Beirut International Franchise Forum

1. Beirut International Franchise Forum Panel 3: E-commerce & Mobile Shopping; The Future Shopping Reality Mr. Stephan Becker Chief Executive Officer Payfair

2. payfair • The future of E-Commerce and Mobile Shopping • BIFEX • Beirut, 17th April 2013

3. payfair –The new SEPA compliant Payment Scheme Addressing the needs of the changing payment landscape • Switching • Clearing & Settlement • Rules & Regulations • Regional Focus • Niche Markets 1. Payment scheme solutions • Closed and Open Loop • Integration of different Mobile payment solutions • Case driven MIF • Cross Border Acquiring • Dedicated solutions for “High risk” business 2. Merchant acquiring solutions • Mobile Payments • Unbanked Population • New merchants (terminal costs and security) • Integration of new technology • E-commerce 3. Technology solutions

4. New trends are shaping the future of payments There is a huge area where authorities, Central Banks, Banks, Mobile Operators, Merchants, Consumers, and the virtual / mobile world require new payment solutions 4

5. Drivers for Change • Regulation • Governments will try to harmonize the markets and keep control • Central Banks will need to change, allowing new entrants and new business • EU – The SEPA card framework will have influence on other regions as well • Consumer Behavior • Young generation has new requirements • Security and ease of use • Mobile attitude and requirements • New Entrants • Mobile Operators are entering the payment space in Emerging markets • Google, Apple, PayPal and other start competing with “old players” and address needs of young generation • Technologic Innovations • NFC and QR-code will change the payment process as well as the infrastructure • Apps • Market Requirements • Merchants as well as regulators are “not happy with MIF” • Changed customer demand and behavior needs to addressed • . 5

6. The challenges of E- and M-commerce • Growing concerns regarding e-commerce/e-payments: • 50% of total card fraud is due to CNP (card not present) internet transactions • 60% increase of this type of fraud per year • 70% of interruptions of e-commerce transactions occur at moment of payment • Consumers are calling for • Security in payments • Convenience • No need to have a card (at least in the short term) • Ease of use • Merchants are calling for • Guaranteed payments • Secure processes leading to minimal charge backs (only service not rendered) • Robust process ensuring all transactions get to completion • Competitive cost and pricing • . Mobile authentication is more secure than using card and personal data 6

7. The Legacy Dilemma – just a comparison … (VW Golf I, 1977) (VW Golf VII, 2011) Fiscal status : if >25 years old  « vintage car ! » Is it reasonable to upgrade this original but ‘veteran’ version with today’s new ‘standard’ features and characteristics ? At what final cost ? Image reputation ? Uncertainty about final performances, life cycle and investments and about future developments ... 2013: normal & ‘mandatory’ features & characteristics Consumption 3,7 l/100km, CO² 99 gr/km ABS-EPS-DCS-Airbags ***** EuroNCap (anti collision test) GPS-MP3-Electronics... Better to opt straight for the new and better one with cost reductions & latest new technologies

8. A competitive Market Cards Market  On line market Mobile payments market • Traditionally driven by Banks and credit Card companies • Established networks and infrastructure, but difficult to change • Dominance of Visa and MasterCard • Difficult to change and to adopt • Slow innovation • Fraud is an issue • High costs of infrastructure • Banks - card based schemes challenged by new and alternative propositions • Fast emergence of new players / service providers moving in the payment value chain • Young generation has different behavior and requirements • Still difficult to participate for unbanked population • Existing card infrastructure under pressure. • Banks / Telco’s / MNO’s pursuing different objectives • Growth in low value / quick check-out locations and in emerging markets • Fast innovation • Independency from physical infrastructure • New technologies change the way of payments (QR, NFC, …) Many organisations compete for share of the payments market – Are theetablishedplayers still in the same boat? 8

9. Retailers will need to establish new partnerships for payments • The future of payments will be driven by • Mobile operators (Vodaphone, Orange….) • Phone and Hardware producers (Apple, Microsoft, Nokia…) • E-Commerce shops (Amazon, eBay,….PayPal) • Social Networks (Facebook….) • Regional differences need to be taken into account • already up to 80% of the monthly salaries are paid to mobile accounts • 80% of the populations have a mobile phone, but only 20% a bank account • A new generation of consumers • Globally the “Young Generation” is early and more often used to Mobile Phones than Bank Accounts. • The young generation is much more used to online than to offline • . New players will drive innovation in e- and m-commerce payments 9

10. Physical cards will be replace by virtual cards and mobiles • Physical World • Plastic will disappear over the next 10 years • QR code and NFC will be new technology mainly on smart phones • The payment will be initiated by the consumer, therefore no need of payment infrastructure at merchants • E-commerce • One time virtual cards • Mobile authentication by Sound, QR, one time PIN • Online banking – Credit transfer • M-Commerce • “PayPal” like services and apps • New types of accounts (Facebook, Apple) • Direct Debits to Mobile Account • . Retailors will have less investment in physical infrastructure but need to invest in E-commerce and mobile payment infrastructure 10

11. Conclusions Plasitc will disappear and the Mobile phone will be the “payment device”The exisitng infrastructure will be replaced and paymnets will be initiated by the Mobile phone and the phone holderNew players will enter the market and drive innovation. “Old Players” will try to protect markets and new alliances will be formedRetailers need to establish relations with new players in the payment industry and review their means of accepted paymnets • The changing payments behaviour and a change in requirements will request retailers to define and establsih a new payment infrastructure 11

12. Thank you! Stephan Becker, CEO payfair Group 4-Bras Building Mechelsesteenweg 455/19 1950 Kraainem (Belgium) T: +32 2 767 66 66 M: +32 479 81 66 45 stephan.becker@payfair.eu