EMV Impacts & Migration 07/12/2018

Agenda Oberthur Card Systems Global Market for payment cards & EMV migration EMV overview Oberthur & the EMV migration An Example: EMV migration in the UK trends & benefits Futur for EMV EMV migration: the price to pay & the best advices EMV migration as an opportunity 07/12/2018

Oberthur Card Systems The world’s leading provider of payment cards for banks More than 5,000 financial banking institutions supplied in 20 years n°1 supplier of Visa and MasterCard stripe and smart cards More than 150 EMV projects on all 5 continents Over 150 millions EMV cards issued and personalised Recognised worldwide leader of smart card personalisation “Banks recognised Oberthur Card Systems as the best card and personalisation supplier to help them facilitate their EMV migration” 2003 Frost & Sullivan award for Brand Recognition in the banking market: 07/12/2018

Global Market for payment cards 9,4% 16,8% 7,9% 8,7% 8,3% 6,3% 6,5% 7,1% 7,4% 7,5% 0,00 1,00 2,00 3,00 4,00 5,00 6,00 7,00 8,00 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 Units, Billions Financial cards Banking cards Financial cards are banking cards and loyalty applications including e-purse, petroleum, store cards,… Banking applications compose 82% of market and are main drivers for its future evolution Smart Cards: roughly 20% of banking cards in the field in 2005 EMV cards: roughly more than 30% of total smart cards in the field in 2005 07/12/2018

Main Contributors to EMV migration On the end H1 2005 in the world were around 330 Mln EMV cards European countries had more than 70% of all EMV cards in the field. UK, France & Germany emitted more than 40% of all EMV cards. EMV cards in M.: UK: 110 Germany: 42 Japan: 40 France: 30 Belgium: 10 Austria: 8 Turkey: 7 Brazil: 7 Others: 75,5 Germany 13% Japan France 9% Taiwan 2% Italy Brazil Belgium 3% Turkey Austria Spain 1% Malaysia UK 34% Others 17% 12% 07/12/2018

EMV at a glance 1996: first release of the specifications by Europay, MasterCard and Visa Trend driven by the need for interoperability, enhanced security, reduce transaction cost and high quality services Migration to EMV standards is the banking sector’s number one challenge at an international level Move is generalised throughout the world, but strategy and choices of products are different Geography of fraud liability : varies depending on the region, from 2005 to 2010 07/12/2018

EMV Opportunities for Issuers 07/12/2018 EMV Opportunities for Issuers Secure payment anywhere Multi-application Pre-Authorised debit Authentication Data Storage & loyalty applications Contactless Payment … Enhanced Risk management & Customer management More services for the “high end” cardholders Less risks with “low end” customers 07/12/2018 © 2004 Oberthur Card Systems.

Oberthur & the EMV migration More than 150 EMV projects Europe & CEI : France, Italy, Spain, UK, Eire, Belgium, Netherland, Germany, Switzerland, Sweden, Norway, Lettonia, Lithuania, Estonia, Czech Republiq, Poland, Hungary, Slovakia, Slovenia, Ukraine, Russia, Kazakstan, … Middle East & Africa: 17 countries, Cameroun, Zimbabwe, Ghana, Kenya, Cyprus, Israel, Kuwait; Oman, Sausi Arabia, Turquie, Egypt, Libanum, Quatar, UAE… Asia-Pac: Australia, Korea, Taiwan, Thailand and China,… North America: Mexico, Canada (few projects in the US 07/12/2018

An Example: EMV migration in the UK History UKIS introduced in 1996. Main driver was to reduce fraud loss Major difference, though: no pin on UK cards until 2003 Chip and pin introduced since beginning of the year APACS promotes interoperability and develops standards in the UK payment industry “Today” 140 M cards in 2004 Penetration rate : 67% of the adult population € 464 bn Transactions Market projected to increase by 36.2% in volume between 2003 & 2008 Fraud is still a major problem, with £ 438 M lost in 2003 90% of consumer spending by card takes place in the UK 07/12/2018

EMV migration benefits in the UK Regular increase in the number of transactions: 58% between 1998 and 2003 Fraud has slowed down as EMV is generalised Remains high due to relatively slow PIN acceptance Introduction of Pin estimated to save € 1,4 bn until the end of the decade New services with EMV cards are now proposed (online authentication,…) No PIN PIN promoted 450 400 350 300 250 200 150 100 50 1997 1998 1999 2000 2001 2002 2003 2004 2005 Fraud (£ million) %UK debit/credit cards 07/12/2018

Futur for EMV New Applications around EMV Already there EMV Authentication Answer card not present type of fraud (mainly Internet transactions) Applications for secured online banking & for secured online shopping For the “near” future Data Storage for loyalty, e-ticketing,… Contactless Payment Transit / Payment convergence? Mobile payment? … 07/12/2018

EMV migration: the price to pay Migration entails necessary update of back office equipment and terminals UK: Total projected costs of Chip and Pin for banks and retailers: € 1,6 Bn France: estimated cost thus far amounts to 1 Bn €, for banks only In addition, banks must understand the new security requirements Key management and associated cryptographic algorithms On-card risk management Technical training is necessary for concerned staff to adapt to the new specifications and requirements. When current card personalisation is done in-house, banks must migrate their bureau or outsource the personalisation Upgrade of existing capabilities, update in data processing and modification of personalisation software 07/12/2018

EMV migration: the best advices Establish the business need Volumes and and Time Frame for Card issuances What kind of applications (Just Payment or Multi-application (authentication for home banking, data storage for loyalty, contactless payment,…) Is it necessary to propose specific applications for specific set of customers ? How to manage personalisation (usual issuance but also premium customer card replacement or personalisation of non payment applications) Chose the right smart card technology Native designed for volumes but can provide multi-application Platforms (JavaCard but also Multos) are more flexible but for higher costs Take into consideration that: Simplest solution is the quickest way for the EMV migration. Value Added Solutions to an EMV card is a key to differentiate issuer offers. Design & Plastics bring also differentiation ( in the hands of the cardholder the payment card is the business card of the bank ) 07/12/2018

EMV migration as an opportunity EMV is not just for Fraud Reduction and Value-Added Solutions EMV Authentication Loyalty Data Storage EMV is the opportunity to: Customize cards to Cardholder needs Improve Card Holder Segmentation and Services Leverage your brand and financial services investments 07/12/2018

Thank you for Your Attention ! Questions ? 07/12/2018 © 2004 Oberthur Card Systems.