Transforming The Card Industry Altair Lee Britton

ALTAIR FINANCIAL SERVICES INTERNATIONAL PLC PREPAID CARDS Transforming The Card Industry PRESENTED BY: LEE BRITTON, CEO O ,C O Altair Financial Services International Plc www.altair-financial.com; info@altair-financial.com +44 (0)20 7659 1140 July 2008 © Altair Financial Services International Plc - All rights reserved

Evaluating the recent growth in the prepaid market: How can we explain this growth?

Prepaid Card Industry Page 3 • Prepaid Cards: Historical Perspective – Newest entrant in a 50-year history of network branded cards – From paper-based methods to electronic systems – Prepaid cards accounted for about $26 75 billion** in US payments in 2006 $26.75 billion • Current Market Drivers – Expansion of the size of the market – Access and movement of funds – SEPA – Banks reach through Europe g p – Benefits for issuing processors – Acquirers to move away from cash – Better targeting key target market – Greater consumer adoption – MasterCard® rePower™ ** Source: Mercator Advisory Group © Altair Financial Services International Plc - All rights reserved

Payments Landmarks Page 4 Tesco bans 2016 only one 1st customer uses Cheque volumes 1 in 3 bills paid by cheques on payment in 50 cashpoint machines peak in 1990, 11 cheque in 1995 25 F b & Feb (840 million in 1967 M issued daily M&S on 1 Mar transactions) will 2008 be made by 1950s 1960s 1970s 1980s 1990s 2000s cheque CHEQUES CASH £108m 1p pieces in circulation in the UK March 2007 CREDIT CARDS COMMERCIAL CARDS 4% of retail Decimalised spending replacing 67.3M credit cards in issue done by shilling and 1966 Barclaycard ATM AND DEBIT CARDS cheque p penny with, y , launched the 1st credit penny card outside US PREPAID CARDS 1990 UK Gov 60% retail 71.6 M debit joined Eu spending 1.5 million cards, 20.2 M Exch Rate done by households no ATM-only cards Mechanism debit or (ERM) bank account credit dit 1999 41.7M debit cards card holders = 84% of adults Sputnik Apollo 13 Space shuttle Hubble Mars Rovers Columbia telescope © Altair Financial Services International Plc - All rights reserved

Out with the old and in with the new Page 5 Cash Payments Cheques All Plastic Card 28500 Purchases 3500 7000 28000 27500 3000 6000 27000 2500 5000 olume (£ Million) 26500 Volume (£ Million) Volume (£ Million) 26000 2000 4000 25500 1500 3000 25000 Vo 24500 1000 2000 24000 500 1000 23500 23000 0 0 19 19 20 20 20 20 20 19 19 20 20 20 20 20 19 19 20 20 20 20 20 98 99 00 01 02 03 04 98 99 00 01 02 03 04 98 99 00 01 02 03 04 Non-cash payments (£ millions) p y ( ) Date 1998 1999 2000 2001 2002 2003 2004 All plastic card 3094 3537 3,923 4,387 4,821 5,318 5,739 purchases All cheques 2986 2854 2,702 2,567 2,394 2,251 2,089 Cash payments 25309 25596 27,910 27,684 26,622 25,859 24,916 © Altair Financial Services International Plc - All rights reserved

Scope of the Prepaid Opportunity Page 6 • Five high-growth segments targeting $448B total Prepaid spend in 20101 Financial Inclusion Public Sector 2010 global spend = l b l d 2010 global spend = l b l d $140B $160B -Consumer reloadable Healthcare and -MasterCard rePower™ Load -Public benefit & welfare programs Insurance -Assistance/disaster relief network -Travel and cash management -Youth 2010 global spend = -Payroll & incentives -Campus $20B -Pension & social security -Health Savings Accounts (HSA) -Flexible Spending Accounts (FSA) Flexible -Health Reimbursement Accounts Consumer Retail (HRA) Corporate Programs -Insurance Claims 2010 global spend = g p 2010 g global spend = p $78B $50B -Gift -Business travel and entertainment -Travel -Meal vouchers -General spend -Corporate purchasing -Payroll P ll -Corporate incentives /promotions 1 Source: Boston Consulting Group Prepaid Market Sizing Overview, April 2007 © Altair Financial Services International Plc - All rights reserved

Prepaid Opportunities and Components Page 7 • Four major opportunity segments emerge in prepaid: – 1. Direct to consumer offers such as travel, gaming ,g g Cardholder Portal Web/Card Design – 2. Low volume business solutions such as insurance Call Centre Card Production – 3. High volume corporate Online KYC solutions such as b l ti h benefits, fit BRAND (Distribution) gifting and payroll Fund Deposit Holder p – 4. Very high volume solutions such as youth and transit/ micropayments © Altair Financial Services International Plc - All rights reserved

Giving the customer control: Accessing a new segment of ne consumers

How Consumers See Prepaid Page 10 • When presented with the potential benefits compared to cash and cheques: – 71% European consumers appreciate the financial control prepaid cards offer * • Respondents recognise prepaid cards would stop them from overspending – 54% European consumers value prepaid cards as a budgeting tool • CASE STUDY: Manchester City FC Prepaid PayPass and micro-transactions ** – Average Match results: • Turnover increased by 10% • 86% of pilot participants attended the stadium, all used to access stadium • O match day, 40% of customers attending th stadium On t hd f t tt di the t di used the card for payment, showing a positive uplift • Considering all g g games, 81.3% used the card for p y payment – Fans Feedback • Ease of having stadium access and prepaid card in one – 55% • It is free to use and no annual fee – 54% • Can use it at every bar/food outlet – 51% * Source: MasterCard survey ** Results from MBNA MCFC PayPass Seasoncard Trial © Altair Financial Services International Plc - All rights reserved

Profiting from prepaid: How can payment service providers share this growth p g

Prepaid Cards’ Place in Payments Landscape Page 12 Interest 16.4% I t t 16 4% Typical Payment > Fees £12 US$38 Merchant 2.5% Free if in credit US$15<Typical US$15 T i l Overdraft £30 Overdraft £30 Payment <US$152 Merchant 90p Fees……… Typical Payment <US$15 (Usually does not warrant the EFTPOS Fee) The Future of Payments report April 08 © Altair Financial Services International Plc - All rights reserved

Typical Prepaid Fees Page 13 • Fees for having the card • Other fees – A li ti f Application fee up t £13.95 to £13 95 – Paper statement fee up to £5 – Monthly usage fee up to £5.95 – Forgotten PIN fee up to £1 – Annual renewal fee up to £9.95 – Postal ID check fee up to £5 – Replacement fee up to £10 – C d activation f Card ti ti fee up t £2.95 to £2 95 – Currency conversion fee up to 3% • Fees for putting money on the card – SMS balance fee up to 25p – Loading fee up to 5% or £8 – Cash out fee up to £10 • credit card up to 5% or £3 – Additional card fee up to £9.95 • debit card up to 5% or £3 – SMS block/unblock fee up to £1 • Post Office up to £1 – Refund fee up to £10 • P P i t/ PayPoint/payzone up t 4% up t £8 to to – Decline fee up to 75p • own bank up to 1% – Retail refund fee up to 40p • online up to 5% or £3 – Retailer cashback fee up to £1.50 • SMS up to 2.75% 2 75% • Fees for taking money off the card – UK - Abroad • ATM withdrawal fee up to 2.95%; up to £7 50 2 95%; £7.50 • Loading fee (FX fee) up to 3 5% 3.5% • face to face retail fee up to 2.5% up to £1.50 • ATM withdrawal fee up to £3 • internet purchase fee up to 2.5% up to £1.10 • face to face retail fee up to 2% Source: Paul Lewis from Moneyfacts data May 2008 © Altair Financial Services International Plc - All rights reserved

Profiting From Prepaid Page 14 • Variety of fees that depend on the type of card • Market averages: – 67% of the cards charge a purchase fee – 42% of the cards charge a monthly service fee – 51 of the cards allow top up and of those 28 charge a fee for this – The average purchase fee across all cards that charge any fee is £6.16 (£6.03 in Dec 07) – Average top up fee, where they are charged at all, in General cards for a £20 load is £0.58 (£0.40 in Dec 07) – The average cancellation fee where charged is £7.25 (£7.07 in Dec 07) Source: Jan 08 Pepper Report © Altair Financial Services International Plc - All rights reserved

Will prepaid cards transform the way people pa ? a pay?

Payments Headlines Page 16 • Move to contactless - MasterCard® PayPass trials in London • Prepaid enters transport & ticketing (Oyster Card) and government payments • MBNA & Altair Launch the Manchester City FC MasterCard® Prepaid Seasoncard with PayPass™ • Partnerships - Metavante & Monitise Introduce 'Mobile Money‘ with Carphone Warehouse • Industry acquisitions – Nomad & Valuetec by Metavante; Prepay Tech by Accor; eFunds by Fidelity • Major national newspapers launched own branded prepaid cards: Independent Newspapers, The Times, The Sun, etc (mass awareness) © Altair Financial Services International Plc - All rights reserved

Why do prepaid cards hold this transformational potential? Page 17 • Inclusion – Everyone can have one • Different target markets – Broad spectrum of vertical markets • Replacement of cash & cheques • Security • Budgeting • Convenience of easy access (mobile internet etc) (mobile, internet, • Strong brand © Altair Financial Services International Plc - All rights reserved

Conclusion Page 18 • Importance of cardholder education and stability of cardholder fees • Statistics over past decades indicate a positive trend toward plastic • Acquirers, Issuers and merchants can all benefit from prepay • The card programs that succeed will be the one’s that manage the risks and one s rewards effectively • A massive uptake in contactless POS terminals indicates a confident move to “less cash” society • Prepaid presents new fl ibilit t th payments sector P id t flexibility to the t t – Not restricted to a card – can be a watch/fob/phone • Will we ever completely eliminate cash? © Altair Financial Services International Plc - All rights reserved

Thank You Altair Financial Services International Plc www.altair-financial.com

Transforming The Card Industry Altair Lee Britton

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