TOWARD FAIRER AND COMPETITIVE PAYMENT SOLUTIONS IN THE EU

© 2013 EUROCOMMERCE | 2 SEPA THREAT OF HIGH FEES ACROSS EUROPE FEE TODAY FEE TODAY TOMORROW? FEE TODAY FEE TODAY FEE TODAY TOMORROW?

© 2013 EUROCOMMERCE | 3 CURRENT MIF SYSTEM ADDS COSTS Consumer bank (issuer) Retailer bank (acquirer) Card Scheme Exclusive Clearing & Settlement MIF covers: marketing costsfree gifts; fraud costs, insurances and payment guarantee No access to consumer account information MIF inflates the price of products (may be additional surcharge) Retailer receives only part of the product price. Merchant Service Charge (MSC) = MIF plus Processing Fees MSC Retail Price minus MSC Consumer account Retailer account

© 2013 EUROCOMMERCE | 4 BASIC PAYMENT PROPOSAL Consumer bank* (issuer) Retailer bank* (acquirer) Processing, clearing & settlement: Unbundled fees Choice of PSP, payment type and clearing & settlement Consumer account Retailer account INCREASED CHOICE RETAIL COSTS OF PAYMENT ARE FAIR AND TRANSPARENT no more restrictive contractual rules access to clearing and settlement direct access to funds availability *or any other payment service provider (PSP)

© 2013 EUROCOMMERCE | 5 WHO SHOULD PAY FOR WHAT: Fraud prevention Paying for fraud when it happens Chargebacks (the money the consumer gets back when theyre the victim of fraudulent transactions) ISSUING BANK /PSP Consumer can also choose to pay for extra services eg: Credit facility Extra insurances Air-miles and preferential services (Payment provider or retailer may also offer to cover these costs) CONSUMER RETAILER Costs of authorisation Clearing and settlement processing costs Retailer may offer to cover some consumer costs

© 2013 EUROCOMMERCE | 6 BASIC PAYMENT BRINGS BENEFIT TO ALL Low-cost basic debit service across EU Freeing up of revenues results in lower costs and prices Available for face-to-face, internet and mobile technologies Full transparency on costs of different payment methods Low-cost basic debit service which operates across EU Removal of excessive costs for payment acceptance Freeing up of revenues results in lower costs and prices Freedom to choose payment provider A lower-cost, efficient EU payments system Open market allows competition and innovation Growth of cross-border e-commerce market Maximise potential of new technologies SOCIETY AND EU ECONOMY RETAILER CONSUMER Basic payment opens access to pan-European market Expanded market for electronic payments A viable alternative to cash Ability to choose which extra services attached to payment No loss of security in payment system Ease of cross-border and e-commerce purchasing Card payments more available in small retail outlets Small retailer can access low-cost electronic payment method Access to cross-border e-commerce Enable retailer to benefit from new technologies BANKS AND CARD COMPANIES Facilitate shift from cash to electronic payment methods No loss of security in payment system Create incentives to combat fraud at source Transparency and trust in banking payment services Increased volume of transactions

© 2013 EUROCOMMERCE | 7 WHAT REGULATORS SHOULD DO : Remove MIF barriers: Current debit MIF system should be removed Fees for credit should be cost-based Unbundle fees: costs for extra services are transparent, paid by beneficiary of service Remove MIF barrier Bring more third party PSPs under regulation Allow PSPs access to verify availability of funds on consumer accounts Ensure EU-wide, real-time processing and clearing & settlement Separate authorisation services from clearing & settlement to allow competition and retailer choice (card or other SEPA instrument) Separate processing services from card schemes Allow access to clearing & settlement for licensed PSPs Open payments market to new players Remove honour-all-card rule restrictions Enable retailer to electronically identify cost of card acceptance at POS Allow account information access Remove national/cross-border price differentials & allow pan-European (x-border) acquiring Enable consumer/merchant choice of payment application at terminal Allow consumers to authorise payments through PSPs across EU Remove restrictive contractual rules