1. Payments – Reloaded! Spending Priorities & Innovation in Payments

2. © IDC Financial Insights Page 2 Payments - Reloaded!

3. © IDC Financial Insights Page 3 Agenda Payments Business – Strategic Relevance CXO Discussion Highlights Financial Insights WW Spending Guide (Payments) Innovation in Payments “Disruptive” Innovation Innovation in Payments

4. Payments Business – Strategic Relevance CXO Discussion Highlights

5. © IDC Financial Insights Page 5 How are IT Budgets being Deployed ? Channels & Distribution 28% Business Process Re-engineering 12% Core Refresh 28% Enterprise Data Management 14% Administration & Reporting 5% Enterprise Payments 13% Australia US$4 Billion Singapore (regional) US$6 Billion India US$4 Billion China US$3 Billion Malaysia, Indonesia, and Thailand are all in excess of US$1 Billion Overall IT Budget N=162 CXOs

6. © IDC Financial Insights Page 6 Payments remains a Major Operational Challenge Human Capital Management (COO) 15% Cost & Performance Management (CFO/COO) 12% Prioritization & Management of IT projects (CIO/CFO) 17% Cards, Payments & Lending (CIO/CFO/COO) 29% Regulation & Compliance (CRO) 10% Innovation & Market Responsiveness 10% (CIO/COO) Business Process Improvements (CIO) 7% N=162 CXOs

7. © IDC Financial Insights Page 7 How is Payments Spend being Allocated, Functionally?

8. © IDC Financial Insights Page 8 What is the Fastest Growing Area of Payments Spend?

9. © IDC Financial Insights Page 9 InfluenceRating Regulatory requirements 1.1 Customer requests for new products/features 1.6 Fraud rates 1.7 Need to match competitive offerings 1.8 Vendor support ending for software application 1.9 Cost Reduction (hardware, software, FTE) 2.1 Globalization of Payment systems 2.1 Consolidation of bank systems due to M&A activity 2.1 Adoption of mobile technologies 2.2 Merger integration 2.2 New software version 2.3 Macroeconomic conditions 2.5 New hardware available 2.6 Default/charge-off rates 2.8 Interest rates 2.8 Silo Convergence – Middle Office Integration 3.0 Exchange rates 3.1 What are the Key Drivers for Payments Spend?

10. © IDC Financial Insights Page 10 FunctionRating Merchant card processing 2.1 Debit or prepaid card processing 2.4 Credit or charge card processing 2.4 Credit or charge card fraud management 2.5 Debit or prepaid card fraud management 2.5 ACH processing 2.8 POS Channel 2.8 Enterprise payments reporting 2.9 Mobile Payments 3.0 Mobile Banking 3.1 ACH fraud management 3.1 Online banking – consumer 3.2 ATM Channel 3.3 Wire Fraud 3.3 RTGS Processing 3.3 Payments Intelligence 3.3 Online Banking Fraud 3.4 Online banking - business 3.4 Payments IT Infrastructure 3.5 Messaging 3.6 Compliance in AML 3.9 SWIFT Processing 4.1 Appetite for Payments Outsourcing?

11. © IDC Financial Insights Page 11 What are the Drivers of Payments Outsourcing?

12. Payments Business – Strategic Relevance Financial Insights WW Spending Guide (Payments)

13. © IDC Financial Insights Page 13 Payments Spend (Overall) +12% +8% +9% +4%

14. © IDC Financial Insights Page 14 Payments Spend (by Solution Element) +12% +8% +9% +4%

15. © IDC Financial Insights Page 15 Payments Spend (by Region) +12% +8% +9% +4%

16. © IDC Financial Insights Page 16 Payments Spend (North America) +9%+9% +9%+9% +5% +6% +7% +0%

17. © IDC Financial Insights Page 17 Payments Spend (Europe) +13% +16% +9% +11% +7%

18. © IDC Financial Insights Page 18 Payments Spend (Asia/Pacific) +12% +9% +10% +9%+9%

19. © IDC Financial Insights Page 19 Payments Spend (Transactions) +10% +6% +7%+7% +8%+8% +3%

20. Innovation in Payments

21. © IDC Financial Insights Page 21 “Disruptive” Innovation?

22. © IDC Financial Insights Page 22 Innovation in Payments requires: Innovation-friendly legal and regulatory environment Harmonization of the payments ecosystem Market maturity and social acceptance Successful integration into existing value chain E-micropayments? International remittances? P2P payments?

23. © IDC Financial Insights Page 23 Innovation in Payment (Products / Services) Users select payment instruments depending on Place, Timing, & Amount – the key is CHOICE! E-Money & Stored Value products Various form factors Prepaid – targeted acceptance Cards 2.0 – driven by: Security – Authentication at the point-of-sale Service – Payment choice at the point-of-sale Merchant offerings Cost-efficient & integrated offerings “Mobilized” merchant acceptance & social mobile payments Free-form, contactless payment devices Locational intelligence; proximity; real-time decisioning Mobile retail marketing tools

24. © IDC Financial Insights Page 24 Innovation in Payments (Delivery Channels) Channel innovation based on Convenience, Interaction, (low) Cost, and Security “Mobilizing” Payments Mobile has become a key component in any medium-term payments roadmap Mobile payments gaining traction across emerging markets; evident in initial acceptance rates, scale, and ambition New fund transfer mechanisms targeting demand for convenience and privacy Mobile technologies driving merchant acceptance Governments also initiating mobile payments innovation

25. © IDC Financial Insights Page 25 Predicting the Future of Payments? Explosion of debit and prepaid card products E-micropayments will gain traction, driven by mobile, prepaid, contactless, biometrics technologies Growing prominence of non-bank PSPs will threaten disintermediation of the payments value chain Mobile devices become established money transfer instruments Increasing challenge of balancing regulations with new market dynamics New forms of risks – “closed” settlements; interoperability creating interdependency, emerging security risks

26. © IDC Financial Insights Page 26 Shawn Yip Asia/Pacific Analyst IDC Financial Insights Email:syip@idc.com Tel:+65 6829 7523