Mobile Payments Certificate 2 Mobile Payments Certificate - - PowerPoint PPT Presentation

Mobile Payments Certificate

Mobile Payments Certificate

➢ While the mobile payment infrastructure is now in place (NFC-enabled phones and POS terminals, various platforms such as Apple Pay), we are about to enter the second phase of growth for the theme, which is mass adoption of payment solutions by consumer ➢ Increasing marketing and improving ergonomics, security and value-added services (such as rewards, loyalty and couponing) should give a major boost to consumer engagement ➢ Mass adoption is not a question of if, but when: ✓ the example of e-commerce says it all: despite initial concerns around security, now most consumers make online transactions ✓ new forms of mobile payments will expand the total addressable market: in-car payments and VR shopping ➢ Government incentives for a cashless society are another major catalyst: increasing number of limits on cash transactions all around the world ➢ The best way to capture this secular growth in the volume of digital payments is to get exposure to payment processors, which handle all these transactions

Investment Case

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Mobile Payments Certificate

AtonRâ Mobile Payments Certificate details

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Mobile Payments Certificate details (EUR Institutional)

✓ Issuing bank: SG Issuer ✓ Calculation agent: S&P Opco ✓ ISIN: CH0239656462 ✓ Currency: EUR (daily NAV) ✓ Fees: 1.5% management fee + 15% performance fee, high water mark ✓ Minimum investment € 100,000 ✓ Bloomberg ticker: IND1AMPE

Mobile Payments Certificate details (EUR Retail)

✓ Issuing bank: SG Issuer ✓ Calculation agent: S&P Opco ✓ ISIN: CH0239656603 ✓ Currency: EUR (daily NAV) ✓ Fees: 2.0% management fee + 15% performance fee, high water mark ✓ Bloomberg ticker: IND1AMPE

Mobile Payments Certificate details (USD Retail)

✓ Issuing bank: SG Issuer ✓ Calculation agent: S&P Opco ✓ ISIN: CH0239657494 ✓ Currency: USD (daily NAV) ✓ Fees: 2.0% management fee + 15% performance fee, high water mark ✓ Bloomberg ticker: IND1AMPU

Mobile Payments Certificate

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Tech giants

Biometrics & Security Processors & Networks Hardware vendors

Mobile Payments Certificate

➢ Mobile payments refer to all payment transactions made from

• r

via a mobile device and debited either on a bank account

• r on a mobile operator bill

➢ The rise of smartphones, tablets, and now wearables has driven new means of paying Mobile payments categories

The Mobile At The Heart Of Digital Interactions

Top 5: Smartphones penetration in 2017

Source: geoba.se/usnews.com/ emarketer

Web / In-app Purchases Person-to- Person Payments Mobile Proximity Payments

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88% 77% 75% 74% 72%

Mobile Payments Certificate

Smartphones Are Used To Pay, But Also To Get Paid (Merchants)

➢ All smartphones now allow contactless payments in a simple and quick way via an electronic mobile wallet, and can also become POS terminals for merchants

NFC « Wireless exchange

• f data »

Mobile money (SMS)

QR Code/ Barcode

Mobile as a point-of- sale terminal

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Mobile Payments Certificate

➢ Mobile Payments are a solution for providing financial services to unbanked people: ➢ In Sub Saharan Africa, the mobile penetration in Africa is 70% but only 10% of the population have a bank account ➢ Payments via mobile are the faster and cheaper way to send money to family. The SMS and USSD technology is compatible with 99% of mobiles ➢ In China, under the impulse of e-commerce and due to the low use of bank cards online payment, and especially mobile-commerce, has become a reality

Africa And China Are The Pioneers Of Mobile Payments

Over 100%

Mobile penetration in top tier cities: democratization of smartphones

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Mobile Payments Certificate

➢ New players enter the payment industry, already benefiting from a large customer base and

• ffering many online services: Internet and Tech giants such as Google, Apple, PayPal and

Amazon are providing new mobile payments solutions ➢ The legacy players (telecoms, banks, card networks…) must assert themselves. The need for innovation is the opportunity to boost these institutions and offer them a new position in the payment industry

The Payment Industry: A Private Club?

8 Financial institutions Internet Giants & apps developers Retailers POS terminals

• Payments

services

• Processors
• ISO
• Acquirers

Telecoms

• perators

Networks

Mobile Payments Certificate

A Look At The Payment Industry Main Players (I)

Hardware and Card Issuance: technology providers ➢ Card issuance: credit and debit card suppliers and software for banks ➢ Semiconductors: At the heart of IT servers, network routers and smartphones ➢ NFC technology, magnetic strip or EMV chips for bank cards Point of Sale terminals providers (PoS)

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Card Issuance

• Wirecard
• First Data
• TSYS

SIM card, Security

• Gemalto
• G&D
• Oberthur

Semiconductor

• Infineon
• Samsung
• STMicro

POS Terminal

• Ingenico
• VeriFone
• NCR Corp

ATM Hardware

• NCR Corp
• Wincor Nixdorf
• Diebold Inc

Mobile Payments Certificate

A Look At The Payment Industry Main Players (II)

Acquiring Services ➢ The acquirer : providing the merchant the services to accept a transaction. The acquirer will route the encrypted transaction details to the card association/network (Visa/MasterCard) ➢ Distribution and maintenance of PoS ➢ Most large acquirers do the processing part Processors: ➢ The technological side of payment processing: clearing and settlement ➢ Acquirers, processors and POS terminal providers offer value added services to merchants: reporting, fraud management, loyalties program, big data analysis

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Acquirers differ depending on regions (can be banks or financial institutions) In US:

• First Data
• Global Payments
• BOA

Terminal services

• Ingenico
• Many regional

banks offer these services to merchant

Some acquirers

• utsource the

processing to third party processors

• TSYS
• Planet Money
• WorldPay
• IPPay

Mobile Payments Certificate

A Look At The Payment Industry Main Players (III)

Credit cards

• Visa
• Mastercard
• Discover
• American

Express Debit cards

• Maestro
• Visa Electron

➢ Identify which financial institution issued the card and re-route the information to the cardholder’s issuing bank ➢ Set the interchange fees Networks Phone line

• AT&T
• Sky
• British Telecom

Internet

• AT&T
• Sky
• British Telecom

Connectivity ➢ Mobile operators and internet: provide connectivity and data transfers

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Mobile Payments Certificate

A Look Behind The Scenes I- Banking data capture and authorization:

PROCESSING* The acquirer and processor

II- Clearing and Settlement:

The merchant pays to the acquirer a "merchant discount“ of ~ 2.50%. How are these costs shared?

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Mobile Payments Certificate

Confidence, acceptation and adoption Secure 68%

Fast 36%

Simple 71%

Loyalty programs

Rewards Personalized Adapt

Convenience

Security

➢ The biggest challenge remains the change in consumer

• habits. It has to be simple, intuitive and comprehensive

➢ Mobile payment requires better communication and education ➢ Mobile payments allow the merchant to increase the visibility on its brand, target consumers and increase loyalty services (e.g. coupons) ➢ As illustrated by the recent success of Samsung Pay’s loyalty program, rewards/couponing are expected to be a major catalyst for mobile payments adoption

The User Experience Is Key In Mobile Payments Adoption

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Mobile Payments Certificate

➢ With tokenization technologies and the emergence of biometrics, mobile payments become more secure than contactless card payments

Security Concerns Need To Be Ironed Out

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Mobile Payments Certificate

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Mobile Payments Certificate

➢ To fight money laundering and tax evasion in 2014, Israel limits cash transaction between businesses to 5,000 shekels (USD 1,400) and private transactions done in cash or by check to 15,000 shekels ➢ In most EU countries (Spain, Portugal, Belgium ecc.) cash payments are limited for residents : ✓ In 2015, France has limited the use of cash payments to € 1,000 from € 3,000 ✓ In 2016/2017, Italy and Lithuania have limited the use of cash payments to € 2,999 ➢ India demonetized some of its banknotes at the end of 2016 ➢ In November 2018, the European Union kicked off its "TIPS“ (Target Instant Payment Settlement), an instant payment service that can be used by consumers and businesses in the euro

• zone. It will allow everyone to transfer money throughout the year and in a few seconds via a

smartphone, tablet or computer ➢ The European Union still plans to launch a service that allows mobile payments person-to-person to use the mobile phone number as a proxy for the IBAN

Governments Around The World Push Towards A Cashless Society

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Mobile Payments Certificate

85 57.8

32.8 26.7 8.5 1.5 163.6

101.3

90.7 64 22.3 6

20 40 60 80 100 120 140 160 180

Asia/ Pacific Africa North America Europe Latin America Middle East 2012 2016 ➢ The annual transaction volume via mobile payments in 2017 was $780bn and is expected to exceed $1.1 tn in 2019. The forecast is expecting a CAGR growth pace of 32% for the next 4 years to reach more than $ 3 tn volume in 2022!

+92% +75%

Strong Growth Outlook

➢ Asia Pacific and Africa are early and faster adopters of mobile payments with more than 260 million mobile payments users in 2016

+177% +140%

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Annual transaction volume in US$ bn - Mobile Payments Mobile Payments users by region (in mn)

Source: AtonRâ Partners, Statista 2018 Source: AtonRâ Partners, Gartner Inc.

500 1000 1500 2000 2500 3000 3500 2015 2016 2017 2018 2019 2022 (est.)

CAGR growth of around 32% between 2017 and 2022

Mobile Payments Certificate

➢ In-car payment solutions will allow drivers to ✓ pay for gas, toll fees or public parking ✓ without having to pull their credit card or smartphone from their pocket ➢ Payments in virtual stores are another exciting opportunity ✓ consumers wearing a VR headset will soon have the ability to visit virtual stores and make purchases ✓ Alibaba recently unveiled a VR mall called Buy+ in which consumers gaze at products long enough to select them and nod their heads to buy them ✓ Amazon is said to be working on a similar initiative

The Future Of Mobile Payments Is Already Taking Shape (I)

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Mobile Payments Certificate

➢ The seamless checkout experience (pioneered by Amazon Go) will deal a final blow to cash payments ✓ In an Amazon Go store, you just walk in, pick the groceries you need and walk out without having to go through a checkout line ✓ Your Amazon account is automatically debited when you exit the store ✓ This revolutionary checkout experience is likely to be adopted by other major retailers in the future

The Future Of Mobile Payments Is Already Taking Shape (II)

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Mobile Payments Certificate

This report has been produced by the organizational unit responsible for investment research (Research unit) of AtonRâ Partners and sent to you by the company sales representatives. As an internationally active company, AtonRâ Partners SA may be subject to a number of provisions in drawing up and distributing its investment research documents. These regulations include the Directives on the Independence of Financial Research issued by the Swiss Bankers Association. Although AtonRâ Partners SA believes that the information provided in this document is based on reliable sources, it cannot assume responsibility for the quality, correctness, timeliness or completeness of the information contained in this report. The information contained in these publications is exclusively intended for a client base consisting of professionals or qualified investors. It is sent to you by way of information and cannot be divulged to a third party without the prior consent

• f AtonRâ Partners.

While all reasonable effort has been made to ensure that the information contained is not untrue or misleading at the time

• f publication, no representation is made as to its accuracy or completeness and it should not be relied upon as such.

Past performance is not indicative or a guarantee of future results. Investment losses may occur, and investors could lose some or all of their investment. Any indices cited herein are provided only as examples of general market performance and no index is directly comparable to the past or future performance of the Certificate. It should not be assumed that the Certificate will invest in any specific securities that comprise any index, nor should it be understood to mean that there is a correlation between the Certificate’s returns and any index returns. Any material provided to you is intended only for discussion purposes and is not intended as an offer or solicitation with respect to the purchase or sale of any security and should not be relied upon by you in evaluating the merits of investing in any securities.

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