Digital Workshop Value chain, stakeholders and Edenred positioning - PowerPoint PPT Presentation

Digital Workshop Value chain, stakeholders and Edenred positioning

Digital… a global and secular evolution Simplification of services and processes New types of relations and interactions Speed of information Data collection and analytics Digital has fostered mutations in our daily lives and in the way of doing business 2

Edenred, forerunner in the shift to digital of prepaid benefits End 1990’s 2000-2010 2000 2010 Post ost-2010 2010 Industrialization Technological phase development First card Shift to digital set as a strategic Based on proprietary launch priority after the spin-off authorization platforms To answer stakeholders’ needs in Latam 58 58 % (government, affiliates, clients) of digital issue volume at end-2013 From paper vouchers to cards and platforms 3

A major change fostering innovation and new opportunities for Edenred Creation of new types of Simplification of processes businesses thanks to data (selling and distribution process) traceability and analytics Easier and less costly roll-out for Like Expense management solutions, Digital Digit al Edenred and clients, especially SMEs or the US NutriSavings program Creation of new growth Enrichment of beneficiary opportunities backed on the experience with new media knowledge of the beneficiary Multiple types of media connected to a Development of new solutions for personal account affiliates and beneficiaries (savings, promotions,..) Digital, a source of new growth opportunities for Edenred 4

Digital workshop Payment value chain and Payment value chain and playe players rs Antoine Dumurgier, Executive Vice President, Strategy and Development

Three types of transaction models Eden Edenred s red solutions olutions Edenr Edenred s ed solut olutions ions Standard banking Standard banking based on based on bas based o ed on n model cards model cards banking model banking model priv pr ivat ate e mod model el 6

Transaction models Standard banking model

A standard banking transaction & interactions 6. Clearing & settlement Issuer/ Scheme Acquirer Program manager 5. Authorization 1. Load / 2. Issue 4. Acquire 7. Reimburse deposit money card merchant merchant / Line of credit transactions 3. Purchase Cardholder/ Merchant Client 8

Main players and role Illustrations Issuer: • Hold the cardholder account Can be • Authorize transaction requests separate • Guarantee the payment to the merchant entities or the same entity Program manager • Design the program Issuer/ • Sell the product to the cardholder Program manager Banking • Can be in charge of POS setup and maintenance acquirer • Allow collection of data from a transaction at POS • Transfer the data to the scheme or directly to Technical authorization platform acquirers • Reimburse merchants Acquirer • Intermediary between issuers and acquirers • Brand management: build a universal network of acceptance • Transaction management: define the rules of a transaction and execute the clearing & settlement of Scheme transactions between issuers and acquirers 9

Focus on the clearing process Issuer 1 Acquirer 1 --- --- ---- ---- --- --- --- --- Issuer 2 Acquirer 2 ---- ---- --- --- Scheme --- --- ---- ---- --- --- Issuer 3 Acquirer 3 --- --- ---- ---- --- --- Clearing files Clearing files Issuer 4 Acquirer 4 10

Technology providers Illustrations • Manufacture and customize cards • Different technological options (magnetic stripes, chip & pin, contactless …) Card manufacturer • Design software and hardware for the acceptance • Sell the electronic acceptance terminals to acquirers, leasing companies or directly to merchants POS manufacturer • Some parts of the value chain can be outsourced by banks to specialized players: technical acquisition, authorization & processing … Other technology providers 11

Transaction models Edenred solutions based on banking model

Three types of acceptance on the banking model Filtered – Filtered – Universal by category of merchants by merchant MCC MID    The scheme ensures that the MCC = Merchant MID = Merchant Identifier card could be accepted Category Code  Each merchant has its own everywhere  A MCC defines a MID. category of merchants (ex.: restaurants, hotels, oil stations…) ATM Merchants … 13

Authorization: a key part of the value chain in Edenred’s business… 6. Clearing & settlement Issuer/ Scheme Acquirer Program manager 5. Authorization 1. Order/Load 2. Issue  Set up of business rules 4. Acquire 7. Reimburse card card merchant merchant  Criteria to authorize the transactions transaction, like availability of the Company funds on the account, merchant ID, time of the transaction… 3. Purchase Cardholder Merchant 14

… and a competitive advantage Strategic advantages of Differentiating in-house platform capacity Specialized in prepaid programs (versus debit/credit) Authorization control customization (FlexiControl) Allows functionalities developed in one market to be rolled-out to all markets Network customization Team dedicated to Edenred , (FlexiLoop) allowing fast time-to-market : New country set up ≤3 months • New program set up ≤6 weeks • Technical features customization (FlexiTech) Laboratory of innovation thanks to the PSS direct clients(PayPal, Debenhams, Eveything Everywhere…) Strategic advantages versus competitors with no in-house platform xxx and cost synergies 15

Illustration of a banking MID model Meal card in Sweden PrePay Solutions is the issuer and Edenred Sweden is the program manager Issuer/PM PrePay Solutions is the inhouse platform used to process transactions Processor • MasterCard is the scheme • The network is filtered through MID Scheme 16

Business model Scheme fees Scheme fees Issuer/ Scheme Acquirer Program manager Client fee Interchange MSC (Merchant Merchant Service Charge), POS reimbursement rental , and other within a period service fees defined by local scheme rules Company Merchant fee Cardholder Merchant xxx Fees earned by Edenred 17

Transaction models Edenred solutions based on private model

Private model transaction Issuer = Acquirer No sheme Issuer/ Acquirer Program manager Authorization Company Cardholder Merchant 19

Private model transaction Issuer/ Program manager Authorization Company Cardholder Merchant The program manager has its own acceptance network. It can deploy its own POS/ software, or leverage an existing acceptance network allowing private acquisition 20

Illustrations of a private model (1/2) Fuel & Fleet card solution in Brazil Edenred Brazil is the issuer and program manager Issuer/PM WATTS is the inhouse platform used to process transactions Processor • Edenred has set up its own terminals at oil stations • Terminals are connected to WATTS Acquirer 21

Illustrations of a private model (2/2) Meal card in Belgium Edenred Belgium is the issuer and program manager Issuer/PM PrePay Solutions is the inhouse platform used to process transactions Processor ATOS is a technical acquirer and transfers transaction data to PrePay Solutions Acquirer 22

Business model Merchant reimbursement within a period defined in the contract Issuer/ Program manager Client fee Merchant fee Company Cardholder Merchant xxx Fees earned by Edenred 23

Transaction models Comparison between private and banking models

Edenred types of solutions Network acceptance 1% (1) 24% (1) 75% (1) Universal MID - Filtered Closed Private model Banking model Banking model Ex.: Ticket Kadéos Universel in Ex.: Ticket Restaurant in Ex.: Ticket Car in France Sweden Brazil 25 (1) In % of total digital issue volume at end-2013

Decision criteria: banking vs. private models Banking model Private model (MID Filtered) More appropriate if the acquirer market is very More appropriate if the acquirer market is Local environment fragmented concentrated Speed of roll-out Client fee, interchange fee, merchant fee, lost & Client fee, merchant fee, lost & expired Sources of operating expired revenue Float holding period Implementation costs Overall profitability Value chain control The acceptance choice between banking and private model is made country by country, depending on local context 26

Illustration of France: a two-step transition Enforcement of the decree In the second half of 2014 1 st version of the card • Banking model 2 d version of the card (private model) • MasterCard Scheme • MID filter Edenred France is the issuer and program manager PrePay Solutions is the inhouse platform used to process transactions CONECS (1) is the technical acquirer and will use some functionalities of Groupement des Cartes Bancaires CB (2) to acquire data The 2d version of the card will be launched before the end of 2014, with enhanced functionalities (1) CONECS is a structure created in July 2013 by Edenred, Groupe Chèque Déjeuner, Sodexo and Natixis, the 4 main local meal vouchers issuers. (2) CB is a national French scheme with more than 1.1 million merchants. 27

Digital workshop Financ Financial effects ial effects Loïc Jenouvrier, Executive Vice President, Finance and Legal Affairs