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FOR 45 YEARS, THE LEADING PUBLICATION COVERING PAYMENT SYSTEMS WORLDWIDE

DECEMBER 2015 / ISSUE 1076

Largest Maestro Issuers Worldwide

Top 150 Credit Card Issuers Worldwide by Region

The 100 largest issuers of Maestro brand debit cards based on purchases at merchants for calendar year 2014 are listed on page 10. The issuers represented 40 countries.

Based on Outstandings in 2014

> see p. 10

Issuers

Visa & MasterCard Outside the U.S. through 3Q ‘15

Region

Outstandings (Bil.)

> see p. 9

48

ASIA– PACIFIC

10

CANADA

ICBC China Construction Bank of China Agricultural Bank China Merchants Bank of Commun. China Minsheng

$542

ACI Worldwide Buys Pay.On ACI Worldwide acquired Pay.On for $200 million in cash and stock on November 4, 2015. Pay.On was a pioneer in sales for online merchants in Europe. It provides a gateway that payment

Square IPO on NYSE

34

EUROPE $163

29

LATIN AMERICA

3

MID. EAST AFRICA

26

UNITED STATES

An initial public offering (IPO) on the New York Stock Exchange (NYSE) of 31 million shares of Square Class A common stock on November 19, 2015, raised $279.5 million. Square provides > see p. 8

Omnichannel QR Code Payments for Large Retailers OmnyPay has created an integrated QR code-based mobile loyalty, rewards, and payment platform for large retailers whose consumers will a wallet app branded with the retailer’s service mark. > see p. 5

Gemalto Brings Dynamic CVV to Mexico All banks in Mexico are required by the Comisión Nacional Bancaria y de Valores, the country’s banking regulator, to secure online and mobile banking sessions with two-factor authentication. > see p. 6

Mobile Payments in Poland Blik is the domestic mobile payment service in Poland. Managed by Polish Payment Standard (PSP), it was formed by Alior Bank, Bank Millennium, Bank Zachodni WBK, ING Bank Slaski, mBank,

Fast Facts ID Tech POS Hardware I Card Group IPO on Nasdaq and TSX RS2 Card Management Software

© 2015 HSN Consultants, Inc. THE NILSON REPORT

U.K. $32.8 Turkey Russia $32.8 Spain $14.0 Greece $4.6 $3.5 $2.9

Brazil $58.5 Venezuela $27.4

$94.8

$119

$5 $705

Chase BofA Amex Citbank Cap. One

$129.6 $100.2 $93.8 $82.3 $72.7

© 2015 The Nilson Report

Top Credit Card Issuers Worldwide The 150 largest issuers of credit cards based on outstanding receivables at year-end 2014 are listed on page 11. Outstandings were tied to American Express, Diners Club, Discover, JCB, MasterCard, UnionPay, Visa, and domestic general purpose credit cards.

> see p. 7

2–4 5 7 12

$59.6 $53.5 $43.6 $36.3 $35.7 $27.4 $27.4

$78

> see p. 6

INSIDE

$373.0

China

MasterCard purchase volume outside the U.S. ed for 63.33% of its global purchase volume of goods and services, up from 61.65% for the same nine-month period in 2014. Purchase

CHARTS

> see p. 11

9 10 11

Visa & MasterCard Worldwide through 3Q 2015 vs. 3Q 2014 Largest Maestro Issuers Worldwide 2014 Largest Credit Card Portfolios Worldwide 2014

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FAST FACTS DECEMBER 2015 ISSUE 1076

Objective, independent reporting for 45 years. No paid advertising. No sponsored content of any kind. Ever.

AMERICAN EXPRESS has expanded the free cash reload network for eligible prepaid Serve Card customers to include Dollar General and Rite Aid locations. The total number of outlets exceeds 45,000 and includes CVS/pharmacy, Walmart, and participating 7-Eleven locations. Stefan Happ is Chief Commercial Officer, Enterprise Growth at American Express, (212) 640-2000, [email protected], www.vantagescore.com.

JETPAY, which provides card acceptance processing and services to 11,000 merchants, now offers its customers software from Hybrid Business Services that automatically calculates the merchant’s total cost of accepting card payments. Merchants can use the calculation to offer their customers a discount if they pay with cash. Peter Davidson is Vice Chairman at JetPay, (484) 324-7982, [email protected], www.mastercard.com.

Conferences & Seminars 7th Annual Healthcare Payments Innovations 2016: January 20-21, 2016. The Phoenix Marriott Tempe at The Buttes, Tempe, Arizona. Estimated attendance: 150. Cost for the two-day conference is $995$1,895. Subscribers to The Nilson Report will receive a $300 discount. (Use code NILSON300.) Aron Barkan at Strategic Solutions Network, (561) 674-0082, [email protected]. at www.haymentsinnovations.com/.

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Merchant Payments Ecosystem 2016: February 16-18, 2016. The InterContinental, Berlin, . Estimated attendance: 600. Cost for the three-day conference is $2,200. Subscribers to The Nilson Report will receive a 20% discount. (Use code NR-MPE2016, only applicable on attendance fee and only prior to ing.) David Vesely at Empiria Group, 421 (245) 248-931, [email protected]. at www.merchantpaymentsecosystem.com.

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on

iti Seventh Ed

THE 2ND U.S. CIRCUIT COURT OF APPEALS IN NEW YORK upheld a lower court ruling made earlier this year that American Express, Citigroup, and Discover Financial Services did not violate the Sherman Antitrust Act by requiring cardholders to submit to arbitration to settle disputes. By requiring arbitration, payment card issuers avoid class action lawsuits. In 2010, Bank of America, Capital One, Chase, and HSBC settled litigation by agreeing to drop arbitration clauses in cardholder agreements for 3 1/2 years.

Largest rs Card Iasnsd ue uirers q c A t n a h Merc BARCLAYCARD in the United States is offering the Barclaycard Cash7th Edition

Figures include cards in circulation and spending for

credit Over 1,000* Card Issuers from 115 countries in all world regions & debit *includes over 700 outside the U.S. card issuers

Forward World MasterCard. Cardholders receive 1.5% cash back on every purchase and a 5% redemption bonus every time they redeem points for cash back. Cash can be deposited to a bank , credited on a card statement, or provided in a prepaid MasterCard card. Rachana Bhatt is Head of Branded Cards at Barclaycard US, (302) 255-8314, [email protected], www.barclaycardus.com.

275* Merchant AcquirersWorldwide

ion

Publicat on Report

from 65 countries in all world regions a 2015 Nils *includes over 190 outside the U.S.

THE CITY OF SAN FRANCISCO is suing American Express in San Francisco Superior Court seeking a judicial declaration that Amex’s rules for merchant card acceptance violate California’s Unfair Competition Law. Case No. CGC-15-548854: People of the State of California, ex rel. Dennis Herrera v. American Express Company et al., was filed November 6, 2015.

uction wing reprod ucing or allo report. Reprod ject to substantial fines. com/special ation sub ilsonreport. copyright viol ORT, www.n manner is a NILSON REP any THE in 5 ent 201 um sultants Inc. tion of this doc © HSN Con on of any por or disseminati

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Asia/Pacific, United States, Europe, Latin America, Middle East/Africa, and Canada

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www.nilsonreport.com/specialreport CARDFLIGHTS’ PCI-DSS Level 1 compliant gateway for mobile payments has been certified by TSYS to accept EMV chip card transactions. Derek Webster is CEO at CardFlight, (646) 3389-4450, [email protected], www.tsys.com. THE IOWA COURT OF APPEALS ruled November 25, 2015, that Capital One did not violate an Iowa debt collection law by collecting debt without ing with the state as a debt collector. SYNCHRONY FINANCIAL has completed its separation from General Electric. S&P Dow Jones Indices added Synchrony Financial to the S&P 500 after the close of trading on November 17, 2015. Margaret Keane is CEO at Synchrony Financial, (203) 585-6152, margaret.keane@ synchronyfinancial.com, www.synchronyfinancial.com. FINANCIAL SERVICES INFORMATION SHARING AND ANALYSIS CENTER (FS-ISAC) has made available a best practices guide for financial services companies working to improve their operational continuity and reduce risks associated with a destructive cyberattack. An executive summary is available upon request. A more detailed paper is available at the Financial Services Sector Coordinating Council website. © 2015 HSN Consultants, Inc. THE NILSON REPORT © HSN Consultants, Inc. 2015 THE NILSON REPORT

PAYONEER, provider of a Web-based platform that facilitates global business-to-business payments including business-to-individual trader transactions, will be used by Amazon for cross-border payments to sellers from 24 countries who sell on marketplaces in the U.S., Spain, , Italy, , and the U.K. Upon registration, sellers receive online s that can collect Amazon disbursements, and that provide access to these disbursements through a local bank or a Payoneer MasterCard. Scott Galit is CEO at Payoneer, (646) 308-1300, [email protected], www.payoneer.com.

Management Changes Merton Smith has been appointed Vice President EMEA, Sales & Business Development Digital Payments at Proxama, 44 (203) 668-2888, [email protected].

DECEMBER 20152015 / ISSUE 10761076 / THE NILSON REPORT NOVEMBER / ISSUE / THE NILSON REPORT

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AMADIS, a provider of software development and consulting services for secure electronic payments, has formed a technical partnership with FIME to EMV payment terminal testing and services. Emmanuel Haydont is a Partner at Amadis, (514) 299-8914, [email protected], www.fime.com.

SEQR will use Dwolla’s payment platform and infrastructure to provide peer-to-peer payments for its SEQR digital payment service set to launch in the U.S. in the first quarter of 2016. Peter Fredell is CEO at Seamless, 46 (8) 5648-7824, [email protected], www.dwolla.com.

WIRECASH gives U.S. residents online access to multiple money transfer, bill payment, and mobile telecom top-up providers to send money to recipients in over 100 countries. A new partnership with Cuallix lets U.S. senders pay bills for utilities, financial services, taxes, telephone, cable, and Internet in Mexico instead of sending money to a family member. Logan Lemberger is VP of Business Development at WireCash, (323) 977-9473, [email protected], www.wirecash.com.

MYPINPAD’S technology for multifactor authentication of transactions originating from unsecured touchscreen devices such as mobile phones and tablets will be available to financial institutions through a 5-year agreement with VocaLink. Last year VocaLink processed over 10 billion transactions. Philip King is CEO at myPINpad, 44 (203) 289-6728, [email protected], www.vocalink.com.

B2 PAYMENT SOLUTIONS, which distributes and s UL products in North America, has delivered UL’s Brand Test Tool to Chase Commerce Solutions, the largest U.S. merchant acquirer. Mitchell Scott is Executive Director at Chase Commerce Solutions, (813) 354-4126, [email protected], www.b2ps.com.

JIFFY, a person-to-person mobile payment service ed by 50 banks in Italy, is expanding to through a partnership between SIA and GFT Technologies. GFT is a -based IT services and consulting company. SIA is a payment service provider in Italy that handles Jiffy transactions. Cristina Astore is Head of SIA North West Europe, 39 (02) 6084-2720, [email protected], www.gft.com.

COSMOS CO-OPERATIVE BANK, INDIA will replace its legacy payment platform with BPC Banking Technologies’ SmartVista suite of card management products for debit and prepaid cards as well as ATM and POS management. Rajan Narayan is Managing Director Asia-Pacific at BPC Banking Technologies, (65) 6423-0313, [email protected], www.cosmosbank.com.

IZICAP’S merchant analytics, card-linked marketing, and customer loyalty software will be integrated into Ingenico Group’s Telium Tetra products. Reda El Mejjad is Founder & President at Izicap, 33 (6) 3533-2827, [email protected], www.izicap.com.

YAPITAL, a QR code-based mobile and online payment service operating in and Luxembourg, will shut down on January 31, 2016. Marc Berg is Executive Director, 49 (4060) 590-0600, [email protected], www.prepaidfinancialservices.com.

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BELL ID’S HCE: NFC’s Missing Link eBook, first issued in 2014, has been updated. It is aimed at mobile payment industry participants seeking better understanding of HCE and tokenization. The eBook can be ed for free at http://info.bellid.com/host-card-emulation-nfcs-missing-link. SWIPP, a mobile payment app used by 800,000 people in Denmark, will be integrated into the 30,000+ retailers using Verifone POS terminals in the country. The app is based on Bluetooth Low Energy (BLE) technology. It allows less payments from smartphones. Peter Bredgaard is CCO at Swipp, 45 (30) 100-599, [email protected], www.boonpayment.com. GIESECKE & DEVRIENT provides the embedded smart card chip and operating system used by Swiss watchmaker Swatch in China for its less Bellamy payment watch. The Swatch Bellamy can be used for less payments at the 5 million China UnionPay POS terminals in China equipped with NFC readers. Stefan Auerbach is Group Executive Mobile Security at Giesecke & Devrient, 49 (89) 4119-2213, stefan.auerbach@ gi-de.com, www.gi-de.com. Order Back Issues / Preview Conferences / View Newsletter Archive Order Back Issues / Preview Conferences / View Newsletter Archive

ID Tech POS Hardware ID Tech, which has manufacturing facilities in Taoyuan, Taiwan, and Cypress, California, provides PCI-certified card reader hardware on a subassembly basis to companies including HP, Dell, and Micros. Those same products, which handle magnetic stripes, chip cards ( and less), QR codes, and signature capture, are also sold as finished goods under the ID Tech brand to customers that connect them to PC-based POS systems and electronic cash s. ID Tech hardware can encryption of magnetic stripe data (including EMV) inside the magnetic head or other equipment for secure transport to acquiring processors. ID Tech also makes and less payment acceptance devices that use its proprietary processing software for customers that install them

in kiosks and vending machines. It competes with OTI and UIC. Last year ID Tech shipped more than 100,000 of those payment acceptance devices and expects 2015 shipments to increase 15%. In recent years ID Tech has also manufactured and sold dongles for use with smartphones and tablet devices. Those dongles can be magnetic stripe or combination mag-stripe and chip readers. They also use ID Tech software to handle payment processing. Most are sold in the Americas under the ID Tech name. ID Tech has the largest installed based of less NFC readers in the world. It sells hardware in more than 90 countries. Eric Lecsene is VP, Marketing at ID Tech in Cypress, California, (916) 203-4535, [email protected], www.idtechproducts.com.

Omnichannel QR Code Payments for Large Retailers from page 1

The app can reside on 95% of all smartphones. OmnyPay aims to lead consumers to purchases with the payment mechanism preferred

by the retailers, led by private label credit or debit cards. To give consumers the same experience in-app, at the physical point of sale, and online, purchases are QR code-based, not NFC. Retailers are able to integrate OmnyPay directly into their existing rewards, loyalty, and promotional programs. Promotions can be automatically delivered to the mobile app and applied at the point of payment. This eliminates coupons, vouchers, or reward cards. The OmnyPay QR code is only an identifier of the sales channel. © 2015 HSN Consultants, Inc. THE NILSON REPORT

All transactions are tokenized using host card emulation. The tokens change with each payment. OmnyPay is not a consumer acceptance mark. It sells its software-as-aservice technology exclusively on a white label basis. Revenue is based on transactions processed. Typically there is no licensing fee. All payments enter the retailer’s POS system as if initiated by a plastic card. OmnyPay can work with a retailer’s private label credit card issuer or debit card processor without integrating with their card management systems. It also

works with issuers to immediately provision new s to the consumer’s app. OmnyPay sees QR codes as the quickest way to get its technology to most top retailers, although its software can also work with SMS texts, less NFC, and Beacon BLE. No POS integration is required because the software connects through a retailer’s back-end system and is completely cloud-based. Ashok Narasimhan is CEO at OmnyPay in San Francisco, California, (650) 743-1090, ashok@ omnypay.net, www.omnypay.net.

DECEMBER 2015 / ISSUE 1076 / THE NILSON REPORT

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Gemalto Brings Dynamic CVV to Mexico from page 1

BBVA Bancomer, which uses Gemalto servers, token technology, and mobile SDKs to satisfy that

to create a digital-only product that limits spending to cardnot-present transactions. Last year, card issuers in Mexico incurred $480 million in losses from 3 million fraudulent transactions, and 20% were tied to ecommerce. There are 1.3 million BBVA Bancomer mobile banking customers, and in the first three weeks of availability 130,000 signed up to add the digital-only Visa card. Payments for purchases

requirement, has decided to leverage those assets to protect ecommerce payments made from its mobile wallet. Gemalto’s Dynamic Code Verification technology 3-digit CVVs are created every 2 replaces static minutes within the mobile wallet. 3-digit card verification value are tied to existing plastic card (CVV) codes with dynamic 3-digit s. Most of the EMV chip CVVs, created every two minutes cards BBVA Bancomer issues are within the BBVA Bancomer supplied by Gemalto. mobile wallet in the customer’s The same enrollment server mobile device. Currently, BBVA BBVA Bancomer uses for Bancomer mobile wallets mobile and online banking contain Visa primary authentications matches the numbers (PANs), which are used

dynamic CVV to the digital-only PAN. Gemalto can fully install its Dynamic Code Verification technology in three months. Dynamic CVV transactions look like any other card-not-present EMV payments. Merchants do not have to make any adjustments to their ecommerce checkout pages. Gemalto’s Dynamic Code Verification technology can also work if issuers want to put existing plastic card numbers into mobile wallets. Additionally, Gemalto offers EMV-compliant plastic cards that generate and display dynamic CVVs. Hugo Najera Alva is General Director, Digital Banking at BBVA Bancomer in Mexico City, Mexico, 52 (55) 5621-6960, hugo.najera@ bbva.com, www.bancomer.com. Hervé Bayle is Vice President, eBanking for the Americas at Gemalto in Mexico City, Mexico, 52 (55) 2122-1427, herve.bayle@ gemalto.com, www.gemalto.com.

ACI Worldwide Buys Pay.On from page 1...

service providers (PSPs) and acquirers license and use on a white label basis. The gateway features more

than 300 alternative payment methods and links to card acquirers operating in more than 160 countries. It does not acquire any transactions. Pay.On gives ACI a card-not-present service including in-app payments via mobile SDKs, oneclick checkout, and recurring billing to fill out its suite of card-present processing services for acquirers and large merchants. ACI has been providing payment acceptance for merchants and acquirers for 20 years. It aggregates card-present transactions, submits them directly to the networks, fleet companies, check authorization firms, etc., or delivers them to acquirers. ACI has more than 300

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direct connections to large merchants around the world. Pay.On offers the possibility of expanding that number with its customers in Europe. ACI also handles chargebacks, manages PCI compliance, provides encryption, and more. Six of the ten largest merchant acquirers in the world are ACI customers. The combined ACI/Pay.On service gives merchants and PSPs the ability to deliver complete omnichannel customer payment — in store, mobile, online — either licensing the software for on-premises use or accessing it on a hosted, on-demand basis.

The gateway features more than 300 alternative payment methods. ACI can also offer Pay.On customers access to its Retail Decisions’ card-not-present fraud protection service, as well as the ability to deploy a common tokenization service capable of identifying repeat

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customers regardless of the channel they are using for a particular purchase. Pay.On will be integrated into ACI in phases. It will not operate as a separate subsidiary or stand-alone business unit. Eventually ACI will have a single global system for card-present and card-not-present processing.

Lynn Holland is VP, Product Line Manager, UP Merchant Retailer Solutions at ACI Worldwide in Naples, Florida, (239) 434-3141, [email protected], www.payon.com.

I Card Group IPO on Nasdaq and TSX cards, 376.2 million prepaid cards, 218.3 million prepaid phone cards, 3.0 million other telephone cards, and 269.1 million nonpayment cards in 2014, providing services to more than 3,200 card issuers. For the first 9 months of 2015 net income was $33.2 million, up 301% from the same period in 2014. Revenues of $280.5 million were up 62%.

I Card Group (I), the 5th largest payment card manufacturer worldwide, raised $150 million in its initial public

U.S. products include EMV and non-EMV Visa, MasterCard, Discover, and American Express cards, as well as private label

offering (IPO) on October 9, 2015 on Nasdaq in the U.S. and the Toronto Stock Exchange in Canada. As of December 3, I had an equity market capitalization of $562 million. I operates seven facilities in North America and two in the U.K. The U.S. debit and credit segment manufactures payment cards and offers personalization services. It s for 55% of I’s total revenue. The U.S. prepaid segment provides cards, packaging, personalization, and fulfillment services. It s for 19% of total revenue.

cards. It also owns an instant card issuance system it sells to bank branches. The U.K. segment U.S. credit and debit cards manufactures for 55% of total revenue. mostly private label prepaid and I is 57.5% owned by loyalty cards for customers in the Tricor Pacific Capital based in U.K. and Canada. It also provides Vancouver, Canada. packaging, personalization, and fulfillment services. The U.K. Steve Montross is CEO at I segment ed for 13% of net Card Group Inc. in Littleton, sales in 2014. Colorado, (303) 345-2460, I Card Group shipped [email protected], 387.1 million payment cards, 17.4 www.icardgroup.com. million transportation/ticketing

Mobile Payments in Poland from page 1...

and PKO Bank Polski in 2013. Collectively over 1 million of their customers have ed for Blik since February of this year — 300,000 of them actively use the service. Consumers fund Blik transactions through a deposit at their bank. PKO Bank Polski customers can also use a prepaid . To initiate a Blik payment they to their © 2015 HSN Consultants, Inc. THE NILSON REPORT

mobile banking application, which generates a one-time, 6-digit code. The code is entered on the PIN pad of a POS terminal or ATM, or at an ecommerce checkout page. Consumers receive

a payment notification from PSP and confirm each transaction in their app by entering their handset . More than 130,000 pointof-sale terminals (100,000 merchant outlets) of the 425,000 POS terminals in Poland can handle Blik transactions. PSP estimates 15% of Blik transactions are generated at the point of sale, > see p. 8

DECEMBER 2015 / ISSUE 1076 / THE NILSON REPORT

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Mobile Payments in Poland from page 7...

In the third quarter of this year, Bank Zachodni WBK added NFC-based payment functionality to its mobile banking app using host card emulation (HCE) and tokenization technology, which the bank developed in-house. The payment feature is based on Visa cloud-based payment specifications. Customers sign in to their banking application to link a Visa or MasterCard debit transfers. The remainder are cash card to fund payments. Customers withdrawals at the more than do not need to to their 12,000 ATMs in Poland that are mobile banking application to Blik-enabled. Only customers of initiate an NFC payment. Bank Millennium and ING Bank Last year ING Bank Slaski Slaski can make P2P transactions partnered with Orange, the second now, but the other owner banks largest mobile network operator will offer that feature in 2016. in Poland, to launch an NFC Blik uses technology Hewlett PackSIM-based ard developed for PKO Bank Polski. mobile payment application called NFC . Over-the-air Merchants integrate with provisioning of Visa debit card Blik through their acquirer. credentials to a smartphone’s SIM First Data and the eService is provided by Morpho. unit of EVO Payments, the two Getin Bank will offer its mobile largest merchant acquirers in wallet, a standalone, NFC-based Poland, have signed marketing payment application for Android agreements. Elavon will offer Blik devices based on Visa cloud-based to its merchants in the second payment specifications, next year. quarter of 2016. HCE technology and payment Blik uses technology Hewlett card tokenization is provided by Packard developed for PKO Oberthur Technologies. A Visa Bank Polski’s mobile banking debit card can be linked to fund application called IKO, launched payments. Getin will also offer in 2013. Around 370,000 of the Blik to its customers in the first bank’s customers have signed up quarter of 2016. to use IKO since it was launched. 30% occur at 25,000 ecommerce checkout pages, and 5% are person-to-person (P2P) money

S Polish Payment Standard Grzegorz Dlugosz is President in Warsaw, Poland, 48 (696) 405-044, grzegorz. [email protected], www.visaeurope.com.

PKO Bank Polski, ING Bank Slaski, mBank, Raiffeisen Polbank, Eurobank, and BPS plan to offer less NFC-based payments in their mobile banking applications in 2016. less payments can be made at over 80% of POS terminals in Poland.

Square IPO on NYSE from page 1...

proprietary card payment processing hardware and software and related commerce services for smartphones and tablets. The IPO valued the company at $3.20 billion, considerably less than what venture capital investors believed it was worth a year before. By December 4, Square’s stock price had grown from $9 per share to $12, increasing its market

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capitalization to $4.57 billion. Square had raised $488 million in five venture funding rounds. About 8% of the company’s shares were sold in the IPO. From January 1, 2015 through September 30, 2015, Square’s gross revenues were $892.8 million, up 49% year-over-year (YOY). The gross payment volume for those 9 months was $25.44 billion,

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up 51.2% YOY. This excludes payments tied to a discontinued contract with Starbucks as well as Square Cash peer-to-peer money transfers. Micromerchants had ed for 88% of Square’s gross payment volume in the third quarter of 2011. By the third quarter of 2015, that figure had fallen to 62%, as the company continued to expand services to new industries. Nearly all of its more than two million active merchant customers (at least five

sales annually) are in the U.S. with a small number in Canada and Japan. Square has started to sign merchants in Australia. Adjusted net revenues of $317.6 million for the first 9 months of 2015 were up 64% YOY. This figure is adjusted to reflect a now discontinued contract to process card payments at Starbucks-owned locations in the U.S. Net income was negative $131.5 million, > see p. 12

Visa & MasterCard Outside the U.S. through 3Q ‘15 from page 1...

transactions worldwide, up from Debit cards issued outside the U.S. 52.32% in 2014. generated 49.21% of MasterCard’s MasterCard credit card global debit card purchase purchase volume on cards issued transactions, up from 43.79% outside the U.S. grew by 12.2% in 2014. Debit card purchase volume Purchase volume outside the U.S. for Visa cards ed for 60.9% of Visa’s total. issued outside the U.S. grew compared to a 6.9% increase 10.3%. U.S. debit card purchase for U.S.-issued cards. Purchase volume grew 7.3%. Purchase transactions on MasterCard credit transactions on Visa debit cards cards issued outside the U.S. issued outside the U.S. were up were up 11.7%. U.S. credit card 14.8%. Purchase transactions on purchase transactions were up Visa debit cards issued in the U.S. 8.1%. Credit cards issued outside rose by 7.8%. Debit cards issued the U.S. ed for 75.49% outside the U.S. generated 53.88% of MasterCard’s credit card of Visa debit card purchase purchase transactions, up from 74.89%. Visa’s credit card purchase volume on cards Dollar Volume (bil.) Purch. Trans. issued outside the U.S. Brand/Type Total Chg. Purchases Chg. Cash Chg. (bil.) Chg. grew by 12.4%. Inside Visa Credit $2,777.06 11.0% $2,583.56 12.0% $193.50 –0.6% 33.26 10.7% the U.S. growth was MasterCard Credit $1,813.05 9.8% $1,673.24 10.6% $139.81 0.9% 21.83 10.8% 11.3%. However, purchase CREDIT TOTAL $4,590.11 10.5% $4,256.80 11.4% $333.31 0.0% 55.09 10.7% transactions on Visa credit Visa Debit $4,647.43 7.2% $2,545.99 9.1% $2,101.44 5.1% 58.96 11.5% cards issued inside the U.S. grew 14.0%, while MasterCard Debit $1,552.64 16.3% $803.29 15.6% $749.35 17.1% 21.68 20.7% growth outside the U.S. DEBIT TOTAL $6,200.07 9.4% $3,349.28 10.6% $2,850.79 8.0% 80.64 13.8% was 9.0%. Credit cards Visa Total $7,424.49 8.6% $5,129.55 10.5% $2,294.93 4.6% 92.22 11.2% issued outside the U.S. MasterCard Total $3,365.69 12.7% $2,476.53 12.2% $889.16 14.2% 43.51 15.5% generated 64.17% of Visa’s TOTAL $10,790.18 9.9% $7,606.08 11.1% $3,184.09 7.1% 135.73 12.5% credit card purchase transactions, a decline Figures are for January 1, 2015 through September 30, 2015. They include all consumer and commercial credit, debit, and prepaid cards. Currency figures are in U.S. dollars. Change figures for dollar volume reflect a year-over-year comparison in from 65.20% in 2014. transactions outside the U.S. ed for 62.39% of its total, up from 60.06%. Visa purchase volume outside the U.S., including Visa Europe, generated 60.92% of its global purchase volume, up from 60.47% for the same nine-month period in 2014. Purchase transactions at merchants outside the U.S. ed for 57.59% of its total, up from 56.98%. MasterCard purchase volume on debit cards issued in the U.S. grew 7.7%. Outside the U.S. that spending was up 26.2%. Purchase transactions on MasterCard debit cards issued outside the U.S. grew 35.6%. In the U.S. they grew 9.1%.

Visa & MasterCard Worldwide thru 3Q 2015 vs. 3Q 2014

local currency. Visa includes the sum of Visa Europe and Visa Inc. and includes Visa, Visa Electron, and Interlink brands. MasterCard excludes Maestro and Cirrus figures. © 2015 The Nilson Report © 2015 HSN Consultants, Inc. THE NILSON REPORT

DECEMBER 2015 / ISSUE 1076 / THE NILSON REPORT

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Largest Maestro Issuers Worldwide 2014 Rank

1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 29 30 31 32 33 34 35 36 37 38 39 40 41 42 43 44 45 46 47 48 49 50

Issuer, Country

ING Netherlands, Belgium, (1) BBVA Provincial Venezuela Commonwealth Bank Australia ABN Amro Netherlands Itau Unibanco Brazil KB Kookmin Card South Korea Banesco Banco Venezuela BancoPosta Italy Caixa Economica Federal Brazil Sberbank Russia Clydesdale Bank United Kingdom Mercantile Banco Venezuela UBS Switzerland Banco Santander Brazil Raiffeisen Schweiz Switzerland Credit Agricole Deutsche Bank National Commercial Saudi Arabia Banco de Venezuela Venezuela Bancolombia Colombia Bancaribe Venezuela Credit Suisse Switzerland NongHyup Bank South Korea Shinhan Card South Korea ANZ Bank New Zealand Commerzbank Banco Santander Chile Riyad Bank Saudi Arabia Standard Bank South Africa Volksbank Austria Caixa Geral de Depositos Portugal BNP Paribas Fortis Belgium Absa Bank South Africa SABB Saudi Arabia Erste Bank Austria Swedbank Sweden Santander Bank Banco Davivienda Colombia Banco Nacional de Credito Venezuela Euro6000 Spain Credit Mutuel Banco del Estado Chile Banco de la Nacion Argentina Ziraat Bankasi Turkey Frankfurter Sparkasse OTP Bank Hungary KEB Hana Card South Korea Rabobank Netherlands Swedbank Estonia DZ Bank

Purchase Volume (mil.)

Cards (000)

Rank

$45,958.7 $35,465.1 $29,809.3 $27,088.1 $23,571.0 $21,351.4 $20,461.5 $19,528.1 $16,941.8 $14,517.4 $8,503.8 $8,463.5 $8,408.6 $7,748.8 $6,901.2 $6,875.6 $6,874.1 $6,683.5 $6,376.4 $5,188.3 $4,698.3 $4,072.2 $3,687.7 $3,554.9 $3,516.6 $3,387.2 $3,185.9 $2,581.1 $2,465.3 $2,318.6 $2,118.8 $1,990.0 $1,970.7 $1,944.1 $1,938.9 $1,756.2 $1,737.5 $1,709.4 $1,708.3 $1,693.0 $1,537.1 $1,465.7 $1,404.0 $1,388.1 $1,334.5 $1,261.1 $1,060.2 $997.7 $996.4 $944.4

12,352 3,158 4,528 6,313 30,632 18,088 3,417 7,344 48,810 38,837 1,710 3,453 1,256 24,181 1,284 2,041 3,942 3,659 4,492 6,340 687 675 7,388 4,493 539 2,044 3,199 1,726 3,537 805 1,397 3,715 4,506 548 556 412 527 2,840 821 896 284 1,593 2,669 9,962 689 2,189 1,917 7,371 487 7,619

51 52 53 54 55 56 57 58 59 60 61 62 63 64 65 66 67 68 69 70 71 72 73 74 75 76 77 78 79 80 81 82 83 84 85 86 87 88 89 90 91 92 93 94 95 96 97 98 99 100

Issuer, Country

BFC Banco Fondo Comun Venezuela Ahli United Kuwait Akbank Turkey PBZ Croatia Borgun Iceland BW-Bank Cartao BRB Brazil RBC Financial Trinidad & Tobago Belfius Bank Belgium Intesa Sanpaolo Card Italy Santander Totta Portugal Raiffeisen Bank Romania Maduro & Curiel’s Netherlands Antilles(2) Slovenska Sporitelna Slovakia VakifBank Turkey Banco Itau Chile Banco Bicentenario Venezuela BNL Gruppo BNP Paribas Italy Banco Caroni Venezuela Banco Comercial AV Villas Colombia BRD Romania National Bank Greece Nuevo Banco de Santa Fe Argentina T. Is Bank Turkey BPH Poland Mauritius Commercial Mauritius Erste & Steiermarkische Croatia Nordea Europe PKO Bank Poland KBC Bank Belgium Nedbank South Africa BIB Serbia Banco Sofitasa Venezuela CIB Hungary Swedbank Lithuania BCR Romania Abanka Vipa Slovenia GE Money Czech Republic Banco Security Chile Erste Bank Hungary Banco Corpbanca Colombia Barclaycard Bank Zachodni WBK Poland BMN Spain CBC Banque Belgium Alior Bank Poland Banco Colpatria Colombia PrivatBank Ukraine Yapi Kredi Bankasi Turkey Banka Koper Slovenia

(1) Also , Italy, Luxembourg, Poland, Romania, Spain, Turkey. (2) And Curacao, Aruba, St. Maarten, Bonaire.

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Purchase Volume (mil.)

Cards (000)

$903.4 $870.4 $826.8 $772.2 $744.2 $735.9 $700.8 $654.2 $648.6 $642.8 $637.1 $622.6 $570.5 $570.4 $567.0 $553.8 $518.9 $485.6 $480.6 $443.9 $437.8 $432.9 $428.3 $425.3 $410.1 $404.2 $387.5 $366.8 $325.3 $321.6 $321.1 $296.3 $296.3 $295.8 $284.8 $283.5 $257.8 $237.6 $228.9 $224.1 $221.7 $209.8 $208.6 $208.3 $193.9 $182.6 $176.7 $160.6 $155.1 $151.2

1,170 130 4,232 624 135 394 1,065 534 3,164 849 255 777 446 279 5,241 179 460 1,702 252 1,352 1,310 3,020 730 2,489 260 642 545 77 184 2,137 830 697 287 185 611 742 146 266 78 291 471 479 94 148 206 114 333 6,635 1,172 103

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Largest Credit Card Portfolios Worldwide 2014 Rank

1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 29 30 31 32 33 34 35 36 37 38 39 40 41 42 43 44 45 46 47 48 49 50

Issuer, Country

Outstandings (bil.) Rank

JPMorgan Chase U.S. $129.57 51 Bank of America U.S. $100.24 52 American Express U.S. $93.82 53 Citibank U.S. $82.30 54 Capital One U.S. $72.66 55 ICBC China $59.57 56 Discover U.S. $56.13 57 China Construction China $53.54 58 Bank of China China $43.59 59 Agricultural Bank China $36.25 60 China Merchants China $35.73 61 Wells Fargo U.S. $35.21 62 U.S. Bank U.S. $32.88 63 Barclays U.K. $27.66 64 Bank of Communications China $27.44 65 China Minsheng China $24.02 66 Itau Unibanco Brazil $22.32 67 China Guangfa China $21.53 68 Barclays U.S. $20.78 69 China Everbright China $18.67 70 USAA U.S. $17.78 71 Ping An China $16.74 72 Mitsubishi UFJ Nicos Japan $16.32 73 TD Canada Trust Canada $15.90 74 Synchrony Financial U.S. $15.15 75 Banco Bradesco Brazil $14.47 76 Lloyds Banking Group U.K. $14.24 77 Shinhan Card South Korea $13.69 78 RBC Royal Bank Canada $13.04 79 China CITIC China $12.28 80 Sumitomo Mutsui Japan $12.15 81 Scotiabank Canada $11.72 82 HSBC U.K. $11.57 83 China Industrial China $10.79 84 Credit Saison Japan $10.48 85 MBNA U.K. $10.47 86 CIBC Canada $10.08 87 Commonwealth Bank Australia $9.73 88 Hyundai Card South Korea $9.66 89 Shanghai Pudong Dev. China $9.61 90 KB Kookmin Card So. Korea $9.58 91 Navy FCU U.S. $9.51 92 Tesco Bank U.K. $9.47 93 Banco do Brasil Brazil $8.53 94 Westpac Banking Australia $8.19 95 ANZ Banking Group Australia $8.18 96 RBS/NatWest U.K. $8.16 97 Yapi Kredi Bankasi Turkey $7.58 98 BMO Bank of Montreal Canada $7.34 99 Fed. Desjardins Canada $7.18 100

Outstandings (bil.) Rank

Issuer, Country

Sberbank Russia $7.17 Banco Nac’l (Banamex) Mexico $7.15 Banco Santander Brazil $7.03 Samsung Card South Korea $6.93 Banco de Venezuela Venezuela $6.68 Garanti Bank Turkey $6.64 BBVA Bancomer Mexico $6.33 Mercantil Banco Venezuela $6.09 PNC U.S. $5.56 Akbank Turkey $5.50 First Nat’l of Omaha U.S. $5.29 Russian Standard Russia $5.28 Nat’l Australia Australia $5.25 Aeon Financial Serv. Japan $5.00 BBVA Provincial Venezuela $4.75 TD Bank U.S. $4.73 Capital One Canada $4.52 Cabela’s WFB U.S. $4.49 UC Card Japan $4.34 Canadian Tire Canada $4.27 T. Is Bank Turkey $4.26 Lotte Card South Korea $4.14 HSBC Hong Kong $3.95 Citi Australia $3.71 Finansbank Turkey $3.65 Orient Corporation Japan $3.53 Santander Cards U.K. $3.44 Capital One U.K. $3.43 Hua Xia China $3.28 Toyota Finance Japan $3.23 Caixa Economica Fed. Brazil $3.20 Cedyna Financial Japan $3.18 KEB Hana Card South Korea $3.17 Banesco Banco Venezuela $3.15 Hang Seng Hong Kong $3.12 Fifth Third U.S. $3.00 Carrefour , Spain, Belg. $2.86 Banco Santander Mexico $2.81 Credit One U.S. $2.78 Nationwide Building Soc. U.K. $2.69 Banco Occidental Venezuela $2.67 Standard Bank South Africa $2.44 CaixaCard Spain $2.39 NongHyup Bank South Korea $2.36 Citibank South Korea $2.30 BB&T U.S. $2.27 Banco Santander Chile $2.15 President’s Choice Canada $2.15 Barclaycard $2.14 Banco Popular Spain $2.11

101 102 103 104 105 106 107 108 109 110 111 112 113 114 115 116 117 118 119 120 121 122 123 124 125 126 127 128 129 130 131 132 133 134 135 136 137 138 139 140 141 142 143 144 145 146 147 148 149 150

Issuer, Country

Outstandings (bil.)

Banco Santander Spain $2.06 Kasikornbank Thailand $2.01 Industrial Bank South Korea $2.00 Banco Santander Rio Argentina $1.99 Citibank Malaysia $1.98 NewDay Cards U.K. $1.94 Merrick Bank U.S. $1.90 VakifBank Turkey $1.88 BOC Credit Card Hong Kong $1.81 Absa Bank South Africa $1.81 Banco Falabella Chile $1.80 Alpha Bank Greece $1.77 Nat’l Bank of Canada Canada $1.75 Virgin Money U.K. $1.74 DenizBank Turkey $1.71 Citizens Bank U.S. $1.70 Banorte Mexico $1.67 E. Sun Commercial Taiwan $1.61 Pentagon FCU U.S. $1.60 State Farm Bank U.S. $1.57 Banco CSF Brazil $1.57 HSBC Turkey $1.56 Bancaribe Venezuela $1.55 Tinkoff Credit Systems Russia $1.50 Nordstrom U.S. $1.47 SunTrust Bank U.S. $1.45 Citi Cards Japan $1.44 Banco de Chile Chile $1.43 Bancolombia Colombia $1.42 Nat’l Bank of Greece Greece $1.41 Citibank Brazil $1.41 Citibank Hong Kong $1.40 Eurobank-Ergasias Greece $1.39 Landesbank Berlin $1.39 Maybank Malaysia $1.35 HSBC Mexico $1.32 Banco Exterior Venezuela $1.31 Banco de Credito B Peru $1.31 Bankia Spain $1.29 Regions Financial U.S. $1.29 EnterCard Norway $1.29 Woori Card South Korea $1.26 Bank of Ireland Ireland $1.23 ANZ Bank New Zealand $1.22 Banco Davivienda Colombia $1.20 First Nat’l Bank South Africa $1.20 Banco Bicentenario Venez. $1.17 Banco Popular Puerto Rico $1.16 Citibank Singapore $1.14 Banco del Pacifico Ecuador $1.13

Outstandings on general purpose cards as of December 31, 2014. American Express and Discover do not include third-party business. © 2015 The Nilson Report © 2015 HSN Consultants, Inc. THE NILSON REPORT

DECEMBER 2015 / ISSUE 1076 / THE NILSON REPORT

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© 2015 HSN Consultants, Inc. THE NILSON REPORT All Rights Reserved. Reproducing or allowing reproduction or dissemination of any portion of this newsletter in any manner for any purpose is strictly prohibited and may violate the intellectual property rights of HSN Consultants, Inc. dba The Nilson Report.

Square IPO on NYSE from page 9...

which compares to negative $117.0 million for the same period a year before. Earnings before interest, taxes, depreciation, and amortization on an adjusted basis were negative $35.0 million. This compared with negative $57.0 million the prior year. Even when Starbucks revenue and costs are taken out, net income would still reflect a loss of more than $100 million through the first 9 months of its 2015 fiscal year. Currently, 88% of Square’s adjusted revenue is generated by handling payments and providing related commerce services. Beyond payment processing, merchants have access to software including , which lets them handle noncard payments; Appointments, which lets them organize client information and more; Analytics, which

is cloud-based information about their business’s performance; and Marketplace, which lets them integrate apps from other companies into their Square POS system. Also available is a digital invoice product that can be used to send bills and collect payments, and Square Cash, a smartphone-based money transfer product for consumers. The other 12% of Square’s revenue comes from financial services including cash advances to merchants and payroll processing as well as marketing services. Square Capital, the merchant cash advance business, is mostly funded by outside investors. So far, $300 million has been advanced. Customer Engagement marketing lets merchants create offers and more.

RS2 Card Management Software Multicurrency, multilingual payment card management software has been available

from RS2 since 1988. Customers include Barclays Bank, which owns 18.5% of RS2, First Data, Global Payments, and OmniPay. RS2 licenses its software directly to large issuers and acquirers. It can also offer itself as a third party processor for all or some card management services to customers including e-money license companies in Europe focused on prepaid cards. Within five years RS2 believes that most of its business in Europe will be for managed services. RS2 is best known for its settlement and reconciliation engine, which has a consistent interface and database

12

worldwide. Payment service directly or through partners. Large providers (PSPs) to online banks use RS2 when needing help merchants find it easier to use with new product development. when managing international and New projects include research local-market-only payment cards & development on blockchain as well as local-market alternative and cryptocurrency as well as payment systems. Large acquiring bitcoin transactions multinationals use the system to from merchants. distribute merchant transactions Radi Abd El Haj is CEO at RS2 to local acquirers, maximizing Software in Neu-Isenburg, their interchange income. PSPs , 49 (6102) 730-030, radi. and acquirers can license only [email protected], www.rs2.com. the settlement and reconciliation Within five years most of its busimodule or use ness will be for managed services. it on a managed service basis. On the card issuing side, Prior issues: 1070, 1057, 1029, 968, much of RS2’s new business is 963, 938, 935, 933, 918, 906, 905, coming from prepaid issuers 861, 791, 782, 774, 773, 764, 754, pursuing unbanked/underbanked 753, 751 consumers. RS2 works with s

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David Robertson, Publisher December 7, 2015

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