transactions by Region (USD Billion) 2011-2013E

© Internal Consulting Group 2015 KAR 017 – Future of Global Payments COMMERCIAL IN CONFIDENCE 25 Cross-border Payments Growth in Trade flows and intensifying competition between banks and non-banks is driving expansion of Cross-border Payments markets. Source: (1) McKinsey/SWIFT, Putting Growth Back on the Banking Agenda pg 20 (2) Capgemini World Payments Report 2014, pg18 (3) McKinsey – Putting Growth back on the Banking Agenda, 2013, pg 26 Banks and non-banks intensify competition in four distinct cross-border markets. 2 1.Corporate sector where payments are made for global trade or goods and services 2.Capital Markets transactions 3.Retail sector which encompasses remittances made by expatriates and 4.Business to Consumer (B2C) transactions Cross-border Trade flows expand at a CAGR of 8% over six years 3 Trade flows are expected to represent 35% of Global GDP by 2020 1

© Internal Consulting Group 2015 KAR 017 – Future of Global Payments COMMERCIAL IN CONFIDENCE 26 Role of Remittances in Emerging Economies Remittance growth is driven by increasing trade flows and introduction of new payments services to markets that have been unbanked or under-banked. For these economies, remittances are a mechanism that increases financial inclusion and improves efficiency. Source: (1) McKinsey/SWIFT Sibos 2013, pg 12 (2) World Bank Migration and Development Brief, 2014, pg 3 (3) Cap Gemini, World Payments Report, pg 18 (4) Hogan Lovell's Global Payments Newsletter, Sep 2014 pg 5 India’s remittance market is very significant for the United Kingdom with overseas remittances, worth over £2.5 billion. 4 Mobile remittances have not yet followed the rapid growth in use of mobile devices in the developing world due primarily to central bank regulations, which in some cases deliver an advantage to less regulated (compared to banks) payment institutions eg. Western Union and Moneygram. 3 Remittance revenue is growing in two regions: Middle East/Africa and Asia 1 Global remittance flows (including those to high- income countries) are expected to rise from US$582 Billion in 2014 to reach US$581 Billion this year and grow to US$608 Billion by 2015. 2 According to The World Bank, remittances to developing countries are expected to grow by 5.0% to reach US$435 Billion in 2014 (accelerating from the 3.4% expansion of 2013), and rise further by 4.4% to US$454B in 2015. 2

© Internal Consulting Group 2015 KAR 017 – Future of Global Payments COMMERCIAL IN CONFIDENCE The Future of the Payments System – Table of Contents 27 SectionComponentDescription 1Executive Summary Overview of our research and findings 2The Global Payments System Overview of the Global Payments System, its evolution and key implications for stakeholders 2a Evolution & Key Concepts: How has the global payments system evolved over the past 10 years? For each different dimension The key thinking from consulting firms, journals and academia as to what constitutes best practice Examples of this best practice across different firms and industries 2b Regulation: How are social, economic and geopolitical factors influencing regulatory change? 2c Customer & Competition: How are customer expectations and competition changing? 2d Innovation in Payments: What are the innovations and key trends? 2e Risk Management: What effect does the changing GPS have on risk management? 2e Governance: What are the key considerations for stakeholders and different governance models? 3Knowledge Sources Relevant published materials for further reading

© Internal Consulting Group 2015 KAR 017 – Future of Global Payments COMMERCIAL IN CONFIDENCE 28 Regulation and Change Balancing protection and growth will continue to challenge Regulators as they incorporate the increasing impact of trends in transformation and extra-territorial compliance. Sources: (1) Cap Gemini, Global Payments Report, p 22; (2) Accenture Future of Payments: Convergence, Competition & Collaboration 2014, p10; (3) World Bank, Payment System Outlook, 2013, p2 (4) McKinsey on Payments: Payments regulation, 2013, pg38 This demands common standards and interoperability. India recently implemented NACH Infrastructure for high volume transactions at 89 centres within a few key regions in-country. Operated by Reserve Bank of India and Commercial Banks, NCPI mandated the platform’s use across the country. The Treasury Select Committee (UK) has made clear its desire to see consistency across payments services and regulators at an EU level have called for a ‘concrete European framework’ for mobile payments 2 Important environmental considerations in the development and oversight of payments and security settlement services include: country demographics, physical infrastructure, involvement in international trade and financial transactions, macroeconomic framework, financial sector, legal and regulatory framework, stakeholders and business perspective 3 2 3 4 Key Regulatory and Industry Initiatives Drive Four Key Transformational Trends 1 Policy-makers want services that are consistent, intuitive and can achieve mass market take-up 1

© Internal Consulting Group 2015 KAR 017 – Future of Global Payments COMMERCIAL IN CONFIDENCE 29 Regulation Through an increasingly complex and interconnected change agenda, Regulators must be vigilant to maintain trust and security and protect rights of retail and commercial customers. Source: (1) Cap Gemini, World Payments Report, p 24, (2) BCG Global Payments, 2014, pg 11, (3) : Payments Council payments roadmap, initial report, 2013, p17 (4) BNY Global Payments 2020: Transformation and Convergence, 2014 pg 34 Legislation in the EU influenced 4 key pillars of change: 1.lower interchange fees 2.greater access to consumer account information for third party providers 3.separation of schemes and payment processing 4.easing of restrictions on cross-border payments 2 Systemic innovation such as standardisation through adoption of ISO20022 will harmonise UK payment formats and help to simplify – for the banking industry, end-users and consumers – how payments are made and received. 3 Regulatory demands at the transactional level are increasing exponentially, given the need for banks to monitor parties for KYC and ‘know your customer’s customer (KYC-C). For banks this includes pressure to reduce intra-day exposures under Basel III. 4 Overlapping Impact of Key Regulatory & Industry Initiatives Drive on Transformational Trends 1

© Internal Consulting Group 2015 KAR 017 – Future of Global Payments COMMERCIAL IN CONFIDENCE 30 Regulation for Social and Economic Benefit In order to drive further efficiency in the payments system and reduce adverse impact of cash on GDP, government and regulators in some jurisdictions are focussed on developing policy aimed at reducing the cost of Cash. These cost-focussed programs complement the transition from cash to electronic payments and associated efficiency gains. Source: (1) McKinsey Global Payments Map – Forging a path to payments digitization, Mar 2103, pg5 (2) Tufts University, Cost of Cash Report, 2013 pg 7, (3) RBA Payment Costs in Australia, 2007 pg 88 Research by McKinsey 1 suggests that countries with a high rate of cash usage bear a higher social cost of cash, exceeding 1% of GDP An Australian study into the costs of payments found annual costs incurred by financial institutions and merchants for payments made by individuals amount to at least $8½ billion, or around 0.8% of GDP. Costs associated with cash payments account for almost half of this total. 3 On aggregate the cost of cash in the United States is $200 Billion annually. A 2013 Tufts University study found that the cost of cash is higher for poor and unbanked Americans than for other groups. Annual Cost of Cash in the US, Stakeholder breakdown 2

© Internal Consulting Group 2015 KAR 017 – Future of Global Payments COMMERCIAL IN CONFIDENCE 31 Regulation, Electronic Payment and Economic Growth Many governments in developing economies advocate the increased use of electronic payments not only as a means of moving away from cash but primarily in terms of tracking transactions in order to improve the taxation base (circumventing the anonymity of cash). Source: (1) McKinsey & SWIFT Sibos, 2013 pg 35 (2) Rfi Evolution of Cash, 2014 pg 18 The advantages of cash mean that it will remain in use in specific areas, including: the black economy; illicit activities (drugs, guns, etc.); older generation & ethnic groups (both as a store of value and for transactions); and some types of merchants. 2 Potential Impact of moving payments from Cash to electronic and digital infrastructures could boost GDP and tax revenues 1 As recently as 2008, Cash was used in 99 percent of all transactions in India, 98 percent in China and 96 percent in Russia. This reliance on cash makes it harder to build strong market economies and exposes countries to a loss of tax revenue from the informal and black economies. 1

© Internal Consulting Group 2015 KAR 017 – Future of Global Payments COMMERCIAL IN CONFIDENCE 32 The Impact of Regulated Card Payments on GDP An increase in electronic payments achieved through Card penetration and use, has had a positive effect on GDP in emerging markets and developed economies. The popularity of (regulated) payment cards continues to grow and in 2012 just over 32% of worldwide consumer spending was Card-based. This figure has grown by an average 7.7% since 2003. Source: (1) Moody’s analytics, impact of electronic payments on economic growth, 2013, p4 (2) BCG Global Payments 2014, pg 9 (3) Capgemini World Payments Report 2014, pg 6 (4) BIS Innovation in Retail Payments, 2012 pg 31 Moody’s studied 56 countries that make up 93% of the world’s GDP over five years (2008-2012) finding: 1 Greater use of electronic payments products (Credit & Debit Cards) added $983 Billion USD to GDP in countries studied. This translated to adding 0.8% GDP growth across emerging markets and 0.3% GDP growth in developed markets. The impact of Card use was found to be a function of three factors: (1) Card penetration, (2) growth in Card use year on year and (3) the proportion of GDP represented by personal consumption. Across Europe, Card payments are dominating growth in online payments. In 2013, Cards had a 50% greater share of total payment values in online spending (compared with offline). 2 In China the rising middle class and global acceptance of China UnionPay payment cards has fuelled growth in non-cash transactions. 3 The evolution of multi-purpose cards may become subject to supervision by authorities since the regulatory requirements for card schemes can differ between single-purpose and multi-purpose instruments. In Japan, transport companies were obliged to increase the customer protection measure of prepaid multipurpose cards beyond the level required for cards that are used solely to pay for public transport. 4 Impact of Card Penetration and Use on Global GDP 1

© Internal Consulting Group 2015 KAR 017 – Future of Global Payments COMMERCIAL IN CONFIDENCE 33 Regulation – Global Trends in Cheques The forecast decline in Cheques has continued however, not at the expected rate. Some markets, including Canada, the United States and more recently Australia, have responded to the resilience of the Cheque, seeking efficiency through digital cheque clearing that involves less manual handling and enables faster clearing: 2 days compared with 5 or 6. Source: (1) UK House of Commons Standard Note SN/BT/5318, Jan 2014 pg 3-8 (2) APCA Annual review 2014, pg 7 (3) HM Treasury Speeding up Cheque Payments, Oct 2014 In Australia, cheques volumes have been steadily declining for more than a decade. In 2014, there were 700,000 cheques written per business day. This represents a 46 per cent decline from the 1.3 million cheques written in 2010. Australia’s Digital Cheque Clearing initiative is scheduled from completion in 2015. In New Zealand there is clear messaging from the Treasury toward completing transactions with government easily in a digital environment. In 2009 UK Payments Council announced Cheques would be phased out by 2018 estimating withdrawal of cheques would create ongoing annual cost savings to banks of the order of £200 million in 2018, and around £750 million to large companies and the public sector. Following pressure from the Treasury Select Committee and the government, in July 2011 the Payments Council reversed its decision and the banks undertook to provide cheque services for as long as customers needed them. 3 Overview of Australian Consumer Payments, Payments per Capita 1 The Absolute and Relative decline of the Cheque Total Payments UK Billions 2

© Internal Consulting Group 2015 KAR 017 – Future of Global Payments COMMERCIAL IN CONFIDENCE 34 Regulation – Global Trends in Cash Progression toward a reduction in Cash continues in mature and some emerging economies. The extent of use of Cash varies by jurisdiction with recent evidence in the UK, Australia and Indonesia strongly suggesting management of a ‘less cash’, but not a ‘cashless’ society in future. Source: (1) Rfi Evolution of Cash, 2014 pg 6,18-20 (2) APCA Annual review 2014, pg 8 (2) UK Payments Council Media Centre, 6 June 2014 ref UK Cash & Cash Machines Report 2014 (3) Accenture, North American Consumer Payments Survey Cash remains the UK’s most commonly used payment method and last year (2013) 20 billion cash payments were made, representing 52% of all payments in the UK. That amounted to a total of £260bn. 2 It is forecast there will be 13 billion cash payments in 2023, representing around 33% of the total volume of payments, down from 52% in 2013. The sum of cash spent is forecast to fall from £260 billion in 2013 to £251 billion in 2023. The majority of this absolute decline appears to have occurred recently, as payment methods such as contactless card transactions have risen rapidly (spurred by the acceptance of contactless transactions by the two main supermarket chains in mid-2012). 1 Change in Cash Payments 2005 v 2013, Australia Indonesia’s central bank adopts a ‘less cash’ mantra in its publications and with almost 250 Million people and Card penetration rate of <15%, small movements in electronic payments with benefit Indonesia in terms of efficiency and cost. 1 In North America, 66 percent of respondents said they make cash transactions, 59 percent use debit cards and 55 percent use credit cards at least weekly to make a payment 3 Eight percent of NA consumers use digital currencies at least weekly to make payments; usage is expected to increase by 10 percentage points by 2020. Cash transactions are expected to decrease by 12 percentage points by 2020 3

© Internal Consulting Group 2015 KAR 017 – Future of Global Payments COMMERCIAL IN CONFIDENCE 35 Regulation and Financial Inclusion through Electronic Payments Electronic payments are furthering their reach around the world in developed and developing economies alike. In developed nations, the move to electronic payments promotes efficiency, speed and convenience and security however, in developing nations, electronic payments often represent a step toward financial inclusion. Source: (1) Rfi Evolution of Cash, 2014 pg 16-17 (2) APCA Annual review 2014, pg 8 (3) McKinsey SWIFT Sibos 2013, p8 Cash as a % of GDP Versus Total Electronic Transactions per Adult (2012) 1 Scanning the globe, New Zealand provides a benchmark for the level of penetration that electronic payments can achieve, starkly highlighting the challenge that lies ahead for much larger economies around the world. 1 Middle East Africa (MEA) markets can be broadly classified as Emerging, Developing or Advanced MEA markets remain heavily cash driven with 99% of all transactions still cash based. Noteworthy, is noncash payment growth through mobile networks in developing markets without formal bank infrastructure. 3 Where previously people didn’t have a way to participate in the banking system in many developing nations, systems such as GCash (Philippines) and M-Pesa (Kenya) offer everyday electronic payment capabilities to millions of people previously excluded.

© Internal Consulting Group 2015 KAR 017 – Future of Global Payments COMMERCIAL IN CONFIDENCE 36 Regulation – Global Trends in Contactless Payments Acknowledging the moderation in decline of Cash payments, growth in Contactless payments is accelerating around the globe and leading to entrance of new players. Source: (1) Rfi Evolution of Cash, 2014 pg 18 & 36 (2) APCA Annual review 2014, pg 8 (3) Visa Europe Newsroom, 4 Aug 2014 Octopus (Hong Kong): commenced 1997, 20 Million cards and generates 12 Million transactions per day Oyster (London): commenced 2003, 20 Million cards and generates c10 Million transactions per day Opal (Sydney): commenced 2013-rollout is continuing, 1 Million cards issued to Oct 2014 Annual Number of Transactions, Contactless v Total (Millions), Australia Open & Closed-Loop Contactless Payments 2 Stored value cards launched initially as closed loop, contactless payment Transit cards are evolving to be open for payments in a retail context e.g., Hong Kong’s Octopus Card. Consumers made almost 20 million (19.7 million) contactless transactions across the UK in May 2014, an 18% increase on April 2014 alone. More than 37.8 million contactless cards have now been issued by UK banks, a 35% increase on the same period last year. May 2014 also set a new record for the total value of transactions made by contactless cards in the UK in a single month, reaching £126.7 million, a 14% increase on April 2014. This also indicates a growth of 189% since May 2013. 3

© Internal Consulting Group 2015 KAR 017 – Future of Global Payments COMMERCIAL IN CONFIDENCE 37 Geopolitics and Regulation Geopolitically, the world is becoming increasingly multi-polar and as economic power shifts so too does the relative importance of currencies. The rapid growth and increasing influence of two economies; China and India, will challenge existing regulatory paradigms and regional influence. Source: (1) BNY Mellon Global Payments 2020: Transformation and Convergence 2014, p5 (2) Moody’s analytics, impact of electronic payments on economic growth, 2013, p4 Region/MarketImplications AsiaChina is involved in a growing web of development banks (including the ADB and World Bank). The Asia Infrastructure Investment Bank (AIIB) - alongside the BRICS- led New Development Bank – will enable China to better influence the governance and operations of global financing institutions given perceived slow pace of World Bank and IMF reforms and Japanese influence on ADB. Emergence of the AIIB through 2014-2016 and its role in governance and regulatory change relevant to Payments is unclear at this time however, as the economies of China and India develop through international trade (and payments) this new organization with membership and geopolitical reach across the region and with regional focus will require consideration by existing payments system participants within separate jurisdictions and the region. EuropeRole of European Payments Council in further SEPA reform across 34 countries Moody’s identify the role of political unrest in Egypt and ongoing economic depression in Greece as examples of geopolitical and economic influence on the (restrained) growth of payment (card) penetration and payments. 2 Emerging economies (Africa, Asia)South Korean government introduced tax incentives, new rules for electronic payments and registration for electronic bill presentment and payment (EBPP) services. ‘Leapfrogging’ in regional developing economies in Middle East Africa through growth of mobile payments outside traditional banking infrastructure and regulation

© Internal Consulting Group 2015 KAR 017 – Future of Global Payments COMMERCIAL IN CONFIDENCE 38 International Organisations & Associations At the coal face of technical and regulatory standard setting, international bodies aim to devise broader international standards that govern the operations of financial markets and the many financial firms in those markets with an important impact on the broader macroeconomy. 1 The same regulatory standards however, are not always applied to new and disruptive market entrants. Source: (1) Kern, A, Global Financial Standard Setting the G10 Committees and Economic Law, pg 867-877 (2) APCA Annual Review 2014, p14 Key International Organisations The Basel Committee (G10) Formed in 1974, with most significant impact on developing legally nonbinding international financial standards. United Nations Security Council Sanctions Committees Can take enforcement measures to maintain or restore international peace and security ranging from economic and/or other sanctions applied to individuals or entities. World Bank & Bank of International Settlements The Committee on Payment & Settlement Systems (CPSS) of the Bank for International Settlement (BIS) is the standard setter for large value retail, FX and securities settlement. IMF International Organisation of Securities Commissions (IOSCO) develops, implements, and promotes adherence to internationally recognized standards for securities regulation, and is working intensively with the G20 and the Financial Stability Board (FSB) on the global regulatory reform agenda. OECD’s Financial Action Task Force (FATF) Tasked with setting international standards of disclosure and transparency for the regulation of banks regarding money laundering and counter terrorism financing. International Association International Council of Payment Association Chief Executives (ICPACE) Engagement between regulatory bodies in different jurisdictions occurs via the International Council of Payment Association Chief Executives (ICPACE) and informally. ICPACE includes payment associations from countries, including the US, UK, Canada, Ireland, South Africa, New Zealand and Australia, and provides a valuable forum for information sharing. ICPACE also facilitates joint research, including publishing research on ISO 20022 implementation. 2

© Internal Consulting Group 2015 KAR 017 – Future of Global Payments COMMERCIAL IN CONFIDENCE 39 Emergence and Impact of Extra-territorial Regulation The increasing frequency of legislative and regulatory change with extra-territorial impact adds complexity to domestic Compliance agendas. One international body described the value of national discretions in smoothing the way for global standards to be suitably applied to advanced and emerging economies, taking into account differences in the structure and development of financial systems. 3 Source: (1) BNY Mellon Global Payments 2020: Transformation and Convergence 2014, p5 (2) Moody’s analytics, impact of electronic payments on economic growth, 2013, p4 (3) Basel Committee on Banking Supervision, Regulatory Framework Discussion Paper, Jul 2013, pg 18 (4) Capgemini World Payments Report 2014 pg 25-29 Regulatory/Market InitiativeCross-Jurisdiction Implications Dodd-Frank Sec1073 and FATCA (Foreign Account Tax Compliance Act) Implications for consumers and providers of electronic remittances from the United States to other jurisdictions and reduction of US tax evasion by individuals and entities including facilitating financial organisations. AML/CFT (and Economic Sanctions)US Treasury Financial Crimes Enforcement Network (FinCEN) identifies jurisdictions outside the United States with perceived deficiencies in their AML/CFT regime SEPA’s single market for paymentsAdoption of ISO20022 for interbank communication. Deadline extended to Aug 2014 Internationalisation of RenminbiRenminbi’s rapid ascension to second most-used currency for Trade Finance. Promoted by Peoples Bank of China, convertibility to leading global currencies with hubs in London, Hong Kong and Canada Eurosystems RTGS Target2 PlatformMigration to ISO20022 in 2017 for large value payments 4 Internet Payment Security in EuropeEuropean Central Bank endorsed approach to facilitate efficient, harmonised and comparable assessment by authorities and payment service providers by Feb 2015 4 Basel IIILiquidity Monitoring and Coverage Ratio’s. The use of national discretion allows international standards to be better tailored to reflect local conditions Data Privacy and PaymentsEuropean Parliament endorsed data protection regulations in Mar 2014 – including consumer’s rights to ‘be forgotten’ and prevent others from tracing them. 4

© Internal Consulting Group 2015 KAR 017 – Future of Global Payments COMMERCIAL IN CONFIDENCE Payment Regulator Models in Key Jurisdictions Because self-governance frameworks are typically domestic to one jurisdiction, they must consider how to manage participants not solely confined to that jurisdiction. 1 40 Canada (CPA) Australia (APCA) NZ (PymtNZ) Ireland (IPSO) Japan (JPA/JBA) Nether- lands (Equens) South Africa (PASA) USA (Nacha) USA (The Fed) UK (UKPC) Government/ Central Bank oversight Co, Self or Advisory Model?CoSelfAdvisorSelf Mandate set in legislation Mandate sets explicit public policy objectives Formal mechanism for stakeholder input Separate payment streams for retail payment systems Role: operates payment systems; develops system operating rules, standards and procedures (1) Role: acts as a policy making body; develops framework, rules, industry best practices and guidelines Role: public payments education Other key stakeholders Minister of Finance, Bank of Canada, Stakehold er Advisory Council Payments Systems Board (Reserve Bank) Payments Council Reserve Bank of New Zealand National Payments Programme Consumer Relations Office National Payment System Advisory, Board Payment Strategy Stakehold er Forum Source: (1) International Council of Payment Association of Chief Executives, Principles of Payments Industry Self-Governance, Nov 2007’ Canadian Payments Association: International Benchmarking Survey Results Notes: (1) Payments NZ owns and governs the SBI clearing system, but does not operate SBI.

© Internal Consulting Group 2015 KAR 017 – Future of Global Payments COMMERCIAL IN CONFIDENCE Payments Infrastructure The global payments system is undergoing a period of rapid, fundamental and sustained change. Payments infrastructure is a key enabler of change and initiatives are being driven by a number of disparate players in different countries. 41 Source: McKinsey Payments Practice – McKinsey on Payments – Transforming National Payments Systems, 2014 pg 24 Key Stakeholders driving Payment Infrastructure Initiatives across the globe

© Internal Consulting Group 2015 KAR 017 – Future of Global Payments COMMERCIAL IN CONFIDENCE Source: (1) Cap Gemini, World Payments Report, p 24, 42 Pan-Regional Initiatives Lessons Learned In February 2014 the deadline for migration to SEPA was extended by six months. As migration has been slow, the majority of players are yet to realise expected benefits with most progress visible in pan-European bank to bank message standardisation Key learning 1.Program Management: greater customer involvement during design, scope eg payment types and technology and Timeline Management 2.Geographical discipline (run as multi country rather than collection of separate country initiatives) 3.Capture and communication of opportunities and benefit in transition Draft provisions raise two key issues: (1) Consumer Protection: common rules for authorisation and refund of direct debits undermine existing Consumer rights and (2) Privacy: third party payment providers’ access to customer accounts SEPA (Single market for Payments in the Eurozone)ERPB Future pan-European Initiatives Tasked with addressing retail Euro payment issues across the EU. Intended to provide a forum for banks, other payments service providers and end-users of payment services Has no formal powers to impose binding measures The expense and funding of the working group has not been finalised SEPA for Cards In January 2014, the SEPA for Cards Standardization (SCS) Volume published setting functional and security requirements for cards payment transactions in SEPA with reference to existing international standards. Implementation has not been made mandatory PSD II - opening of payments markets

© Internal Consulting Group 2015 KAR 017 – Future of Global Payments COMMERCIAL IN CONFIDENCE Consumer Payment Usage Traditional payment instruments will decline slightly as emerging payment instruments become more widely used at the end of the decade, especially amongst Millennials 44 Source: Accenture, North American Consumer Payments Survey 2014; Note (1) include daily and weekly Popmoney®/ ClearXchange Wire Transfer Money Order/ Certified Cheque Digital Currency (1) Prepaid/ Gift Card PayPal (1) Cheque Credit Card (1) Debit Card (1) Cash (1) Future Today At least daily + at least weekly Q: How often do you use the various payment instruments to complete a transaction? Q: How frequent to you anticipate you will use those payment instruments to complete a transaction in 2020? (Ranked by instrument usage levels today) Change+3%+2%+1% +10%+2% +7% +0% -3% -6%-12% Changing Consumer Usage Patterns by Payment Type

© Internal Consulting Group 2015 KAR 017 – Future of Global Payments COMMERCIAL IN CONFIDENCE 45 Source: (1) Payments council payments roadmap, Initial report, 2013, p12 (2) Accenture future of payments: convergence, competition & collaboration 2014, p5 Government 2 Markets for Goods and Services to be more secure and less dependant on physical cash, which can be hidden inside the economy at the expense of forfeited GDP and lost tax revenues Regulators 2 More transparency into transactions as well as adequate collateral to prevent future crises and present greater barriers to fraud and other abuse Customer Needs While customer demand is driving innovation in the client-facing part of the payments value chain, it is also a driving factor when it comes to innovation at the processing or back-end, of the value chain. Customer Wants & Needs 1 Choice in payment method Cost effective Differences in Customer Need and Value Added Services arise as result of the economic, social, technological and regulatory contexts in which payments are made. Easy to useReliable AccessibleTimely (faster) SecurityControllable AuditableCertainty

© Internal Consulting Group 2015 KAR 017 – Future of Global Payments COMMERCIAL IN CONFIDENCE 46 Source: (1) Rfi Evolution of Cash, 2014, pg 39 (2) Bain & Company Mobile Payments, the next step in a bank’s digital journey, Bain Online Survey Customer Wants and Needs Agnostic of electronic channel, Customers consistently voice Security and Privacy as key needs. In concert with evolving legislation regarding Privacy obligations in a number of jurisdictions, these factors will be critical to maintaining Compliance and Consumer confidence in payments Security Concerns for New Payment Types, March 2013 1 In 2013 Customer research (n=562) conducted by Bain & Company in the United States, Security was the top rated customer concern in use of mobile payments. In order of greatest concern, Customers identified the following: Security, Privacy and Convenience ahead of Loyalty benefits and Acceptance (at point of sale).

© Internal Consulting Group 2015 KAR 017 – Future of Global Payments COMMERCIAL IN CONFIDENCE Innovation and Competition Lead to Disintermediation Traditional players in the global payments system face increasing competition from within the financial services sector and from disruptive new entrants such as; global technology firms seeking to disintermediate, and mature industries expanding their offer. 47 Source: (1) Accenture Future of Payments: Convergence, Competition & Collaboration 2014 pg 6-9 (2) Capgemini World Payments Report 2014, p18 (3) Bain & Company Mobile Payments, the next step in a bank’s digital journey (4) McKinsey Payments Practice – McKinsey on Payments – Transforming National Payments Systems, 2014 pg 26 Threats to traditional Payments players As emerging payments process pure-players seek to disintermediate the banks and take a growing share of the transactions with online and mobile offerings, banks’ legacy product-based payments models are increasingly exposed 1 The competitive threat is further reinforced by payments convergence at several levels 2 ; Convergence between point-of-sale, mobile, online and other channel payments with smart mobile devices Growing convergence and integration of pre-payment activities such as search, payment itself, and post-payment processes and customer experiences such as loyalty schemes. Convergence between automated clearing houses (ACH) and card payments e.g., Giropay. Banks are facing growing external threat from proven alternative payment providers such as PayPal, and also from well-funded entrants whose initial priority is not revenue but acquisition of a lucrative share of users and transactions. 1 Intensifying competition between banks and non-banks in Cross-border Payments markets 3 The digital convergence of commerce and payments has attracted new competitors who are developing convenient, faster payments solutions. These players will intensify the competition for payments and threaten banks’ position unless banks innovate and invest in better systems. 4

© Internal Consulting Group 2015 KAR 017 – Future of Global Payments COMMERCIAL IN CONFIDENCE Innovation and Competition Lead to Disintermediation (2) The payments value chain is being redefined to include pre and post-payment activity. The advent and application of new technology and increasing competition from existing and new players creates a new dynamic for traditional payments participants requiring a change in approach. 48 Source: (1) Deloitte for Australian Payments Council presentation, 2014 (2) McKinsey on Payments – Transforming National Payments Systems 2014, pg 29 (3) BNY Mellon Global Payments 2020: Transformation and Convergence 2014, pg 5 It will no longer be sufficient to regard payments as commoditised, undifferentiated and volume driven products. Successful payments providers will take a strategic view of payments and ‘payment-proximate’ activities to offer value-added solutions. 3 Competition across the Payment value chain – pre and post-payment 1 New Payments Products & Services need to address a range of features 2

© Internal Consulting Group 2015 KAR 017 – Future of Global Payments COMMERCIAL IN CONFIDENCE Responding to Innovation, Competition and Disintermediation Traditional payments players must act now; develop distinct value propositions, explore non traditional alliances and new partnerships to facilitate product development and service delivery. 49 Source: (1) Accenture Future of Payments: Convergence, Competition & Collaboration 2014 pg 6-9 (2) Capgemini World Payments Report 2014, p18 (3) Bain & Company Mobile Payments, the next step in a bank’s digital journey (4) BCG Global Payments Report, 2014, pg 9-10 (5) http://thefinancialbrand.com/44154/social-media-pop-up-branch- apple-pay/,4 Nov 2014 Opportunities To avoid being outflanked by competition, traditional payments players – banks and card companies – need to establish clearer value propositions. They have a window of opportunity to do this since consumers already trust banks’ brands to guard their financial security and are not yet ready to invest the same degree of trust in new online entrants such as retailers, technology or alternative payments providers. The time to act is now. 3 In response to these threats, banks are advised to explore partnerships to ‘...comprehensively serve the geographical and functional needs of its clients in a cost-effective way. Technologically innovative alliances can extend access to underserved markets with new ways of doing things.’ Case 1 Digital payments innovation remains country specific however, in Europe, some initiatives are truly addressing customer needs e.g., in-app payment wallets such as Starbuck’s Loyalty app and mobile taxi booking apps such as mytaxi and Uber, each with embedded payment functionality have a clear customer benefit and been developed not requiring coordination with the broader payments eco-system. 4 Case 2 In the UK, new apps have fully leveraged real-time Faster Payments with person to person (P2P) payments such as Paym, mobile point of sale (POS) payments such as Pingit and Zapp. 4 Case 3 In the US this month, Wells Fargo and Visa announced their partnership with Apple Pay. 5

© Internal Consulting Group 2015 KAR 017 – Future of Global Payments COMMERCIAL IN CONFIDENCE 50 Innovation Case Studies Illustrating the diversity of innovation disrupting the payments marketplace these cases represent: the convergence of technology and payment channels, new entrepreneurial challengers and the rise of partnership between traditional players (banks and card schemes) and technology firms. Barclays Pingit contactless payment app Send/receive money between bank accounts POS scan and pay using QR codes Utilising industry wide mobile payments service Launched 2012 Apple Pay contactless payment app utilising NFC technology and biometrics (Apple’s fingerprint sensor) Stores Credit Card details Partnership with Visa, MasterCard, American Express and over 500 banks Launched 2014 TransferWise Peer to Peer platform for transferring money abroad Lower cost (fees and charges) than currently offered by banks or traditional money transfer services Launched 2011 Venmo Person 2 Person payment app Currently no fees Stores Credit card details Backed by Venture Capitalists Launched 2012 Bluebird Partnership between Walmart and American Express Prepaid card that can withdraw cash from ATM’s and make mobile Person to Person payments Lower cost (fees) than banks Launched 2012 Partnership between France’s Group BPCE bank and Twitter. Offers Twitter users in France to transfer money with Tweets without having to enter the beneficiary’s bank details Stores credit card details Launched 2014

© Internal Consulting Group 2015 KAR 017 – Future of Global Payments COMMERCIAL IN CONFIDENCE 51 Pressure and Challenges – The Shadow Economy A prevalence of cash often allows an informal (shadow) economy – one that is not taxed, monitored by government or included in GDP – to grow or dominate. The shadow economy is nearly completely comprised Cash however, Virtual Currencies are a growing contributor. The evolution and proliferation of electronic payments has realised operational efficiencies and made quantification easier however, the ongoing use of cash and introduction of other forms of shadow payment most notably (virtual and) crypto-currencies, creates a significant issue for the governments, central banks, regulators and law enforcement around the globe. 1 Source: (1) McKinsey & Company, McKinsey on Payments, Payments Practice, Mar 2013 (2) Virtual Currencies: The Challenge to Global Fiat Paradigms, Colabella & Shoff, St Johns College, 2014 (3) AT Kearney/Visa The Shadow Economy in Europe, 2013 pg 3,8-14 High cash usage perpetuates a shadow economy and hinders the evolution of a digital economy 1 The Shadow Economy Some of the most powerful actions taken to curtail the shadow economy are actually indirect measures. eg. Germany’s ‘mini’-jobs’ reform has simplified red tape and taxes to encourage lower-wage workers, such as domestic workers, to join the official economy. On average across Europe, the shadow economy is as large as 18.5% of GDP. 3 In a black market government is purposely excluded and governments are powerless to curtail black markets and shadow economies as they are similarly called. The values traded in a black market are generally for currencies only but now that spectrum has been broadened to include virtual currencies. 2

© Internal Consulting Group 2015 KAR 017 – Future of Global Payments COMMERCIAL IN CONFIDENCE 52 The Emergence of Shadow Payments Source: ICG Analysis (2) Capgemini World Payments Report, 2014, pg 14 and McKinsey & Company, McKinsey on Payments, Payments Practice, Mar 2013 A key disruptive trend enabled by Innovation is the growth and development of new forms of payment that exist between regulated, visible transactions and untraceable, anonymous cash and Virtual Currency transactions. These hidden or ‘Shadow Payments’ have a range of characteristics, and may operate within regulatory frameworks however, they can be unreported, without customer information and traceable to the point of transaction only. Customer Identification/Information may not be required. WhiteShadowBlack RegulatedRegulated and Outside regulationOutside regulation TraceablePartially TraceableUntraceable TransparentPartially AnonymousAnonymous e.g., Cards, Faster paymentse.g., Prepaid, Loyalty cardse.g., Cash, Virtual Currency Five major elements to the Shadow Payments market 2 1.Closed/Restricted loop pre-paid retail/gift cards e.g., Walmart American Express: no credit checks, reloadable and can withdraw cash from ATM, 2.Virtual Currency e.g., Bitcoin & Ripple 3.Prepaid mobile wallets: e.g., Starbucks Card Mobile App enables barcode-based checkouts, 4.Payment Aggregators: PayPay uses stored value accounts, Google Checkout and Amazon Payments enable merchants to accept credit card and bank transfers without merchant account with bank or card association 5.Worker Remittances: sent through private, rather than open, payment networks remain unreported Characteristics Market Transparency and Active Governance Continuum More Less

© Internal Consulting Group 2015 KAR 017 – Future of Global Payments COMMERCIAL IN CONFIDENCE Pressure and Challenges – Virtual & Crypto Currencies While in existence for decades virtual and crypto currencies have taken a larger part of the pie, and while not linked to existing currencies in the global payments system have the potential to play a much larger part in commerce 53 Source: Adapted from Celent, Taxonomy of Payments, ICG Analysis, (1) consortium or individual processors (outsourcing); (2) other enabling networks Country Z Country B Country A Business Government Individuals Bank Interbank Utilities 1 P P P P P P P P P P P Virtual & Crypto B2B P2P N2N2 P P

© Internal Consulting Group 2015 KAR 017 – Future of Global Payments COMMERCIAL IN CONFIDENCE 54 Virtual & Crypto Currencies Virtual and Crypto-currencies have seen increased application and become attractive to new stakeholders. As the concept of this form of currency matured, its potential applications increased and linking virtual and fiat currency became attractive to entrepreneurs and those looking to circumvent the law. Source: (1) European Banking Authority Opinion on Virtual Currencies, 2014, pg 1 Virtual Currency Example: Loyalty programs with points generated through activity (purchases) redeemable for goods and services within program rules Online gaming credits earned and redeemable according to rules within that game eg Second Life’s Linden dollars and Facebook Credits Crypto Currency Example: Virtual value generated through complex mathematical algorithms and not linked to fiat currency, operating online, unregulated and outside traditional frameworks eg. Bitcoin Virtual Currencies are a digital representation of value that is neither issued by a central bank or public authority nor necessarily attached to a Fiat Currency, but is accepted by natural or legal persons as a means of exchange and can be transferred, stored or traded electronically. 1 Virtual currencies have been in existence for decades however, these currencies were not linked to existing currencies in the global payments system. Virtual Currency

© Internal Consulting Group 2015 KAR 017 – Future of Global Payments COMMERCIAL IN CONFIDENCE 55 Source: (1) FATF Report, Virtual Currencies, 2014, pg 8 (2 ) S.Girn, CIO RBA, Speech to the Committee for Economic Development of Australia (CEDA) Adjusting Australia Series Sydney - 11 June 2014 (3) Payment Systems Board Information Paper, May 2013 pg 2 Taxonomy of Virtual Currencies 1 Virtual Currencies Evolve Recent developments motivated by currency ‘owners’ and consumers has seen a number of Virtual Currencies repeat history, establishing convertibility to commodities such as gold or fiat currency. The potential for “digital disruption” of the payments sector by digital currencies is obvious – it offers a fundamentally better alternative (to the present approach) for solving a customer problem, in a cheaper, quicker and more convenient manner with technology playing a key enabling role. 2 In a 2013 paper, the Reserve Bank of Australia 3 noted ‘...users may find bitcoins appealing when compared with more ‘traditional’ payment systems because of four factors: (1) no/low transaction fees - relative to traditional payment methods, this is a particular advantage for cross-border transfers (2) anonymity of the transaction (3) value can be transferred relatively quickly and (4) transactions are irreversible after confirmation. CentralisedDecentralised Convertible Administrator, exchangers, users; third-party ledge; can be exchanged for fiat currency. Example: WebMoney Exchangers, users (no administrator); no Trusted third-party ledger; can be exchanged for fiat currency. Example Bitcoin Non-convertible Administrator, exchangers, users; third-party ledger; cannot be exchanged for fiat currency. Example: World of Warcraft Gold Does not exist

© Internal Consulting Group 2015 KAR 017 – Future of Global Payments COMMERCIAL IN CONFIDENCE 56 Source: (1) European Banking Authority Opinion on Virtual Currencies, 2014, pg 10 (2) http:cryptocoinrank.com, 29 Oct 2014 @ 11:00 AEST Crypto-currency Charts by Market Capitalisation $USD 2 Growth in Crypto Currencies Notable for its volatility and associated risks, current reports value the top ten crypto-currencies at an aggregated value of $5 Billion USD by market capitalisation. The most prominent of these currencies, Bitcoin represents c96% of this value. When stated in relative terms however, the EBA note ‘…even if interpreted very generously, the number of Bitcoin transactions, which accounts for the vast majority of VC transactions, has never exceeded 100 000 per day across the globe, compared to approximately 295 million conventional payment and terminal transactions per day in Europe alone. 1 The establishment and subsequent collapse of Virtual Currency marketplaces such as MtGox in 2013, highlights the risks associated with payments infrastructure operating unsupported, outside government and regulatory controls.

© Internal Consulting Group 2015 KAR 017 – Future of Global Payments COMMERCIAL IN CONFIDENCE 57 Source: (1) APCA – Submission to the Financial System Inquiry, Aug 2014 pg 3 (2) UK Government HM Revenue and Customs Policy Brief 9, 3 Mar 2014 Governance of Virtual Currencies Government, Central Banks and Regulators maintain a watching brief on Virtual Currencies and Bitcoin in particular, that operate unregulated, outside the governance framework of the global payments system. Many jurisdictions have recently, or are currently evolving, legislation regarding treatment of these currencies for taxation purposes. JurisdictionBitcoin Legal?Taxation Implications AustraliaYes for private individuals and businessATO regard Bitcoin as neither money nor currency but as an asset for CGT & FBT New ZealandYes for private individuals and businessIRD has no formal position however is on record saying, ‘Generally, if goods or services sold in exchange for Bitcoin, the market value of the goods or services received in exchange is liable for tax.‘ United KingdomYes for private individuals and businessVAT due in the normal way from suppliers of goods and services in sold in exchange for Bitcoin 2 United StatesApril 2013 US FinCEN declares Bitcoin exchanges ‘money-transmitters’ with AML/CFT regulatory obligations IRS tax Bitcoin as property European UnionEBA advise lenders to refuse Bitcoin in July 2014 ChinaYes for private individuals CCB barred FI’s for trading PBoC barred FI’s and payments companies unable to price, buy or sell Bitcoin An illustration of the level of regulation in other countries 1 Virtual Currencies are challenging key controls and regulatory frameworks in the global payments system.

© Internal Consulting Group 2015 KAR 017 – Future of Global Payments COMMERCIAL IN CONFIDENCE General Trends in Payments, Clearing & Settlement Globalisation, technological advancements and new industry participants, as well as risk management, efficiency, and user interest considerations are shaping five key trends in payments. Digitisation of payments – the replacement of cash and paper-based transactions with electronic – is transforming payment choices available to consumers and businesses. This drive to digital is at mature stages in most developed economies and is gaining momentum in the developing ones Consumers are increasingly willing to transact electronically using both traditional electronic methods (e.g. credit or debit cards) and alternative one (e.g. e-wallets, virtual currencies like BitCoin). Move to increase the speed of payment processes continues to accelerate. More countries are implementing same-day settlement for bulk retail payment systems and/or creating new systems or services to provide a faster payment option for individual payments. Convergence towards a global payments standard for payment messages. ISO 20022 is gaining significant momentum with adoption or planned adoption in many parts of the world for retail and large-value payment systems. Interdependencies among financial market infrastructures and systemic risk issues as a result of the global financial crisis are driving more stringent regulations and standards on risk management. These more stringent standards, in addition to regulations in relation to anti-money laundering, data privacy, security, consumer protection and competition policy, are impacting the design and use of both retail and large-value payment systems 59 Source: 2014 Environmental Scan: Global Trends, Challenges and Impacts on Canada, CPA

© Internal Consulting Group 2015 KAR 017 – Future of Global Payments COMMERCIAL IN CONFIDENCE General Trends in Payments, Clearing & Settlement (2) Globalisation, technological advancements and new industry participants, as well as risk management, efficiency, and user interest considerations are shaping five key trends in payments. Interdependencies (continued) Regulatory initiatives include, Basel III and liquidity monitoring tools, the Dodd-Frank Act and the CPSS- IOSCO risk management standards for financial market infrastructures The impact of these regulatory initiatives are numerous, including: more costly intra-day liquidity, higher collateral requirements for financial institutions, changes to clearing rules and, in some cases, a complete revamping of risk management practices by financial market infrastructures Public authorities in many countries are continuing to examine and, where appropriate, revise governance structures and oversight frameworks. Governance reform of payment systems is continuing, as evidenced by the planned or adopted changes in the governance structures for payment systems across the globe. In addition to Canada, the most recent example is in the U.K., with the establishment of a new payments system regulator, removing the formal strategy role of the U.K. Payments Council. In accordance with the new CPSS-IOSCO risk management standards, a number of financial market infrastructures are taking measures to strengthen their governance with the inclusion of independent Board members. Also, central banks in many jurisdictions are strengthening their powers and broadening their scope of oversight to include systems of financial or prominent importance (i.e. systems whose failure can have a major economic effect and undermine public confidence). 60 Source: 2014 Environmental Scan: Global Trends, Challenges and Impacts on Canada, CPA

© Internal Consulting Group 2015 KAR 017 – Future of Global Payments COMMERCIAL IN CONFIDENCE 61 Innovation through Collaboration As the underlying infrastructure of the global payments system evolves, traditional players are exploring the role of Utility and Shared Services in meeting Compliance obligations generated by extra-territorial regulation. Among the many factors that spark innovation, regulatory change has been one of the most important over the past few years. Source: (1) http://www.semble.co.nz/what-is-semble/the-semble-story (2) http://complianceservices.swift.com/sites/complianceservices/files/swift_kyc_registry_factsheet_01_2014.pdf (3) APCA. Case 1 Development of the Semble mobile payment app in New Zealand through collaboration between the company that processes the greatest volume of Eftpos transactions (owned by the four largest banks in NZ) and three of NZ’s mobile network providers. With a market pilot commencing Nov 2014 and expected launch in 2015, this payment app is unique in that it can be used across any NZ mobile network. 1 Case 2 The scheduled launch in late 2014 of a KYC Registry 2 industry utility service for Correspondent Banks, presents an opportunity for the twelve registered international banks to meet Compliance obligations and drive efficiency. The centralised repository maintains a standardised set of information about banks required for regulatory due diligence. The solution does not assess (score) or assume risk associated with the transaction. Case 3 Development has commenced in Australia of the New Payments Platform (NPP), which will introduce a shared payments infrastructure over which individual organisations can create and overlay customer oriented, value adding services. The NPP program is a collaborative initiative currently involving 17 participants (all are Authorised Deposit taking Institutions) and expects to deliver faster payments and more information regarding that payment. 3

© Internal Consulting Group 2015 KAR 017 – Future of Global Payments COMMERCIAL IN CONFIDENCE Value Chain Innovation Traditionally, payments’ heavily process oriented value chain has represented significant opportunities for innovation (e.g., cheques) 62 Source: ICG Analysis Initiate Make Payment Present Payment Clear & Settle Report, Reconcile and Support Customer (C) and Supplier (S) contract for a good or service (including options on how payment to be made) C requires standing in the market – i.e., access to credit or banking services Cash remains an option (with limited view) C chooses payment type and tenders as agreed S directs payment (e.g., cheque) to Bank C unwilling and/or unable to make payment Fraudulent transaction, either payment or contracted good or service S Bank processes and validates item Claims value from C’s Bank though appropriate mechanism dependent on payment type Payment cannot be completed due to Insufficient funds Need to cancel transaction Receive item, validate and confirm bone- fide Prepare and process S Bank settles with C Bank Finality of funds Indirect players will require correspondent in market to settle funds Confirm settlement and exchange information as defined by rules of engagement Provide information and support to stakeholders Multiple jurisdictions Limited payment information or ability to retrieve Reconciliation Traditional stages of payment, clearing and settlement Select payment- related complications Conceptual Payments Value Chain Illustrative Governance and Risk Management Oversight Timeline Selected Risks (C) Credit Risk (H) Operating Risk, high manual and IT processing intensity (R) Settlement and Other Risks (T) Prone to time delays R T H C R H C R H C T C R R T Days, Weeks, Months H

© Internal Consulting Group 2015 KAR 017 – Future of Global Payments COMMERCIAL IN CONFIDENCE Value Chain Innovation – Cheques/Checks The ability to virtualise paper cheques has allowed for significant innovation to occur, improved risk profiles, and may lead to a longer useful life for the cheque 63 Source: ICG Analysis Initiate Make Payment Present Payment Clear & Settle Report, Reconcile and Support Customer (C) and Supplier (S) contract for a good or service (including options on how payment to be made) C requires standing in the market – i.e., access to credit or banking services Cash remains an option, with limited view C chooses payment type and tenders as agreed S directs payment (e.g., cheque) to Bank C unwilling and/or unable to make payment Fraudulent transaction, either payment or contracted good or service S Bank processes and validates item Claims value from C’s Bank though appropriate mechanism dependent on payment type Geography, and time Payment cannot be completed due to Insufficient funds Need to cancel transaction Receive item, validate and confirm bone- fide Prepare and process S Bank settles with C Bank Finality of funds Indirect players will require correspondent in market to settle funds Confirm settlement and exchange information as defined by rules of engagement Provide information and support to stakeholders Multiple jurisdictions Limited payment information or ability to retrieve Reconciliation Innovation in stages of payment, clearing and settlement Select payment- related complications Conceptual Payments Value Chain Illustrative Governance and Risk Management Oversight Timeline Selected Innovations & Implications (A) Automate and eliminate manual and/or machine processing (C) Capture and exchange information more quickly to reduce risk (F) Faster support, insight and/or settlement (I) Improve customer experience and differentiate your Bank F F F C F A A F F Minutes, Hours, Days, Weeks, Months I I I C A

© Internal Consulting Group 2015 KAR 017 – Future of Global Payments COMMERCIAL IN CONFIDENCE 64 Source: Cap Gemini, World Payments Report, p 24 Standardisation Competition & Transparency Innovation Basel III Capital Norms Basel and Intraday Liquidity Norms Cross-Border Low Value Payments Processing Access to Accounts (PSD II) FATCA AML/AFT SEPA/e-SEPA Pressure on Card Interchange Fees Prepaid Payment Product Regulations in NA Large Value Payment System Upgrades Real Time Retail Payments European Current Account Switching EMV Adoption in the US Internet Payment Security in Europe Data Privacy and Payments Payments Governance ISO 20022 Standards in Payments Risk Reduction Key Regulatory & Industry Initiatives (KRIIs) Industry Transformation Trends (ITTs) Overlapping Impact on KRIIs on ITTs (1) There has been a shift of focus towards global levels, with a considerable degree of overlap in terms of ITTs, with more than 50% falling into innovation HighMediumLow Impact on Payments

© Internal Consulting Group 2015 KAR 017 – Future of Global Payments COMMERCIAL IN CONFIDENCE Overlapping Impact on KRIIs on ITTs (2) There has been a shift of focus towards global levels, with a considerable degree of overlap in terms of ITTs, with more than 50% falling into innovation 65 Source: Cap Gemini, World Payments Report, p 24 Standardisation Competition & Transparency Innovation Mobile Payments Contactless Cards/NFC SEPA for Cards E-invoicing e-government National Payments Corporation of India CPSS-IOSCO Access to Clearing Mobile Payments Security in Europe Virtual Currency Regulations Capital Rules for Foreign Banks in US Financial Transaction Tax Bank Payment Obligation Cybersecurity Directive Electronic Identification and Trusted Services Tokenization for Cards UAE Wallet Financial Inclusion Risk Reduction Key Regulatory & Industry Initiatives (KRIIs) HighMediumLow Impact on Payments Industry Transformation Trends (ITTs)

© Internal Consulting Group 2015 KAR 017 – Future of Global Payments COMMERCIAL IN CONFIDENCE Five Trends and Considerations for the Payments Industry Insights from Sibos 2012 66 The whole payments sector is now in the midst of a transformation, the likes of which will change the fundamental rules of the game. Through the course of our presentations, discussions and participation, KPMG identified five key themes that – whether they were on the Sibos agenda or not – dominated the discussion at this year’s conference. On their own, each of these issues creates new and challenging complexities for payments participants; taken together, they signal an undeniable transformation agenda that cannot be ignored. They are: Coping with Unrelenting Regulatory Change Move Towards Faster Payments Picks Up Pace The Rise of Asia Competitive Threats Change the Rules of the Game Transformation Takes Centre Stage 1 2 3 4 5 Source: KPMG, What we took from Sibos 2012

© Internal Consulting Group 2015 KAR 017 – Future of Global Payments COMMERCIAL IN CONFIDENCE Five Trends and Considerations for the Payments Industry Insights from Sibos 2012 TrendPerspectives Coping with Unrelenting Regulatory Change “The linchpin that connected almost every conversation at this year’s Sibos conference. Few (if any) participants were bold enough to suggest that they were coping with the pace of regulatory change; most admitted they were struggling – or worse, failing – to keep up There were very positive signals that many of the participating organizations were now starting to recognize the need to develop a more strategic approach to managing regulatory change, particularly its impact on technology systems and infrastructure “People are deeply interested in understanding how they can apply a portfolio approach to their regulation-driven technology challenges,” “They want to understand the future direction of regulatory changes so that they can get out ahead of it and build systems and processes that will help them ensure compliance around the world and across their lines of business.” “Many of the attendees were uncertain about the impact of existing regulation on their international business.” “For example, few were aware of the potential impact of US Dodd Frank rule 1073, which will by extrapolation require payment service providers to give detailed data to a US- originating bank on timing, charges and local taxes applied to a transaction in advance, so that full and final information can be provided to a customer at the initiation point for remittance transactions originating from the US; the rule comes into force in February 2013, so there is no time to waste.” 67 1 Source: KPMG, What we took from Sibos 2012

© Internal Consulting Group 2015 KAR 017 – Future of Global Payments COMMERCIAL IN CONFIDENCE TrendPerspectives Move Towards Faster Payments Picks Up Pace Hot topic -- is the move towards executing immediate payments”. “Following in the footsteps of the UK, we will soon see Singapore and Australia move forward quickly on this and – before long – I suspect that all major markets will be implementing rules to bring about instant payment services driven by a move to mobile. ”For most banks, this move towards instant payments will require a significant transformation in their technology systems and processes. Banks will need to do a lot of preparation work to be able to make and accept real-time payments and this will demand significant investment from the banks.” “A faster payment capability is an absolute pre-requisite to creating a successful mobile payments platform; people won’t wait for days to receive their payments in the mobile world. We are also seeing greater adoption of international standards such as ISO20022, which will be critical to supporting the settlement of instant payments in cross-border transactions.” The Rise of Asia Asia’s growing dominance underlined almost every session and permeated into everything from plenary sessions though to networking events. For Asian banks, the focus was on identifying new strategies to grow their business and leverage lessons from the West. Those from outside of Asia, however, took the opportunity to learn more about the region and will undoubtedly be going home to assess their capabilities and presence in the market. “Everyone knows that Asia is where the real growth is occurring in today’s market, but while the broader industry seems to recognize the trends, many organizations are still trying to work out what the impact will be on their business and, once they figure that out, what they should do about it.” “The Asian market is going to be bigger than the European and US markets combined and banks – particularly the big global guys – simply can’t ignore that this is where the volume is going and need a plan for how they are going to address this shift towards Asia” 68 2 3 Source: KPMG, What we took from Sibos 2012 Five Trends and Considerations for the Payments Industry (2) Insights from Sibos 2012

© Internal Consulting Group 2015 KAR 017 – Future of Global Payments COMMERCIAL IN CONFIDENCE TrendPerspectives Competitive Threats Change the Rules of the Game Banks are increasingly recognizing that their payments revenue is slowly being eroded by new and non- traditional competitors in the marketplace. From massively successful payments organizations such as China’s AliPay or TenPay through to telecom and mobile service providers, banks are starting to feel pressure on their transactions margins. “In some cases, the regulatory landscape is leading to a competitive imbalance between the banking industry – which is heavily regulated – and the new market entrants which are generally less regulated when it comes to payments. But banks must also recognize that these non-legacy players tend to be much more agile, more innovative and are often quicker in the marketplace, meaning that banks will need to work hard to protect and defend their existing markets.” “Whether Fidor Bank is ultimately successful or not, it has already turned the rules of banking on their head and forced the payments industry to think differently about innovation in this sector.” Transformati on Takes Centre Stage Given the prevailing currents within the payments sector, many attendees and speakers were focused on developing transformation strategies to help banks and payment providers adapt to the realities of the new market environment. “There was a general agreement that agility and flexibility would need to be core characteristics for the industry going forward. The old days of implementing massive legacy systems across the organization in three or four year cycles are clearly gone; to survive in today’s environment, banks must be able to make changes and adjustments on an ‘as needed’ basis.” “Particularly for those banks that have grown through acquisition, a major challenge will be in unpicking the mess of overlapping and inter-related IT systems to create a more flexible and adaptive system. Organizations are now focused on creating services and applications that cross the organization horizontally rather than creating several vertical solutions that support a limited number of business needs.” 69 4 5 Source: KPMG, What we took from Sibos 2012 Five Trends and Considerations for the Payments Industry (3) Insights from Sibos 2012

© Internal Consulting Group 2015 KAR 017 – Future of Global Payments COMMERCIAL IN CONFIDENCE 70 Pressure and Challenges - Transformation Innovation across the payments value chain has risen dramatically in recent years. Retail payments in Europe are in a state of flux, with transformational forces disrupting economic models. Four key transformational forces (apart from regulation) are: 1.Heterogeneous growth patterns 2.Digital innovation 3.Evolving merchant payment needs 4.Widespread M&A activity In recent years multiple types of deals between European banks have occurred from collaboration on bank utilities to the forging of strategic partnerships The trend toward deals and partnerships is expected to accelerate in the coming years Source: BCG Global Payments Report, pg 10; Cap Gemini, World Payments Report, p 37 and McKinsey on Payments: Payment regulation, 2013 pg 38 Transformational Forces Key External Pressures and Internal Challenges and Their Impact on Payments Processing

© Internal Consulting Group 2015 KAR 017 – Future of Global Payments COMMERCIAL IN CONFIDENCE 71 Pressure & Challenges – Wholesale Markets Innovation in mature Wholesale markets is influenced by the pressure to defend and grow revenues. Overcoming complex legacy environments and responding to changing client needs will be key to success. In the Commercial and Wholesale markets, there will be increasing demand for more than ancillary information related to a transaction with demand for data-driven analysis, including predictive liquidity analytics. 1 In order to move forward effectively, wholesale transaction banks need to focus on several areas: achieving sustainable regulatory compliance …and capturing the growth in regional developing economies. 2 Across retail and corporate payments markets customer demand is regarded as the main driver of transformation and innovation. Catalysts for innovation are threefold: —Customer demand —Entry of non-banks and —Convergence of delivery channels 3 Source: ; (1) BNY Mellon Global Payments 2020, pg 35: (2) BCG Global Payments Report 2014, pg 22; (3) Cap Gemini, World Payments Report 2014, pg35-38 (4) AB+F the payments revolution, Alan shields, Rfi advisory, July 2014 While it may be intuitive to assume industry collaboration should be easier in markets with fewer payments players ‘...in markets like Australia, New Zealand and Canada, where a few banks have a dominant position, it often seemed to have the opposite effect, possibly because consumers have less choice.’ 4

© Internal Consulting Group 2015 KAR 017 – Future of Global Payments COMMERCIAL IN CONFIDENCE Pressure and Challenges Industry thought leaders have various points-of-view on Innovation and Collaboration SourcePerspectives Accenture ( Future of Payments: Convergence, Competition & Collaboration 2014, p9) Advocates developing a comprehensive, board endorsed, holistic payments strategy. This should include targeting investment at areas offering the best long-term returns while minimising internal duplication by, for example, creating centralized or ‘utility’ functions such as authorization, authentication and fraud management. This includes building an accurate understanding of the scale of costs associated with retail payments and the income at risk. BCG (Global Payments Report 2014, p22) In order to move forward effectively, wholesale transaction banks need to focus on several areas: achieving sustainable regulatory compliance, … and capturing the growth in regional developing economies Cap Gemini (Global Payments Report pp35-38) While customer demand is driving innovation in the client-facing part of the payments value chain, it is also a driving factor when it comes to innovation at the processing, or back end, of the value chain. Across retail and corporate payments markets customer demand is regarded as the main driver of transformation and innovation Catalysts for innovation are threefold: customer demand, entry of non-banks, and convergence of delivery channels RFI Advisory (AB+F The Payments Revolution, Alan Shields, July 2014) While collaboration should be easier in markets like Australia, New Zealand and Canada, where a few banks has a dominant position, it often seemed to have the opposite effect, possibly because consumers have less choice. 72 Source: Accenture, BCG; Cap Gemini

© Internal Consulting Group 2015 KAR 017 – Future of Global Payments COMMERCIAL IN CONFIDENCE Risk Management Industry thought leaders have various points-of-view on the payments system and its participants actively managing risk through a range of methods and frameworks SourcePerspectives BCG (Global Payments Report 2014, pg 15) Although banks are well positioned – they possess key assets such as security and risk management skills, as well as reliable, scalable infrastructure – technology companies and retailers are matching some of these assets and excelling at others (such as one-click purchases). 1 US Federal Reserve (Policy on Payment System Risk, 2011) With an increasing number of new entrants in the global payments system, the US Federal Reserve offers the following risk management perspective regarding potential entrants to a system. Broadening the availability of information concerning a (payment and settlement) system's risk-management controls, governance, and legal framework, for example, can facilitate this understanding and analysis and also assist those interested in a system in evaluating and managing any risk exposure. 2 National ACH Association (NACHA) (Risk Management Strategy pg 1) …growth in transaction volume and in Network innovation affords significant opportunities, but with those developments comes the need to effectively and creatively analyse, examine and manage payment system risk. 3 FATF (Guidance, AML & Terrorist Financing and Financial Inclusion, 2013, pg 15) In a guidance paper on balancing financial inclusion in emerging economies with the risk of money laundering issued by the Financial action Task Force, it acknowledged at the same time that financial exclusion works against effective AML/CFT policies. Indeed the prevalence of a large informal, unregulated and undocumented economy negatively affects AML/CFT efforts and the integrity of the financial system. Informal, unregulated and undocumented financial services and a pervasive cash economy can generate significant money laundering and terrorist financing risks… 4 74 Source: ; (1) BCG Global Payments Report 2014, pg 15 (2) Federal Reserve Policy on Payment System Risk, 2011) (3) NACHA Risk Management Strategy pg 1 (4) FATF Guidance, AML & Terrorist Financing and Financial Inclusion, 2013, pg 15

© Internal Consulting Group 2015 KAR 017 – Future of Global Payments COMMERCIAL IN CONFIDENCE 75 The Reserve Bank of Australia on the number of policy areas that may be affected by the operations of Bitcoin 2 The payments system Fall in Seigniorage Monetary policy Financial stability Consumer protection (fraud) Taxation Anti-money laundering and counter- terrorist financing (AML/CTF) and more generally, financing of illegal activities Risk Management Through the lens of a Central Bank, the emergence and proliferation of Virtual Currencies – currently assessed as being in a nascent state and not a systemic risk – highlight a number of Risks and Policy areas that require proactive consideration as they impact Global Payments. Source: (1) Virtual Currency Schemes report, published by the European Central Bank (ECB) in October 2012, (2) Payment Systems Board, RBA, May 2013, pg 7 (3) Australian Broadcasting Corporation, 21 Nov 2014 The European Central Bank (ECB) on Risks associated with Virtual Currencies 1 Expose users to credit, liquidity, operational and legal risks Pose a challenge to public authorities due to their use in illegal activities May fall under central banks’ responsibility for the payments system, depending on their legal mandate Could negatively impact central bank’s reputation (if an incident occurs after a system has grown substantially without central bank oversight). Recently in Australia, the national broadcaster reported the last of the big four banks decided to no longer support international money remitters through their banking facilities. This follows recent warnings about the use of international money transfer businesses to finance crime and terrorism and a federal government review of AML/CFT laws. 3

© Internal Consulting Group 2015 KAR 017 – Future of Global Payments COMMERCIAL IN CONFIDENCE 76 Identifying Emerging Risks and Mitigating through Collaboration Advances in technology, increasing uptake of electronic and mobile banking combined with transformation of payments infrastructure and introduction of payments utilities exposes participants in the global payments system to new risks that increasingly involve third parties. Source: (1)McKinsey SWIFT Sibos, 2013 pg 39 (2) http://www.prnewswire.com/news-releases/aml-share-launches-communications-utility-to-fight-terrorist-finance- 72352862.html (3) http://complianceservices.swift.com/sites/complianceservices/files/swift_kyc_registry_factsheet_01_2014.pdf. New and changing Risks Cyber-crime and Fraud: Attacks on cloud platforms like those used by Google and Facebook have left financial institutions, central banks and regulatory authorities worried about the possibility of cyber-crime and fraud. Large clouds could be vulnerable to environmental security risks of this kind, and market infrastructure providers will need to ensure they have proper controls in place to detect and prevent attacks. 1 Data Privacy, Security and Retention Consumer Protection including risks associated with payments infrastructure operating outside government and regulatory controls eg Virtual Currency exchanges Business Continuity and Disaster Recovery including development and operation of Joint Ventures and shared services Case 1 In the US this year, a technology company is piloting a shared communications service for financial institutions to combat terrorist financing and money laundering under Sec 314(b) of the USA Patriot Act. The service, which is enlisting at least 10 financial institutions, offers industry the first secure communications network to share information for such purposes. 2 Case 2 The 2014 launch of an Industry Utility KYC Registry 3 service for Correspondent Banks, presents an opportunity for the twelve registered international banks to more efficiently meet due diligence obligations referencing common, standardised information.

© Internal Consulting Group 2015 KAR 017 – Future of Global Payments COMMERCIAL IN CONFIDENCE Governance Looking ahead, governance issues for payments may arise due to: pre and post payment activity, the establishment, operation and development of shared infrastructure and extent to which standardisation is adopted. The payments landscape will be reshaped by technology and redefined by regulation, the emergence of new economic powers, and changes in the global currency landscape. 1 Governance considerations associated with shared infrastructure: - Procurement processes - Standardisation - Funding arrangements and investment 2 Direct involvement of the central bank in managing clearing and settlement systems has been, in many countries, the first step to governing the overall structure and operation of a country’s payments system and ensuring that the desire to limit system risk, especially in the area of large-value payments is taken into account. 3 Establishing a flexible legal framework in which clearing and settlement occur, guiding the development of industry standards and innovation and ensuring the physical payments infrastructure is stable and secure. 4 As national payments systems across the globe modernise, the changes are reverberating among banks, payment solutions developers and vendors, and will eventually affect the entire value chain – from national networks and central banks down to treasury managers, merchants and consumers. 5 78 Source: ; (1) BNY Mellon Global Payments 2020, pg 1: (2) Payments council payments roadmap, initial report, 2013, p17 (3) Word bank, Payment System Outlook, 2013, p2: (4) McKinsey on Payments, 2013 pg 42, (5) McKinsey on Payments – Transforming National Payments Systems 2013, pg 30

© Internal Consulting Group 2015 KAR 017 – Future of Global Payments COMMERCIAL IN CONFIDENCE Mandate Oversight organisations address the challenges of their environment as appropriate for their market – i.e., formally or informally tiered, structure of clearing, membership, etc. 79 Canada (CPA) Australia (APCA) NZ (Pymt NZ) Ireland (IPSO) Japan (JPA/JBA) Nether-lands (Equens) South Africa (PASA) USA (Nacha) USA (The Fed) UK (UKPC) Wholesale systems formally tiered N.A. Retail systems formally tiered Separate clearing systems for retail payment schemes (with optional membership) (1) Multiple clearing arrangements for indirect members permitted in practice (2) (3) Non-Financial institutions (other than government) eligible for Membership (4) Associate/Affiliate Members (5) Notes: (1)With retail payment clearing and settlement schemes in the hands of different organizations, financial institutions (and other bodies, where appropriate), may be a member of one without having to be a member of another (2)Where no formally tiered clearing structure exists, informal tiering may nevertheless be employed in practice between direct participants in the system and financial institutions a leveraging clearing agent’s services for their payment items. (3)The CPA’s Automated Clearing Settlement System (ACSS) Rules do not currently permit multiple clearing arrangements, with the exception of the POS payment scheme where multiple clearing arrangements are permitted. The framework for these arrangements is currently under review. (4)Non-financial institution membership eligibility is restricted to regionally based bankers’ associations. (5)“Associate Members” refers to organisations interested in payment clearing and settlement system matters, but that clear and settle no payment items. Source: Canadian Payments Association: International Benchmarking Survey Results

© Internal Consulting Group 2015 KAR 017 – Future of Global Payments COMMERCIAL IN CONFIDENCE 80 Source: (1) International Council of Payment Association chief executives, principles of payments industry self-governance, 2007 (2) McKinsey & Partners, McKinsey on Payments - Forging a path to payments digitization (3) APCA Submission to Financial System Inquiry, Mar 2014, pg16 In their submission to the Financial Services Inquiry regarding future challenges facing the payments industry and regulators APCA recommend; 3 Supporting co-regulation in payments Ensuring functional equivalence of regulation Reviewing the RBA’s current jurisdictional reach Encouraging use of virtual, automated and electronic payments Efficient structuring of interactions between regulated entities and regulators Five principle that characterise a sound self- governance framework for payments systems are: 1.Certainty 2.Legitimacy 3.Transparency 4.Flexibility 5.Efficiency Fit for Purpose Governance The extent of government involvement in payments governance models varies around the globe. As one approach is unlikely to meet the needs of payment participants in all jurisdictions, the pace, nature and extent of change in the payments system, in the context of dynamic regional influences and developing economies, are catalysts that challenge key assumptions underpinning existing models. Several countries – among them Canada, Australia, the United Kingdom and South Africa have established a National Payments Council to drive policy development, self regulation and standards development. 2 Spectrum of Self-Regulation Governance Principles

© Internal Consulting Group 2015 KAR 017 – Future of Global Payments COMMERCIAL IN CONFIDENCE Roadmap Towards Desired Payments Processing Capability Understanding the relative maturity of payments markets is particularly important in view of increasing use of electronic and cross-border payments, growth of crypto-currencies and nature of extra-territorial legislation. 81 Payments markets can be characterised in four ways 1 Source: (1,2) McKinsey on Payments, 2013 pg 43-44 The extent of regulatory intervention needed to support the ‘protect today, enable tomorrow’ agenda varies considerably by market. 2 Evaluating a market across four criteria can help key stakeholders assess whether regulatory intervention is likely. 1.How mature is the market? 2.How far has the market progressed eg. move from paper to electronic payments? 3.How competitive is the market? 4.How strong and independent are the Industry bodies? Most ideal state Influence of Market Maturity

© Internal Consulting Group 2015 KAR 017 – Future of Global Payments COMMERCIAL IN CONFIDENCE The Way Forward: A Transformation Journey Relook at incremental transformation 82 ChallengeDescription AlignmentAn environment of rapid change and increasing demand from various client segments, make it difficult to draw a complete picture of all customer demands. CostManaging the complexity and higher costs involved in achieving the desired capabilities and features of payments processing Risk-RewardBalancing the time it takes to implement robust transformation with the desire of improved time to market for new products and services Innovation vs. RiskDetermining the right balance between compliance and innovation Reputational RiskArising from a potential failure of a transformation project. Legacy players, especially the global giants, face heightened risk if a product or service roll-out fails Shortage of ExpertiseAvailability/long-term retention of senior payments executives (particularly SMEs) Source: Cap Gemini World Payments Report 2014, p40-42 While traditional payments processors have taken an incremental approach to transformation, some might benefit from a more robust, end-to-end project management and execution aligned to a clear business vision Such an approach would help firms avoid delays and deliver clear benefits to their customers and themselves While incremental, agile transformation is common sense, firms need to more closely follow the fundamentals of program management to achieve their goals While organisations typically begin their journey with an incremental approach in mind, the majority of them deviate when faced with challenges. There are a number of common constraints and challenges that occur:

© Internal Consulting Group 2015 KAR 017 – Future of Global Payments COMMERCIAL IN CONFIDENCE The Way Forward: A Transformation Journey Payments processors should continue to take an incremental transformational approach to deliver value for themselves and their clients 83 Source: Cap Gemini World Payments Report 2014, p40-42 Building Transformation Vision Incremental Transformation Integrated Payments Back- Office Delivering Long- term Business Benefits Roadmap Towards Desired Payments Processing Capability Decide on long- term payments processing vision Assess the current maturity and agree on the future desired maturity Formulate an incremental transformational strategy Execute the strategy through short-cycle projects Develop an integrated processing platform with desired capabilities and flexibility Deriving business benefits for the firm and clients

© Internal Consulting Group 2015 KAR 017 – Future of Global Payments COMMERCIAL IN CONFIDENCE The Way Forward: A Transformation Journey Firms need to diagnose their current processing maturity on eight key components and agree on the desired maturity levels across these components 84 Source: Cap Gemini World Payments Report 2014, p40-42 Questions to assess transformation components: ComponentQuestion ScaleHow would you rate your systems efficiency in processing a large number of payments transactions? SpeedHow quickly can you process the payments for your customer and product base? EfficiencyWhat is the extent of straight-through-processing in your firm overall, and per instrument? Channel Coverage To what extent can your systems process payments originated from any channel? Geographical Reach What is your geographical reach for payments processing? Do you have a single payments processing factory per country, currency or region? InsightsTo what extent is your firm able to leverage data to drive internal improvement and customer value add? PriceTo what extent are you able to provide customized pricing based on products, channels, and reach? Product Coverage To what extent can your systems process payments initiated from any product?

© Internal Consulting Group 2015 KAR 017 – Future of Global Payments COMMERCIAL IN CONFIDENCE 86 ReferenceSource Mobile payments, the next step in a bank’s digital journey, 2014Bain & Company Payment Systems Outlook, 2013 World Bank Submission to the Financial System Inquiry, Mar 2014 Australian Payments Clearing Association Global Payments Evolution Study – Executive Summary, May 2014 RFi Principles of Payments Industry Self-Governance, Nov 2007 International Council of Payment Association of Chief Executives, (ICPACE) Global Payments 2014 Boston Consulting Group/SWIFT Taxonomy of Payments, Part 1 Celent The future of Payments: convergence, competition and collaboration, 2014 Accenture The Impact of Electronic Payments on Economic Growth, Feb 2013 Moody’s Analytics Global Payments 2020: Transformation and Convergence, Sep 2014 BNY Mellon Payments Regulation a Catalyst for Innovation, Mar 2012 McKinsey ISO20022 Registration Bodies Governance, Jul 2014 International Standards Organisation (ISO) The Payments Roadmap – An Initial Report, Jun 2013 The UK Payments Council The Payments Revolution, 22 Jul 2014 AB+F World Payments Report, 2014 Capgemini/RBS Forging a path to payments digitization, 2013McKinsey McKinsey/SWIFT Sibos 2013McKinsey/SWIFT Migration and Development Brief, 2014World Bank Relevant Articles and References

© Internal Consulting Group 2015 KAR 017 – Future of Global Payments COMMERCIAL IN CONFIDENCE 87 ReferenceSource Transforming National Payments Systems, 2013McKinsey Payment Regulation, 2013McKinsey Payments Prospectus, Market Insights, 2013Citibank Putting Growth back on the Banking Agenda, 2013McKinsey Policy on Payment System Risk, 2011US Federal Reserve Risk Management Strategy, 2013National Automated Clearing House Association (NACHA) AML & Terrorist Financing and Financial Inclusion, 2013Financial Action Task Force (FATF) McKinsey on Payments, 2013 & 2014McKinsey What we took from Sibos 2012KPMG Opinion on Virtual Currencies, 2014European Banking Authority Banks’ Payments Businesses are Facing New and Tall Challenges, Sep, 2014Boston Consulting Group Virtual Currencies-Key Definitions and Potential AML/CTF Risks, Jun 2014Financial Action Task Force (FATF) Report of the Working Group on Innovations in Retail Payments May 2012Bank for International Settlements (BIS) Virtual Currencies: The Challenge to Global Fiat Paradigms, Colabella & Shoff, St Johns College, 2014 Colabella P & Shoff M, St Johns College, 2014 The Shadow Economy in Europe, 2013 pg 8-14ATKearney/Visa Global Payments Newsletter, Sep 2014Hogan Lovell Cost of Cash Report, 2013Tufts University Relevant Articles and References (2)

© Internal Consulting Group 2015 KAR 017 – Future of Global Payments COMMERCIAL IN CONFIDENCE 88 ReferenceSource Payment Costs in Australia, 2007Reserve Bank of Australia Evolution of Cash, 2014RFi Innovation in Retail Payments, 2012Bank of International Settlements Standard Note SN/BT/5318, Jan 2014UK Government House of Commons Annual review 2014Australian Payments Clearing Association Speeding up Cheque Payments, Oct 2014UK Government HM Treasury Global Financial Standard Setting the G10 Committees and Economic Law, pg 867-877 Kern A Regulatory Framework Discussion Paper, Jul 2013Basel Committee on Banking Supervision North American Consumer Payments Survey 2014Accenture Australian Payments Council Overview presentation, 2014Epal Conference/Australian Payments Council/Deloitte Opinion on Virtual Currencies, 2014European Banking Authority Payment Systems Board Information Paper, May 2013 pg 2Reserve Bank of Australia Policy Brief 9, Mar 2014UK Government HM Revenue and Customs 2014 Environmental Scan: Global Trends, Challenges and Impacts on Canada Canadian Payments Association Virtual Currency Schemes Report, Oct 2012European Central Bank International Benchmarking Survey ResultsCanadian Payments Association Relevant Articles and References (2)

© Internal Consulting Group 2015 KAR 017 – Future of Global Payments COMMERCIAL IN CONFIDENCE 89 Reference http://www.web.worldbank.org http://www.australianbankingfinanance.com http://www.swift.com/products_services/renminbi_reports http://www.cryptocoinrank.com http://www.rba.gov.au/speeches/2014/sp-so-110614.html http://thefinancialbrand.com/44154/social-media-pop-up-branch-apple-pay/ http://www.npci.org.in/clearingBackground.aspx http://www.semble.co.nz/what-is-semble/the-semble-story http://www.visaeurope.com/newsroom/ http://thefinancialbrand.com/44154/social-media-pop-up-branch-apple-pay/ http://complianceservices.swift.com/sites/complianceservices/files/swift_kyc_registry_factsheet_01_2014.pdf http://www.prnewswire.com/news-releases/aml-share-launches-communications-utility-to-fight-terrorist-finance- 72352862.html Websites

UNBUNDLED CONSULTING PROJECT SUPPORT CAPABILITY BUILDING PROFESSIONAL ASSOCIATION Internal Consulting Group Email enquiries@internalconsulting.com or visit our website at www.internalconsulting.comenquiries@internalconsulting.com This document was prepared by Gerry Purcell (gerry.purcell@internalconsulting.com) a Practice Leader in our Toronto Office and Paul Ekins (paul.ekins@internalconsulting.com) an Affiliate in our Sydney Office They were assisted by ICG’s Financial Services Practice Leader, David Moloney, Marc Potter, Leader of our New Zealand office and our ICG expert Paul Blond drawn from ICG’s Affiliate pool.

© Internal Consulting Group 2015 KAR 017 – Future of Global Payments COMMERCIAL IN CONFIDENCE Knowledge Area Review (KAR 017) The Future & Implications.

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© Internal Consulting Group 2015 KAR 017 – Future of Global Payments COMMERCIAL IN CONFIDENCE Knowledge Area Review (KAR 017) The Future & Implications.

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