1. © Accourt Limited 2006 SCNF Conference Payments - Setting the Scene Adrian Cannon Managing Director adrian.cannon@accourt.com www.accourt.com Tel: +44 (0) 207 612 1221 Mobile: +44 (0) 7766 051 289

2. © Accourt Limited 2006 2 This presentation covers:  The history of payments –What matters – ubiquity, trust  The structure of the payments industry –Schemes – Visa, MasterCard, Link....  The evolutionary tree of payment products –Dinosaurs and mammals –The importance of EMV  The importance of payment within card schemes –Don’t treat payment as an afterthought

3. © Accourt Limited 2006 3 The history of card payments  Card payment products provide a solution to a number of core problems –Personal security –Trust amongst strangers in a world of easy travel –Ubiquity of use  The card payments industry began with proprietary solutions but rapidly realised that achieving ubiquity demands collaboration - payment schemes were created –One of the two most successful models for card system deployment yet invented –The alternative is brutal standardisation and competition on other fronts e.g. GSM

4. © Accourt Limited 2006 4 A little history... 1940 1950 1960 1970 1980 1990 2000 2010 2020 2030 Increasing card performance Franklin National Bank First ATM First EMV cards issued

5. © Accourt Limited 2006 5 The structure of the payments industry – a simple model.. Customer’s Card Issuing Bank Merchant’s Transaction Acquiring Bank £ £ Transaction Data

6. © Accourt Limited 2006 6... made much more complex by scale, geography, and open competition, regulation, criminals... Customer’s Card Issuing Bank Merchant’s Transaction Acquiring Bank

7. © Accourt Limited 2006 7... made much more complex by scale, geography, and open competition... Issuing Bank Acquiring Bank Scheme

8. © Accourt Limited 2006 8 Third party transaction processor rationalized the merchants side of the four corner model... Issuing Bank Acquiring Bank Scheme Third Party Processor

9. © Accourt Limited 2006 9 The evolution of card payment products – little change from the consumers perspective... 1940 1950 1960 1970 1980 1990 2000 2010 2020 2030 Increasing card performance Franklin National Bank First ATM First EMV cards issued Consumer Functionality Identity and Authentication

10. © Accourt Limited 2006 10... but a lot of efforts to achieve change – some dinosaurs – a few mammals perhaps  E-purse –many attempts all failed the ubiquity challenge –Cost of infrastructure deployment of operation too high –standardisation hasn’t helped - CEPS now dead as an issue for major players  EMV is offering new hope –E-purse like consumer propositions achieved through EMV infrastructure –allows for interoperability - meets the ubiquity challenge  Contactless – high convenience payments on the way  Mobile comms. based products will emerge –As part of existing scheme offerings –Possibly as Telco products

11. © Accourt Limited 2006 11 The importance of payment  A key consumer proposition  Cannot be an after thought in the design of a scheme –Security –Ubiquity –Branding –.....  Don’t reinvent the wheel –Understand what exists today, its limitations and strengths –Engage with the payments sector to influence future developments –Exploit the investment that has been made to better service your customers