Card Acceptance and Contactless A Success Story

Cris Topfner-Rigby Head of Merchant Acquiring and Payment Services IT Coles Financial Services

A bit about Coles…

Coles Financial Services

Cards & Insurance

Providing Coles Customers with award winning solutions helping them save more money more often

Merchant Acquiring and Payment Services

• 16% card processing in Australia over 3% terminal footprint • Biggest contactless acquirer in the world • First merchant in the world to have their own core payment systems • 43rd biggest acquirer in the world • Fastest merchant in the world at enabling card scheme connectivity

Scheme’s

Private Label Partners

- Bilateral Partners

Cash, Cards and

Contactless

What does the payment landscape in Australia look like?

An evolutionary change is occurring in the payments landscape with a

fundamental shift from paper based to electronic forms of payment

When it comes to card payments ($459bn), we are closely monitoring the performance

of each of the 3 key schemes

16.84 $10,024 $15,100 19.73

Electronic Payments Are Significant

65.7% 66.5%

68.1% 68.7%

64%

66%

68%

70%

2011 2012 2013 2014

% of Total Txn’s

0%

15%

30%

45%

VIS

A /

MC

CR

VIS

A /

MC

DR

EFTP

OS

AM

EX

Gif

t C

ard

Cas

h

In the last 2 years; • Number of Card

transactions has grown by 10% CAGR

• Volume of Card transaction has grown by 7% CAGR

>11,000,000 contactless

transactions per month

Cash Is King……or is it?

51%

30%

35%

40%

45%

50%

55%

60%

65%Ja

n-1

1

Mar

-11

May

-11

Jul-

11

Sep

-11

No

v-1

1

Jan

-12

Mar

-12

May

-12

Jul-

12

Sep

-12

No

v-1

2

Jan

-13

Mar

-13

May

-13

Jul-

13

Sep

-13

No

v-1

3

Jan

-14

Mar

-14

May

-14

Jul-

14

Sep

-14

% of Transactions

Percentage of Cash Tender Transactions (LHS) Percentage of Card Tender Transactions (LHS)

0 20 40 60

Don't know

Other factors

Privacy

Use Credit

Reward Points

Charges

Safety

Obtain cash-out

Managing finances

Available method

Use own funds

Speed

Factors Influencing Choice of Payment

Source: Roy Morgan Research, Reserve Bank of Australia Bulletin, September Quarter 2011

Customer expectations change materially and rapidly. Our strategies need to continue to focus on their needs and our cost of acceptance.

Source: HP-RFi Australian Payments Report, September 2013

2%

3%

5%

5%

6%

6%

8%

12%

13%

29%

12%

13%

22%

21%

24%

19%

23%

41%

33%

55%

0% 20% 40% 60% 80% 100%

Speed Txn to acc't

Speed Txn Processed

Level of surcharge

Acceptance

Reward Points

Discout/Cash Back

Budgetary Control

Convenience

Use own funds

Security

Ranked 1st Ranked 1 - 3

Chip & PIN (EMV)

Contactless NFC Mobile

& Digital Wallets Small Ticket

• Card present

• PIN /signature required

• Tap & go card

• No Pin for <$100

• Only works with contactless cards

• Card present

• No PIN for <$35

• Works on all credit cards

Technology Evolution in Payments 2009 2011 2012 2013+

Magstripe & PIN

1996

• Integrated NFC payment app

• Multiple credit card + loyalty

• Card present

• PIN /signature required

Tender Options – Cost Reduction Drivers Card Cash

Reconciliation Cash handling, transport

and storage ( 9 activities)

Labour Reconciliation is accurate and

automated

Increased risk of theft and armed hold up

Risk

Fraud can be tracked at trend and transactional level

Focused on non-customer, sale facing activities Staff Staff redeployed to other activities

Value Cash introduces wages

and costs into the business

Card is 3 times cheaper than cash Card transaction is double the value

of the average cash transaction

Fast

Secure

Modern and easy to use

No PIN under $100 Platform for Mobile

and Wallet

Contactless

Speed 4-25 seconds

7- 8 seconds

5-6 seconds

Has it worked?

Source: National Retail Federation, May 2011

• Transactional Profile

• Customer Feedback

• Store Feedback

Transactional Profile 52% transactions and 75% value are non-cash products

38.8%

29.0%

1.5%

30.7%

0.0%

5.0%

10.0%

15.0%

20.0%

25.0%

30.0%

35.0%

40.0%

45.0%

CHIP INSERT CONTACTLESS TAP HAND KEY MAGNETIC STRIPE

79%

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%M

ar-1

2

Ap

r-1

2

May

-12

Jun

-12

Jul-

12

Au

g-1

2

Sep

-12

Oct

-12

No

v-1

2

Dec

-12

Jan

-13

Feb

-13

Mar

-13

Ap

r-1

3

May

-13

Jun

-13

Jul-

13

Au

g-1

3

Sep

-13

Oct

-13

No

v-1

3

Dec

-13

Jan

-14

Feb

-14

Mar

-14

Ap

r-1

4

May

-14

Jun

-14

Jul-

14

Percentage of Visa & MasterCard transactions using Contactless

>11,000,000 contactless

transactions per month

Rollout completed

Contactless Resonates With Customers

~xx,000,000 contactless transactions per month

across the group

Contactless as % of MasterCard and Visa Transactions

Feedback

Customer

• "The pin-pad processes my transaction so quickly when I use contactless."

• "I get through the checkout quicker when I use contactless."

• "This is so much easier than signing or entering my PIN."

Store Staff • "Transactions are so much faster with contactless, we can serve more people in less time, reducing

customer queues."

• "Contactless helps us reduce our cost of doing business as we can process transactions faster."

• "The take up of contactless and other card technologies has meant we can install 'card only' self checkouts in stores, reducing our cash handling costs."

How are we evolving mobile?

Consumers Are Ready For Mobile

Source: HP-RFi Australian Payments Report, September 2013

Can you envisage a scenario where your mobile phone becomes your most used method of payment? Yes

We are solving this through innovation

NFC Payment at the checkout

1

2 Better

experiences in store

3 Use in App

purchasing to support online

Thank You Cris Topfner-Rigby Head of Merchant Acquiring and Payment Services IT Coles Financial Services