Eric Tomlinson
June 18, 2008
Revolutionising the industry:
Assessing the strategic impact
of new technologies

The SEPA “Discontinuity” and Innovation
• Significant increase in competition
for domestic debit business
• In view of the expected co-existence
of domestic schemes with
international schemes for some time
to come, MasterCard must deliver
innovation to compete
• Against the background of
regulatory uncertainty, banks need
to deliver value add products and
services to move from loss-making
commodity to payments profitability
June 18, 2008 2

For Banks, Innovation and Technology
need to follow a logical flow . . .
4.
Technology
3. Innovation
2. Customer
Propositions
1. Retail Banking Strategy
June 18, 2008 3

…European electronic purses an object
lesson
A technology without a proposition…The payments pyramid on it’s head
Superior, secure technologies…
… but the Product and Customer Proposition did not work for anyone…
– Consumers –
– No enhanced speed; “Preload” requirement not convenient;
Lost card = lost funds perceived as less secure
– Retailers –
– No perceived benefits over cash (speed, customer
novelty/demand);
– Unique national use only terminals – no SEPA benefits of
economies of scale
… and added nothing to enhance competitive Retail Banking Strategies
– No differentiation;
– Locked into single country investments – no SEPA benefits of
pan-Europe
June 18, 2008 4

Rethinking our innovation and technology
development strategy
“This Project aspires to redefine the payment card category, moving it to a new,
superior level, both in terms of customer / merchant / bank experience & excellence,
via a change of mindset & a different approach”
From mostly … To more …
• Issuer-centric • Consumer & merchant-centric
• MasterCard technology driven • Needs driven
• Selling features • Proposition
• (Credit) card model • Access to MY money
• Credit, debit and prepaid products • When and how to pay
• A debit acceptance mark
• A real debit brand
June 18, 2008 5

We identified an innovation and
technology strategy with 8 lead
opportunity areas
From … To …
Confidence
Chip-based issuer-centric security
Consumer-centric communications
solutions
and cutting-edge technology
1. Get basics
Ubiquitous
right Closing acceptance gap vis-à-vis Beating cash in acceptance and
domestic scheme preference
E-commerce
Unfriendly security-driven protocol Beating convenience and "security"
of PayPal and new entrants
Control
Cash in wallet managing spend
2. Move to need- Keeping track of MY money
based offering
Speed and ease
Transaction perceived as slower Transaction perceived as faster than
than cash cash
No frills
Adding low cost, unbundled,
Monolithic, bundled offer solution
Rewards
No rewards Rewards and promotions funded by
3. Value banks, merchants and consumer
goods companies
Add Lifestyle
Suite of tailored debit card features
Simple one-size-fits-all and offerings
June 18, 2008 6

Get the Basics Right –
Moving from unfriendly security driven protocol to
convenience AND security
Maestro Debit Card Secured e-Commerce Access
• Viable payment card for SEPA requires
e-commerce access… by definition global
• Many national or proposed European schemes
have no e-commerce solution today or planned
• In those countries with domestic e-com schemes,
fraud has migrated to the ‘weakest link’ – card not
present
Maestro SecureCode
MasterCard Announced in May 2008 its
Maestro Advance Registration Programme
June 18, 2008 - Secure Solution for the major ‘one click’ merchants 7

Speed and Ease
Maestro Paypass an alternative to security driven e-
purses PLUS the right consumer/retailer proposition
Maestro PayPass™ Introduction in the Netherlands
• Start date: June 17
• Promotion of Maestro contactless payments at
Vroom & Dreesmann department store and La
Den Haag
Place restaurant in Den Haag
June 18, 2008 8

Value Add
Delivering propositions, innovation and
technology win-win propositions
MasterCard EMV Loyalty Combo Card – Finland First Launch in Europe
• Stockmann – Largest retailer in the Nordics
• Nordea – Largest bank in the Nordics
• MasterCard – Global Access and leveraging the
power of EMV driven by SEPA
• Migration of proprietary loyalty card to global
access, credit and debit combo plus loyalty
Which products
Screen displays
does the terminal
choices based on
accept ?
Issuer priority:
Credit
Debit
Available
on card: I select:
Credit Debit
Debit
June 18, 2008 9

Value Add –
MasterCard inControl –
Device Neutral Customer Propositions
• Should I focus on mobile commerce, internet, RFID…?
– Yes – all devices are just that, access tools to the core
banking relationship
• MasterCard inControl can integrate all of these
channels while allowing banks to focus on managing
their customer propositions…
June 18, 2008 10

MasterCard inControl delivers real-time
controls and capabilities
Authorization Controls
Authorization controls enable issuers and/or their
cardholders to define spending parameters
Specific Transaction Curfews Geography
Merchants Limits
Routing Controls
Intelligent transaction routing routes purchases
made on one card to multiple funding sources,
Credit Debit Home Equity Installment
depending on the type
Line-of-Credit of transaction
Alert Controls
Robust real-time alerts provide safeguards
against over-limit spending but allow flexibility for
SMS/Email On Event Forewarning
emergencies
June 18, 2008 11

inControl meets specific customer needs and
differentiates the bank brand
Potential Propositions Technical Solutions
• Block transactions after a specific time
Consumers
Control, Security, • Set maximum monthly/weekly limits
Convenience, Confidence
• Send email alert when close to hitting
limit
• Block purchases on the
weekends
Small Business
Low cost, high tech • Send SMS alert if purchase is
made at specific merchant
business spend solutions
• No internet purchases allowed
• Assign a unique account number for a
Large Corporations specific transaction
Streamlined payments, • Block all transactions in a specific country
Enhanced Reporting, • Limit transaction amount to specific spend
Auditing and limit
accountability • Enhanced data
• Auditability and Accountability
June 18, 2008 12

Conclusions
• Avoid the technology trap…
– Know your retail bank strategy
– Identify your target customers
– Make the technology work for your
strategy
June 18, 2008 13

Thank you.