Making Maestro the preferred debit brand in post-SEPA Europe

1. Making Maestro the preferred debit brand in post-SEPA Europe Aneace Haddad Chairman & Founder Welcome Real-time September 2007

2. Banks will soon be able to choose among multiple debit brands “ We will issue cards with the scheme which gives us the most profit.” Niklas Bartelt, DZ Bank

3. Brands that give more interchange will attract more issuers Competition for issuers will automatically cause schemes to raise interchange fees.

4. Banks choose products which earn the highest interchange… (60-100 bpts more interchange on premium cards)

5. … and give them away for free Merchants pay, cardholders get the perks!

6. “ NETS will be squeezed out of the market if it does not raise its rates, because banks may no longer issue NETS cards, opting instead for the more lucrative debit cards.” NETS CEO Poh Mui Hoon

7. Fee Hike 3-4x 0.35 - 0.55% 1.5 - 1.8% After July 2007 Before July 2007

8. “ The British Retail Consortium (BRC) says pressure from its members led to the withdrawal of MasterCard's new debit card charging system, which would have seen percentage, or so-called ad valorem, fees charged to retailers.” UK retailers claim victory as MasterCard scraps changes to debit fees 31 Aug 2007

9. New York January 2006 www.StopInterchangeNow.com

10. Sydney April 2006

11. Denmark November 2006

12. USA August 2007 (LA Times)

13. Lots of features for cardholders but very few for merchants Very little added value for merchants, yet interchange fees are much higher! How long can this last? Purchase protection, extended warranties, theft protection, lounge access …

14. Lots of features for cardholders but very few for merchants “ The Visa Mini eliminates the need to pull out a card from a wallet or purse and makes payments more convenient.” (Visa web site) MasterCard Side Card MasterCard mc2 Gemalto Free Shape AmEx clear card Perfumed (“freshen up your card”) Gemalto Earthcard (“be ecological”)

15. Is contactless an enhancement that benefits merchants?

16. 1 out of 133 “ There are 6 million places where you can use your credit card, 45,000 (contactless locations) doesn’t excite me .” John Suchanec, Bank of America

17. “ Waving a card in front of a reader takes about as much time as swiping one through.” Manager, Sheetz, Inc.

18. Contactless forecasts for 2007 230 million Jupiter Report (2004)

19. Contactless forecasts for 2007 230 million Jupiter Report (2004) 37 million Jupiter Report (2006)

20. Contactless forecasts for 2007 230 million Jupiter Report (2004) 37 million Jupiter Report (2006) 25 million Card Technology (June 2007)

21. The problem must be solved at the payment network level Scheme initiatives (contactless, mobile, EMV, SEPA …) will struggle without active merchant participation.

22. The problem must be solved at the payment network level Merchants and regulators will continue challenging the interchange pricing model if scheme products don’t provide more value.

23. The problem must be solved at the payment network level Payment schemes will find it more and more difficult to attract issuers if they have to dramatically cut interchange.

24. Which brand will deliver the most interchange? The one that offers the most value to merchants!

25. HOW CAN MAESTRO OFFER MUCH MORE VALUE TO MERCHANTS? ?

26. “ Bank-managed data could help retailers identify their best customers and prospects .” “ [help] entice customers to visit the retailer - either for the first time or for repeat patronage .” “ [banks can charge] direct fees or indirect/bundled pricing e.g., in the form of higher interchange .”

28. DID YOU KNOW ?

29. Promotional marketing is huge ($342 billion in the US alone!)

30. Promotional marketing is global and the same techniques are used everywhere

31. France

32. Germany

33. Italy

34. Spain

35. Pakistan

36. China

37. Newspaper ad, half page: € 9,000 - €12,000 Co-op package mailing, 1 insert: €350 Local coupon book, 1 page: €350 Promo marketing is expensive (and rarely targeted because too difficult)

38. Merchants can use data hidden inside the Maestro chip to deliver targeted messages at the POS, at very low cost. BPI advertisement, Philippines, 2007

39. HOW VALUABLE ?

40. Payment data in the chip indicates that this man last filled up at Esso more than 30 days ago. He has obviously been filling up somewhere else…

41. … since he is here now, why not print an offer at the bottom of his card receipt? ---------------------------- Coupon TRY OUR NEW EZ CAR WASH AND ENJOY A COFFEE WHILE YOU WAIT CAR WASH+COFFEE SPECIAL $2.00 Expires Nov. 15, 2007 A feature that is simple, low cost and valuable for all types of merchants.

42. 1st visit ---------------------- M---R---S-- Use your Visa payWave card at McDonald’s. When all the letters above are filled, win your McSurprise! 2nd visit ---------------------- MC--RPR-S-- Use your Visa payWave card at McDonald’s. When all the letters above are filled, win your McSurprise! 3rd visit ---------------------- MC--RPRISE- Use your Visa payWave card at McDonald’s. When all the letters above are filled, win your McSurprise! 4th visit ---------------------- Coupon MCSURPRISE! Congratulations! Present this ticket to any clerk and get your McSurprise! Not valid with any other offer. Expires 31 Jan 2008 Card receipts don’t have to be boring.

44. What happens when merchants prefer one brand over others? A simple, merchant funded promotion helped a Malaysian bank boost acceptance and usage of its cards at Pizza Hut. + 49%

45. Payment products that support targeted merchant promotions enjoy increased transaction volume Avg + 75%

46. An opportunity to differentiate What happens when a brand is first to provide valuable features to merchants?

47. vs When a scheme’s product is valuable to merchants When the product is not valuable to merchants

48. vs When a scheme’s product is valuable to merchants When the product is not valuable to merchants Merchants encourage customers to use that payment product over others. They encourage use of cheaper payment methods (such as cash).

49. vs When a scheme’s product is valuable to merchants When the product is not valuable to merchants Merchants encourage customers to use that payment product over others. They encourage use of cheaper payment methods (such as cash). Merchants encourage customers to get a card if they don’t already have one. They make no special efforts to promote card acquisition.

50. vs When a scheme’s product is valuable to merchants When the product is not valuable to merchants Merchants encourage customers to use that payment product over others. They encourage use of cheaper payment methods (such as cash). Merchants encourage customers to get a card if they don’t already have one. They make no special efforts to promote card acquisition. The cards are more attractive to customers, so easier to sell. The cards are no different than those of other payment schemes.

51. vs When a scheme’s product is valuable to merchants When the product is not valuable to merchants Merchants encourage customers to use that payment product over others. They encourage use of cheaper payment methods (such as cash). Merchants encourage customers to get a card if they don’t already have one. They make no special efforts to promote card acquisition. The cards are more attractive to customers, so easier to sell. The cards are no different than those of other payment schemes. High interchange fees are justified with regards to that payment scheme. High interchange fees are not justified, and end up getting cut.

52. vs When a scheme’s product is valuable to merchants When the product is not valuable to merchants Merchants encourage customers to use that payment product over others. They encourage use of cheaper payment methods (such as cash). Merchants encourage customers to get a card if they don’t already have one. They make no special efforts to promote card acquisition. The cards are more attractive to customers, so easier to sell. The cards are no different than those of other payment schemes. High interchange fees are justified with regards to that payment scheme. High interchange fees are not justified, and end up getting cut. The product is adopted by more issuers. Banks prefer other payment products.

55. The Bigger Picture (i.e. why this is so important)

56. “ MasterCard’s IPO, the biggest since Google, is a success despite ongoing legal battles over what are known as interchange fees.” “ Visa and MasterCard face dozens of lawsuits across the nation.” “ Gas station owners make less money, or even lose money, when customers pay with plastic .” “ Paying in cash instead of credit cards could lead to more money saved for everyone.” Interchange awareness comes to Wall Street

57. “ Historically, MasterCard and Visa were mirror images of each other. Visa should spell out if and how it plans to differentiate its interchange strategy, the markets and business it intends to cultivate, and the information-based services enhancing its customers’ profitability.” Lessons Visa Can Learn From MasterCard’s IPO

58. The problem must be solved at the payment network level Payment schemes will find it more and more difficult to attract issuers if they have to dramatically cut interchange. Show issuers that Maestro provides more structurally stable interchange revenues (other debit products face a higher risk of getting cut).

59. The problem must be solved at the payment network level Merchants and regulators will continue challenging the interchange model if schemes don’t provide more value. Change perceptions - show merchants and regulators (and Wall Street) that Maestro provides major new innovation for the benefit of merchants.

60. The problem must be solved at the payment network level Important scheme initiatives (contactless, mobile, EMV …) will struggle without active merchant participation. Get merchants to see Maestro as an integral and strategic part of their marketing activities (while other brands provide little added value).

61. Thank you Aneace Haddad Chairman & Founder, Welcome Real-time [email_address] http://aneace.blogspot.com www.welcome-rt.com