Edenred Sa · EURONEXT:EDEN
Edenred Sa — Investor Day (2011)
143 slides from Edenred Sa's investor day presentation, 2011
Slide 1: Edenred Investor Day
Edenred Investor Day (=) Edenred
Slide 2: Morning Agenda
Morning Agenda Time Section Theme Speakers 10:00-10:30 Executive Summary Jacques Stern, Chief Executive Officer Loïc Jenouvrier, CFO Our Strategy to Create and Roll out Solutions in the Prepaid Market Jacques Stern, Chief Executive Officer 10:30-12:15 1 1. Prepaid market overview 2. Our current posi
Slide 3: Afternoon Agenda
Afternoon Agenda Time Section Theme Speakers Jacques Stern, Chief Executive Officer Digital Strategy Osw aldo Melantonio, COO Brazil 1. The Digital Value Chain 2. Digital Strategy 2:00-4:15 3 3. Country Illustration: Brazil Gilles Coccoli, PrePay Solutions Director 4. Key Role of PrePay Solutions 5.
Slide 4: Executive Summary
Executive Summary
Slide 5: Our Expertise Built on 50-years' Experience
Our Expertise Built on 50-years’ Experience Our. Mission To design and deliver solutions that make life easier for employees and improve the efficiency of organizations We design and deliver solutions to our clients that enable them A pivotal role to offer beneficiaries purchasing power in a relatio
Slide 6: Our Positioning in the Prepaid Market Universe
Our Positioning in the Prepaid Market Universe Payment Market: €24Tr Prepaid 1.8% Prepaid Market: €441Bn Who loads prepaid funds? Three types of clients Debit, credit cards and cash B2B B2G B2C 98.2% Dedicated 98.1% 1.0% How are Funds 0.6% prepaid funds spent? Non 0.3% 0% 0% Two fund dedicated purpo
Slide 7: Our Offer in the Prepaid Market
Our Offer in the Prepaid Market B2B B2G B2C Dedicated 98% 1% 0.6% funds Non dedicated 0.3% 0% 0% funds Our Offer in the Prepaid Market B2B B2B B2B B2G Employee Expense Incentive Public Social Benefits management & Rewards Programs Quality Food of life 78% 9% 8% 3% 1% x 2010 Edenred Issue Volume weig
Slide 8: A Business Model Characterized by Strong Growth
A Business Model Characterized by Strong Growth Generation… Offering based on strong, sustainable Edenred Annual Issue Volume market growth fundamentals Meal & Food benefits: 10.8% annual issue volume +10.5%* growth* Strong potential in Edenred’s core business after 40 in €bn years of continued gr
Slide 9: … and High Cash Generation
… and High Cash Generation A cash generating model Strong annual FFO(1) growth with a high operating flow-through ratio(1): 45% on average since 2003 A low capital-intensive model: €213m +24%(2) limited maintenance capex (€30m to €40m per annum) €46m A structurally negative working 2003 2010 capital
Slide 10: Our Ambition in the Next 5 Years
Our Ambition in the Next 5 Years Today world leader in prepaid corporate services 1954 - 1976 1976 - 2000 2000 - 2010 Our ambition From a meal Roll out of Food Diversification of voucher concept... Benefits worldwide our offer Affiliates Quality of Life Build differentiated Benefits solutions and de
Slide 11: A Strategy to Drive Growth
A Strategy to Drive Growth Invent 3 Invent 2016 Develop new solutions for Clients thanks to 2016 digital Create new solutions for Affiliates and Beneficiaries thanks to digital Conquer 2012 2 Organic Strategy Conquer Focus on growth in the core business 2012 Digital Strategy Accelerate the d
Slide 12: Conquer 2012: A Two-Pronged Strategy
Conquer 2012: A Two-Pronged Strategy 1 ORGANIC STRATEGY Focus on growth in the core business Set up the conditions for 2 More DIGITAL STRATEGY systematically deploying our solutions innovation Accelerate the digital transition through 4 organic drivers Faster Set up the conditions for Target of 6% t
Slide 13: Issue Volume Organic Growth through 4 Drivers
1 Issue Volume Organic Growth through 4 Drivers ORGANIC GROWTH Four drivers contributing to the Normalized Timing 6% to 14% organic issue volume growth target (1) 1 Increase penetration rate in existing markets 2-5% Create new solutions and deploy Post Organization, resources and clear roadmap in
Slide 14: Our Strategy to Create and Roll Out New Solutions
Our Strategy to Create and Roll Out 1 New Solutions ORGANIC GROWTH expertise Strong World leader in B2B B2G B2C employee benefits A C Dedicated Incentive funds & D Rewards Public Social B Programs Expense Management Non B dedicated Expense funds Management Leverage our worldwide leadership Keep a cl
Slide 15: Roadmap by Type of Solution
1 Roadmap by Type of Solution ORGANIC GROWTH A B C D B2B B2B B2B B2G Employee Expense Incentive Public Social Benefits management & Rewards Programs Strengthen our Accelerate the Roll out solutions in leadership conquest of new our main countries to Expand our offer to by rolling out markets enhance
Slide 16: Digital Transition: an Essential Step in our Strategy
Digital Transition: 2 an Essential Step in our Strategy DIGITAL STRATEGY A relevant shift for all stakeholders Long-term positive effects for Edenred Affiliates Simplified administrative Address process more clients 1.2 million Value-added services more easily Cost savings Volume Create Benefi
Slide 17: Accelerating the Digital Shift
Accelerating the Digital Shift 2 DIGITAL STRATEGY Target of 50% digital issue volume by First results of the acceleration decided the end of 2012 end-2010 2016 Digital issue volume as a % of total issue volume by geography Digital issue volume Latin Europe RoW America 2012 >70% (end- 6% 59% 59% 2009
Slide 18: Investor Day Agenda
Investor Day Agenda Our Strategy to create and roll How to boost volume growth through out solutions the roll out of our existing solutions in the Prepaid Market and the creation of new solutions Digital How to operate the digital shift Strategy that will open new growth territories 18
Slide 19: Our Strategy to Create and Roll Out Solutions in the Prepaid Market
Our Strategy to Create and Roll Out Solutions in the Prepaid Market Section 1
Slide 20: Contents
Our Strategy to Create and Roll Contents Out Solutions in the Prepaid Market • Prepaid Market Overview • Our Current Positioning • Our Strategy to Create and Roll Out Solutions • Two Illustrations of Recent Launches • Launch Process and Financial Impacts 20
Slide 21: The Prepaid Market in the Payment Universe
The Prepaid Market in the Payment Universe Prepaid 0.4 Debit Prepaid market: 3 €441 billion Credit 3.9 Cash & Equivalent 13.4 Electronic funds transfer 3.7 Total Payment market: €24.4 trillion Internal source (In € Trillion) Prepaid market is a niche in the overall payment market 21
Slide 22: Prepaid Market Segmentation
Prepaid Market Segmentation Prepaid 0.4 Debit 3 Three types of fund loaders Credit 3.9 Cash & Equivalent 13.4 Electronic funds transfer B2B B2G B2C 3.7 • Food Benefit • Food • Gift (single-brand or • Non Food Benefit • Education multi-brand) Dedicated • Expense • Fertilizer funds Management • Fuel •
Slide 23: Sizes and Growth Rates of Prepaid Market Segments
Sizes and Growth Rates of Prepaid Market Segments x Market segment size B2B B2G B2C 2009-2017 expected x growth rate €102Bn €91Bn €125Bn €318Bn Dedicated funds (Filtered / Closed Loop) 14% 5% 14% 12% €19Bn €25Bn €79Bn €123Bn Non dedicated funds (Open Loop) 21% 27% 20% 22% €121Bn €116Bn €204Bn €441Bn
Slide 24: Contents
Our Strategy to Create and Roll Contents Out Solutions in the Prepaid Market • Prepaid Market Overview • Our Current Positioning • Our Strategy to Create and Roll Out Solutions • Two Illustrations of Recent Launches • Launch Process and Financial Impacts 24
Slide 25: An Offer Organized Around Four Types of Solutions
An Offer Organized Around Four Types of Solutions B2B B2G B2C Dedicated 98% 1% 0.6% funds Non dedicated 0.3% 0% 0% funds B2B B2B B2B B2G Employee Expense Incentive Public Social Benefits management & Rewards Programs Quality Food of life Dedicated funds Non dedicated funds Buyer of the Human Finance
Slide 26: A Strong Footprint in the Distribution of Dedicated Funds
A Strong Footprint in the Distribution of Dedicated Funds from Corporate clients Breakdown of x Edenred’s 2010 issue B2B B2G B2C volume by segment 98.2% 1.0% 0.6% IV: 0.1Bn Dedicated IV: €13.7Bn IV: 0.07Bn Funds Ex : TR card Ex : Dote Scuola 0.3% 0% 0% Non dedicated IV: 0.04Bn Funds Ex : Insurance c
Slide 27: Focus on our Offer in the Distribution of Dedicated Funds
Focus on our Offer in the Distribution of Dedicated Funds from Corporate Clients B2B B2G B2C Dedicated B2B 98.2% 1.0% 0.6% Funds Employee Expense Incentive Non Benefits management & Rewards dedicated 0.3% 0% 0% Quality Funds Food of life 2010 IV breakdown (in %) Dedicated 78% 9% 8% 3% Funds L/L grow
Slide 28: Competition in our Core Business
Competition in our Core Business: Dedicated Funds from Corporate Clients Employee Expense Incentive Benefits management & Rewards Quality Food of life Global players Wright Express Sodexo Sodexo Sodexo FleetCor Carlson Marketing Continental Chèque Déjeuner (Europe) Chèque Déjeuner (Europe) players V
Slide 29: Competition in Prepaid Market's Other Five Segments
Competition in Prepaid Market’s Other Five Segments B2B B2G B2C • Blackhawk (USA – Gift More than 90% managed by Closed loop) Dedicated Funds public institutions, except in the USA • InComm (USA – Gift Closed loop) • JP Morgan (USA) • Sodexo (France) • Cheque Dejeuner (France) • Account Now (USA – •
Slide 30: Prepaid Market's Ecosystem
Prepaid Market’s Ecosystem • Ceridian • ADP • VeriFone • Paychex • Ingenico • WageWorks • Oberthur Payroll • Gemalto company POS / • Carrefour Card Retailer • Tesco manufacturer • Wal-Mart Prepaid • Auchan • Citi prepaid services (ex e-count) Services • Comdata (Ceridian Payment • Visa subsidiary) P
Slide 31: Conclusion
Conclusion Prepaid Market Edenred’s positioning A large and fragmented Edenred is the clear market, worldwide leader more structured in in Employee Benefits and dedicated funds, a major player in other with high growth potential corporate prepaid in every segment solutions A strategy favoring organi
Slide 32: Contents
Our Strategy to Create and Roll Contents Out Solutions in the Prepaid Market • Prepaid Market Overview • Our Current Positioning • Our Strategy to Create and Roll Out Solutions • Two Illustrations of Recent Launches • Launch Process and Financial Impacts 32
Slide 33: Our Strategy to Create and Roll Out Solutions
Our Strategy to Create and Roll Out Solutions expertise Strong World leader in B2B B2G B2C corporate benefits A C Dedicated Incentive funds & D Rewards Public Social B Programs Expense Management Non dedicated funds B Expense Management Leverage our worldwide leadership position in the large Employe
Slide 34: Roadmap by Type of Solution (1/2)
Roadmap by Type of Solution (1/2) A B B2B B2B Employee Benefits Expense Management Strengthen our leadership Accelerate the conquest of new growth territories based on our Latin American by rolling out solutions experience Emerging countries: Latin America: Develop solutions helping governments and
Slide 35: Roadmap by Type of Solution (2/2)
Roadmap by Type of Solution (2/2) C D B2B B2G Incentive & Rewards Public Social Programs Expand our offer to public institutions in Roll out solutions in our main countries countries where Edenred is already to enhance our offer to stakeholders present Provide the following value-added services to o
Slide 36: Expand Our Leadership in Employee Benefits
A Expand Our Leadership in Employee Benefits Meal and Food Quality of Life Our existing solutions Childcare/ Green/Culture/ as of 2010 Meal Food Transportation Gift Home serv ices Sport/Holiday Belgium Brazil France Italy Mexico UK 69 solutions worldwide as of 15 16 9 4 18 7 2010 11 solutions launch
Slide 37: Illustration of New Benefits Solutions
A Illustration of New Benefits 11 solutions launched in 2011 or under development worldwide Meal and Food Quality of Life H1 2011 Ticket Restaurante (Mexico – March 2011) Ticket Transporte (Spain – June 2011) Ticket Plus (Gift in Germany – Dec. 2011) H2 2011 Mind & Body (Finland, New country– Nov.20
Slide 38: Deploy our Expertise in Expense Management
B Deploy our Expertise in Expense Management Our existing solutions Travel & Uniform Merchant Insurance Fuel/Fleet as of 2010 Entertainment cleaning card (1) card/Payroll Belgium Brazil France Italy Mexico UK 16 solutions worldwide as of 2010 5 1 6 1 3 16 solutions worldwide as of 5 1 6 1 3 2010 9 s
Slide 39: Illustration of New Expense Management Solutions
Illustration of New Expense Management Solutions B 9 solutions launched in 2011 or under development worldwide Uniform Fuel/Fleet T&E Merchant card Insurance card cleaning Ticket Corporate Ticket Vestuario H1 2011 (Spain) Ticket Plus (Chile) (Turkey) Expendia Smart (Italy) H2 2011 Ticket Frete Ticke
Slide 40: Deploy Incentive & Rewards Solutions in our Main Countries
Deploy Incentive & Rewards Solutions in our Main Countries C Our existing Partner channel & Partner channel & Promotion, Savings & solutions as of 2010 Employee Recognition Consumer loyalty Sales force incentive Discount Belgium Brazil France Italy Mexico UK 33 solutions worldwide as of 2010 14 4 12
Slide 41: Expand our Public Social Programs Offer
D Expand our Public Social Programs Offer Solutions already Four illustrations of Public Social Programs developped in 14 countries Meeting the needs of Meeting the needs of Meeting the needs of Meeting the needs of French Local authorities Lombardy region Chilean Government Madhya Pradesh State Obj
Slide 42: Contents
Our Strategy to Create and Roll Contents Out Solutions in the Prepaid Market • Prepaid Market Overview • Our Current Positioning • Our Strategy to Create and Roll Out Solutions • Two Illustrations of Recent Launches • Launch Process and Financial Impacts 42
Slide 43: Expense Management Market Overview
Expense Management Market Overview Fuel/Fleet Fuel Other car/truck related expenses Tyres, Washing 90% All fuel types 10% Maintenance Other (parking, toll, insurance) Travel & Entertainment Travel Entertainment Air Accommodation 60% 30% to Rail to Food & Beverage 70% 40% Car rental Other Parking / T
Slide 44: Brazilian Expense Management Market: Our Vision
Brazilian Expense Management Market: Our Vision In 2011 Potential Market Potential Market Distribution Edenred Brazil Focus €91B €74B €34B Light Fleet €17B €40B Heavy Fleet Expense Management Travel & Entertainment Fleet Management Potential Market Market Market Travel, Transportation, Company's own
Slide 45: Edenred Brazil Focus: Fleet Management Market
Edenred Brazil Focus: Fleet Management Market MARKET MARKET TYPICAL SEGMENT SIZE SERVICES €34B Fuel Control Maintenance FLEET LIGHT €14B Access Control €1.4B (10%) Driving Reports Potential(1) Addressable (2) Addressed Consulting €40B Fuel Control HEAVY FLEET Driving behavior reports €
Slide 46: Fleet Management Market
Fleet Management Market BUSINESS VALUE CHAIN 1 2 3 PRE-TRIP ON-TRIP POST-TRIP Ordering & Behavior & Profile Fuel Fleet Management Logistics Diesel Insurance Telemetry Web Portal 24h Assist. Analysis Gasoline Maintenance Ethanol Reporting Documents X X X COMPETITORS POSITIONING 46
Slide 47: A Leadership Position in Fuel & Fleet Management Market
A Leadership Position in Fuel & Fleet Management Market FUEL & FLEET MANAGEMENT Launched in 1998 Leader in Light Vehicle Fleet & Fuel Management market 6,000 Clients (46% cross-selling) 14,000 Affiliates (71% gas stations) 87% of satisfied clients 47
Slide 48: Expense Management Change: Edenred Brazil Case
Expense Management Change : Edenred Brazil Case Shell First Sustainable Solution Fuel Cards Web Operation Partnership (Ticket Car Carbon Control) 1998 2000 2002 2004 2006 2008 2009 2010 Other Services: • Investment in new • Investment in new Maintenance technology platform service platform Service •
Slide 49: Focus on Client Needs
Focus on Client Needs Fleet usage policy Accepted on Broad Network Expense controls by vehicle Multiple drivers per vehicle and by person Cost Reduction (up to 20%) Detailed web-accessed reports Eliminates expense advance Flexibility and Security and reimbursement processes 49
Slide 50: Case Study
Case Study What is this company? With Ticket Car, Natura has succeeded in reducing its fleet Natura Cosmeticos SA is a Brazil-based company that is engaged in the manufacture, process engineering, distribution and sale of management costs and its cosmetics, fragrances and personal hygiene products .
Slide 51: Brazilian Expense Management Market: Our Vision (From 2012)
Brazilian Expense Management Market: Our Vision From 2012 Potential Market Potential Market Distribution* €114B Edenred Brazil Focus €91 Bi €74B €23B €17B Expense Management T&E Fleet Management Carta Frete Potential Market Market Market Market Travel, Transportation, Company's own vehicle Payment o
Slide 52: Fleet Expense Management: Ticket Frete Positioning
Fleet Expense Management: Ticket Frete Positioning Fleet expense management market is divided into four macro segments Description Own transportation Companies with their own fleet system Vehicles belonging to carriers Third party Heavy vehicles transportation Available for eventual freight co
Slide 53: Ticket Frete: individual drivers' business expense management
Ticket Frete: individual drivers’ business expense management Current system: New regulation from Nov. 2011 New system: (penalties from Nov. 2012) paper-based card-based Claim refund Corporate client (1) Distribution of paper vouchers usable in Payment of travel expenses Card system: paper replace
Slide 54: Ticket Frete, a Unique Selling Proposition
Ticket Frete, a Unique Selling Proposition Partnership with Itau Bank Partnership with STP Edenred has signed a partnership with Itaú, the Brazilian toll collection only by cash or automatic largest Latin American bank, with nearly 5,000 payment system (debit/credit cards not accepted) branches
Slide 55: Business Model: Ticket Car vs. Ticket Frete
Business Model: Ticket Car vs. Ticket Frete Fuel/Fleet Expense Management Take-up rate (1) excl. Lost & Expired 4.0%-6.0% 0.5%-1.5% Lost & Expired - - Float & Financial - - Revenue EBIT/IV margin(2) 1.5%-2.5% 0.4%-0.7% A solution with slightly lower margins, however always accretive to FFO (1)Take-u
Slide 56: Conclusion
Conclusion 10-years’ experience in the Fuel & Fleet Expense Management A leadership position Market in this market Sophisticated transaction processing Particularly in Light Vehicles segment systems and platforms A new market created by the government to improve tax Ticket Frete, a unique selling co
Slide 57: Contents
Our Strategy to Create and Roll Contents Out Solutions in the Prepaid Market • Prepaid Market Overview • Our Current Positioning • Our Strategy to Create and Roll Out Solutions • Two Illustrations of Recent Launches • Launch Process and Financial Impacts 57
Slide 58: Expense Management in France
Expense Management in France Fuel/Fleet Management Focuses on a niche segment of the expense management market T&E Management Smart solution for corporate uniform cleaning Managed as a separate Business Unit, but benefiting from cross-selling opportunities Other Expense Management Ticket Clean
Slide 59: A Smart Solution with 3 Key Components
A Smart Solution with 3 Key Components A pre-paid dry-cleaning card (points-based) to maintain employees’ uniforms A wide merchant network of over 1,300 dry-cleaners (one-third of France’s dry- cleaners) A secure extranet dedicated to corporate clients; to manage card orders, check employee us
Slide 60: A Unique Selling Proposition
A Unique Selling Proposition Ticket Clean Way helps organizations to meet Health & Safety (H&S) obligations* + - Expensive, as the subsidy is subject Cash allowance Easy administration to social contributions/payroll taxes (Added to Salary) No control on actual usage of funds Cost of adminis
Slide 61: Corporate Uniform Cleaning: Historical Targeted Segments
Corporate Uniform Cleaning: Historical Targeted Segments Two historical targeted segments How does it work? Image clothing Work clothing Edenred Affiliates Clients 1,300 300 Beneficiaries 80,000 Market size €85m* €75m* Each card is loaded with “cleaning points” based on client instructions Competi
Slide 62: Corporate Uniform Cleaning: Opportunity to develop a new segment
Corporate Uniform Cleaning: Opportunity to develop a new segment A Newly Targeted Segment How does it work? Personal Protection Equipment (PPE) Edenred Affiliates Clients Beneficiaries Market €128m* size Clothes have a barcode and are scanned at each cleaning Competitive Report ensuring compliance
Slide 63: Conclusion
Conclusion 10-years’ experience in the corporate uniform A leadership position cleaning market in this market Unique network of affiliated dry-cleaners A unique selling proposition enrolled in our private card system A new market segment Ticket Clean Way EPI, an add-in opportunity created by functio
Slide 64: Contents
Our Strategy to Create and Roll Contents Out Solutions in the Prepaid Market • Prepaid Market Overview • Our Current Positioning • Our Strategy to Create and Roll Out Solutions • Two Illustrations of Recent Launches • Launch Process and Financial Impacts 64
Slide 65: New Solutions Launch Process
New Solutions Launch Process Development Phase Soft Launch Phase Launch Phase Cruising Speed Phase (9/12 months) (3/6 months) (12/24 months) Analysis of customers’ Marketing campaign for Steady ramp-up Market studies experience to check clients Stakeholders’ needs study Solution design r
Slide 66: Creating and Deploying Solutions: Financial Impacts
Creating and Deploying Solutions: Financial Impacts P&L impacts Clients Year 5 Clients Year 4 Clients Year 3 Stable Very low attrition rates in client base the business Clients Year 2 Clients Revenues Year 1 Costs related to a new client: acquisition cost + Variable Variable costs transaction co
Slide 67: Conclusion
1 Conclusion ORGANIC GROWTH Accelerate Leverage our leadership and expertise creation and to expand our offer in emerging and developed countries roll-out of with a specific roadmap by type of solution solutions Increase Meet the target of 2 to 4% contribution contribution to issue volume growth pos
Slide 68: Financial Focus
Financial Focus Section 2
Slide 69: Contents
Contents Financial Focus • Float Investment Policy • Sensitivity Analysis 69
Slide 70: Float Investment Structure
Float Investment Structure By region (end-2010) By investment horizon Eurozone Rest of > 1 year 2010 YTD2011 Europe < 1 year 55% 17% 13% ~25% Latin America Other countries 87% 75% 25% 3% Extended maturities in Brazil Float breakdown between Latin America and Europe reflecting product mix Medium-term
Slide 71: Float Investment Policy
Float Investment Policy Prudent Cash Investment Policy A centralized cash management policy at Group level: Strictly defined policies Monthly reporting by counterparty, country, structure and internal audit controls Investment vehicles: No bonds, no equities Only money market instruments
Slide 72: Contents
Contents Financial Focus • Float Investment Policy • Sensitivity Analysis 72
Slide 73: Sensitivity Analysis – Impact on EBIT
Sensitivity Analysis – Impact on EBIT Sensitivity of the business model to four main macro-economic indicators Unemployment (1) Inflation (2) Interest rates (3) Exchange rates(4) +/- 1% +/- 1% +/- 50bp +/- 5% EURO LATAM OTHER BRL VEF MXN ~ €5.4m ~ €3.7m €6.0m €3.0m €2.2m €5.3m €1.6m €0.9m €Xm Impact
Slide 74: Shift to Digital Strategy
Shift to Digital Strategy Section 3
Slide 75: Contents
Shift to Digital Strategy Contents • Introduction • The Digital Value Chain • Edenred Digital Strategy • Country Illustration: Brazil • Key Role of PrePay Solutions • Financial Impacts • New Growth Opportunities 75
Slide 76: Why shifting to digital makes sense for all stakeholders
Why shifting to digital makes sense for all stakeholders A win-win solution for all stakeholders Clients: optimized and simplified processes, cost savings Edenred Beneficiaries: convenient, fashionable solution A C Affiliates: simplified administrative process, value-added services, B cost sav
Slide 77: Why shifting to digital makes sense for Edenred
Why shifting to digital makes sense for Edenred Rationale for the shift to digital Financial impacts Issue volume growth Market demand New sources of revenue, which offset the reduction in lost products First mover / Competitive advantage Reduced operating costs, leading to an operating flow-thr
Slide 78: Contents
Digital Strategy Contents • Introduction • The Digital Value Chain • Our Digital Strategy • Country Illustration: Brazil • Key Role of PrePay Solutions • Financial Impacts • New Growth Opportunities 78
Slide 79: How to Shift to Digital
How to Shift to Digital 2016 2012 >70% 2009 50% A strategic move from paper to digital, 30% implying changes in the value chain and interactions with new stakeholders 1 Program Launch Phase Two Main Phases 2 Program Management Phase A country-by-country process 79
Slide 80: Digital vs. Paper Value Chain: Program Launch Phase
Digital vs. Paper Value Chain: 1 Program Launch Program Launch Phase Phase Phase 1: Program Launch Digital Paper Value Chain Value Chain Solution creation 1 1 Set up of processing capabilities 2 2 Affiliation network manager 3 3 Set up of POS devices 4 Set up of interfaces between POS 5 and processo
Slide 81: Set Up of POS Devices
Set Up of POS Devices 1 Program Launch Phase POS devices: two options Owned POS Use of existing POS Conditions for setting up our own POS: Conditions for the use of existing POS: Need for strategic control No need for strategic control Specific technical features of the solution Existing
Slide 82: Digital vs. Paper Value Chain: Program Management Phase
Digital vs. Paper Value Chain: 2 Program Program Management Phase Management Phase Phase 2: Program Management Digital Paper Value Chain Value Chain Issuer 1 1 Program Distributor 2 2 Redecard and Cielo (Brazil), Acquirer (technical or banking) 3 ATOS (Belgium)… Payment scheme (Visa, MasterCard, CB
Slide 83: New Stakeholders in the Digital Value Chain
New Stakeholders 2 Program in the Digital Value Chain Management Phase Acquirer Switch Processor / (international or domestic (technical or banking) payment schemes) Authorization Technical acquirer: Technical entity which: Intermediary between issuer and acquirer, which: Allows collection of fina
Slide 84: Coexistence of Two Models within the Digital Value Chain
Coexistence of Two Models 2 Program within the Digital Value Chain Management Phase Program Manager control point Private Model Banking Model Intermediary control point Private software set up in the POS, Use of the standard banking alongside banking software software (already part of the POS) Issue
Slide 85: Focus on the Private Model
Focus on the Private Model 2 Program Management Phase Private Model Processing and Processor 5 authorization of the Processor Technical acquirers transaction Merchant Issuer acquirer Technical Acquirer 1 Private settlement negotiated Card betwwen issuers and acquirers issuance 4 2 Loading Merchant 6
Slide 86: Focus on the Banking Model and Payment Schemes' Role
Focus on the Banking Model 2 Program and Payment Schemes’ Role Management Phase Banking Model 5B Authorization 5A Switching Processor Banking acquirers Processor Payment scheme: Domestic or international Switching & Clearing Merchant payment schemes Issuer of transactions acquirer Banking Acquirer S
Slide 87: Focus on the Mobile Value Chain
Focus on the Mobile Value Chain 2 Program Management Phase Mobile Phone Devices Mobile value chain is the same as card value chain Specific features of the mobile value chain: Different technology (mobile vs. card) Mobile operators play the role of acquirers Different options for mobile te
Slide 88: Contents
Shift to Digital Strategy Contents • Introduction • The Digital Value Chain • Edenred Digital Strategy • Country Illustration: Brazil • Key Role of PrePay Solutions • Financial Impacts • New Growth Opportunities 88
Slide 89: Overall Digital Strategy
Overall Digital Strategy Long-term positive effects for Edenred Acceleration of the shift to digital 2016 Volume Digital issue volume 2012 >70% growth 2011E New 2010 50% revenue 2009 sources 41% Reduced 34% operating 30% costs Acceleration of the shift to digital since the demerger: objective of 41%
Slide 90: Choice of Digital Model
Choice of Digital Model Two options depending on local conditions and program characteristics Private Model Banking Model Choice criteria: Choice criteria: High volume program Low volume program Filtered-loop network Open-loop network (with filter option) Edenred examples: Edenred ex
Slide 91: Choice of Technology
Choice of Technology A wide range of technologies in the digital universe Technology selection criteria: Edenred operates with all types of technologies Client demand Local environment (percentage of Ex: currently 3 countries with mobile pilots merchants and beneficiaries equipped with the techn
Slide 92: Digital Transition Map
Digital Transition Map Rest of the Latin America Europe World (end-2009) 59% digital IV 6% digital IV 59% digital IV (end-2011E) 71% 10% 62% Latin America and Rest of the World in final stage of digital roll-out Start of digital roll-out in almost all European countries Group’s target: 50% of digita
Slide 93: Contents
Shift to Digital Strategy Contents • Introduction • The Digital Value Chain • Edenred Digital Strategy • Country Illustration: Brazil • Key Role of PrePay Solutions • Financial Impacts • New Growth Opportunities 93
Slide 94: Reasons Behind the Shift to Digital in Brazil
Reasons Behind the Shift to Digital in Brazil in the Early 2000s Pressure from the Government to avoid misuse by the beneficiaries (vouchers are easier to sell) Pressure from supermarket operators to avoid vouchers theft (online card transactions are safe ) Process optimization and cost savings in t
Slide 95: Migration Timeline
Migration Timeline Launch of Launch of Migration to WATTS Platform Ticket Alimentação Ticket Restaurante Launch of Electronic (TAE) Electronic (TRE) (Worldwide Application Ticket Alimentação (TA) for Transactional Ticket Services) Migration Project 1997 1998 1999 2002 2003 2006 2007 TA Pilot started
Slide 96: Technology Shift: A New Value Chain
Technology Shift: A New Value Chain Card Value Chain Edenred Private Model Corporate Clients Cardholders Full control of the key elements of the digital value chain by Edenred: • Card issuance • Transaction authorization • Clearing & Settlement Issuer Redecard and Cielo, two Processor Authorizer
Slide 97: Migration Pace by Type of Solution
Migration Pace by Type of Solution Paper issue volume (%) Digital issue volume (%) 2000 2005 2010 16% 84% 100% 100% 11% 74% 100% 89% 26% 97
Slide 98: The Shift to Cards: Impact on Costs
The Shift to Cards: Impact on Costs Paper cost drivers Card cost drivers Printing Card embossing Delivery Delivery Recycled security paper Acquiring voucher Processing Voucher cover Average cost per call Reimbursement PIN number reissuance Acquiring fees: a clear competitive ed
Slide 99: The Shift to Cards: Impact on Margins
The Shift to Cards: Impact on Margins Food & Meal voucher margin growth Meal & Food vouchers Issue Volume (in local currency - million) 3.4% 3.4% 7,000 Phase 1: Implementation 3.2% Short term increase in costs due to 6,000 investment in technology, rollout of 2.8% electronic solutions, management
Slide 100: Conclusion
Conclusion A relevant shift for all stakeholders Affiliates Safety Convenience Beneficiaries Cost savings After initial development Clients stage with renewed processes High level of satisfaction and technologies, positive economic outcome for Edenred Better control of allocated funds Public
Slide 101: Contents
Shift to Digital Strategy Contents • Introduction • The Digital Value Chain • Edenred Digital Strategy • Country Illustration: Brazil • Key Role of PrePay Solutions • Financial Impacts • New Growth Opportunities 101
Slide 102: Prepay Solutions (PPS)
Prepay Solutions (PPS) UK pioneer in prepaid leading the sector for the last 10 years with continued innovation delivering successful prepaid programs throughout Europe 102
Slide 103: PPS in the Digital Value Chain
PPS in the Digital Value Chain Digital Value Chain PPS is an e-money institution passported into the Issuer European Economic Area PPS is a MasterCard member with a European licence Program Distributor Acquirer (technical or banking) Switch (international or domestic) Processor / PPS provides co
Slide 104: PPS is 100% Focused on Prepaid
PPS is 100% Focused on Prepaid Closed Hybrid Filtered Open (Closed Loop Loop & Open loop) Loop Loop 104
Slide 105: PPS's Positioning in the Prepaid Market
PPS’s Positioning in the Prepaid Market B2B B2G B2C Dedicated Funds 21.6% 23 0.1% 1 45.9% 29 Non dedicated Funds 2.3% 4 30.1% 18 X% % of PPS’s Activity Volume* X # of active programs PPS is active in all identified segments *Activity Volume includes Issue Volume and Managed Volume 105
Slide 106: A Flexible Platform Around Smart Wallets
A Flexible Platform Around Smart Wallets Load Account Account Account Account Account Spend channels channels Wallets Wallets Wallets Wallets Wallets POS Account NFC(1) Merchant Loop Filter Velocity Controls Loading Rules Transfer Rules QR Code(2) Multiple Wallets Mobile PPS’s account and wallet man
Slide 107: An Integrated Platform (45+ Integrations)
An Integrated Platform (45+ Integrations) Internet Open Gift Card Loop Mall Network Networks Clients (Point to Point) Closed Cash Loop Top-up Network Networks Decoupled Bank Debit Top-up Networks Networks Credit Domestic Card Networks Top-up Networks Airtime Top-up Networks BABS PPS’s architecture a
Slide 108: PPS's Innovation Stream
PPS’s Innovation Stream Master Account 2012 Mobile NFC (Mobile sim-based payment) Sub-Account Sub-Account Sub-Account Card Card Card Card Level controls (Usage rules for each card) Mobile Solutions (Mobile-based services) Virtual Cards (No physical card) B2B Features (Tools for the corporate client)
Slide 109: Case 1: Paypal Access Card
Case 1: Paypal Access Card Paypal’s special authorisation process Merchant / Standard MasterCard PayPal APIs MC interface Authorisation Interface (to debit/credit) < 1 second on average < 0.5 second on average Very strong and unique integration 109
Slide 110: Case 2: Orange Cash Card (1/2)
Case 2: Orange Cash Card (1/2) 110
Slide 111: Case 2: Orange Cash Card (2/2)
Case 2: Orange Cash Card (2/2) Load Virtual Spend p2p Credit Card Virtual NFC Debit Card Direct Credit Standing Order Card Wallet Controls Limits Redemption & Cash Top-up Withdrawal Loyalty Points Top-ups Redemption MicroPayments Using PPS key functionalities 111
Slide 112: Case 3: Meal Card - Edenred Belgium
Case 3: Meal Card - Edenred Belgium Meal Card system in Belgium Merchants One connection to all Atos POS terminals in Belgium NFC Network Terminals Control (For small restaurants) Key elements of the project Developement and certification for Belgium Transaction protocol Integration with the new
Slide 113: Case 4: Expense Card - Edenred Spain
Case 4: Expense Card - Edenred Spain Expense Card system in Spain B2B Card Management One Platform connected to two different networks Clients Merchants (Repsol gas stations) Key elements of the project Real-time card level controls Integration with Solred Network B to B integration with My Bu
Slide 114: My Business Account Illustration
My Business Account Illustration 114
Slide 115: My Business Account Illustration
My Business Account Illustration 60 00 115
Slide 116: My Business Account Illustration
My Business Account Illustration Weekly Load €50 116
Slide 117: PPS, Enabler of Edenred's Digital Strategy
PPS, Enabler of Edenred’s Digital Strategy Short time-to-market by leveraging capabilities to quickly adapt Edenred’s offer to clients’ needs through a Product dedicated team at PPS working on Edenred programs Full integration with Edenred’s Back Office Short time-to-market to roll out new cou
Slide 118: Conclusion
Conclusion A dynamic business that supports Edenred in its digital strategy and gives it an edge in prepaid innovation 118
Slide 119: Contents
Shift to Digital Strategy Contents • Introduction • The Digital Value Chain • Edenred Digital Strategy • Country Illustration: Brazil • Key Role of PrePay Solutions • Financial Impacts • New Growth Opportunities 119
Slide 120: Short and long-term financial impacts of the digital transition
Short and long-term financial impacts of the digital transition Short-term Long-term 1. 1 No major investment linked to the 1 Stable take-up rate(2) 1. shift to digital solutions (authorization and settlement platforms already deployed) 2. 2 5% to 10% cost reduction 2. 2 Extra costs during the speed
Slide 121: Extra costs during the speed-up phase (1/2)
2 Extra costs during the speed-up phase (1/2) Speed-up phase (2011/2012) Project launch costs (non-recurring) Start-up costs (non-recurring) Market survey Creation of acquiring and processing solutions Digital ecosystem study Middle-office adaptation or creation Analysis of the regulations
Slide 122: Extra costs during the speed-up phase (2/2)
2 Extra costs during the speed-up phase (2/2) 2010 2011 2012 2013-2016 €24-34m €10-15m Digital €14-19m extra-costs €10-15m €10-15m €4m €4m €4m One-off extra costs during the digital speed-up phase (2011/2012): €10-15m per year 122
Slide 123: Stable Operating Revenue / Issue Volume ratio
1 Stable Operating Revenue / Issue Volume ratio Brazilian Experience Invent 2016 Creation of new sources of revenue New sources of revenue to be developed Couponing and loyalty services for affiliates and/or beneficiaries CLIENT Card issuance fee Card reissuance fee Consumption statistics to
Slide 124: Post-transition Cost Reduction
2 Post-transition Cost Reduction Cost trend at constant volume - Illustration (Base 100) 109 100 100 95 92 30 New recurring costs (+10%) 60% reduction Type of costs Affiliation/Training (card launch) 35 Call centers IT costs Production and logistics Sales 35 Support functions (marketing, finance…) 1
Slide 125: Float Holding Period Reduction
3 Float Holding Period Reduction Paper Cycle 1 2 3 4 5 Order Client User Merchant Edenred Delivery Retention Retention Retention Retention Float holding period (100% paper) ~ 8.5 weeks Card Cycle 1 3 3 5 Order User Edenred Load Retention Retention Float holding period (100% digital) ~ 7 weeks Holdin
Slide 126: Contents
Shift to Digital Strategy Contents • Introduction • The Digital Value Chain • Edenred Digital Strategy • Country Illustration: Brazil • Key Role of PrePay Solutions • Financial Impacts • New Growth Opportunities 126
Slide 127: Digital Transition: Opening New Horizons
Digital Transition: Opening New Horizons Invent Since the 1960’s 2012 2016 Large territories offering A well-known, but opportunities for innovation restricted territory and differentiation New markets New solutions New Customers New competition New needs Web2.0 community… From Paper… Digital Transi
Slide 128: Digital will help Edenred to Invent 2016
Digital will help Edenred to Invent 2016 More value-added, Value-added services Edenred customized solutions to make merchants more attractive! Employee Benefits Invent Promotion 2016 Expense Affiliates Clients management Loyalty Incentives & Rewards New growth areas Beneficiaries Public Social Prog
Slide 129: Contents
Shift to Digital Strategy Contents • Introduction • The Digital Value Chain • Edenred Digital Strategy • Country Illustration: Brazil • Key Role of PrePay Solutions • Financial Impacts • New Growth Opportunities UK illustration 129
Slide 130: UK Context: Technology Shift
UK Context: Technology Shift Technology used in 2004 Technology used in 2011 11% 22% Paper Paper 78% Electronic Electronic 89% Mainly B2B2E or C sales Almost exclusively B2B sales With web platforms, we can now We knew less than 5% of the interact with 100% of some of our employees of our clients cl
Slide 131: Overall Strategy
Overall Strategy Situation Proposition Provide employers with online platform for employees to save money on day- to- day shopping Increase purchasing power and employee engagement Only major companies had access to Simplify implementation process, Employee savings platforms due to high deve
Slide 132: Affiliates Strategy
Affiliates Strategy Affiliates B MWO C EDENRED INCREASE BUSINESS VOLUME Product promotion, vouchers/cards New end users sales Visibility/brand awareness Exclusive entry in B2B channels 132
Slide 133: Beneficiaries Strategy
Beneficiaries Strategy A Beneficiaries MWO C EDENRED HELP FACE ECONOMIC CLIMATE Exclusive savings on 450+ retailers Travel clubs, discounted holidays Cash back: > 1,400 offers Ease of use: reloadable cards, SMS vouchers Single sign on, seamless process 133
Slide 134: Client Strategy
Client Strategy A B MWO Clients EDENRED OFFER VALUE TO WORKFORCE Increase motivation and engagement Increase purchasing power Easy/fast platform customisation Comprehensive communication plan (e-mails, posters, leaflets) 134
Slide 135: Strategy for Edenred
Strategy for Edenred A B MWO C EDENRED INCREASE TRANSACTION VOLUME Offering differentiator Address SMEs with new solution Increase network fees, awareness E-mail database, beneficiary profiling Online SSV/C sales commissions Up and cross selling 135
Slide 136: Implementation
Implementation Platform customisation 20 minutes to set up Ongoing e-mail campaigns Customised to fit with overall client objectives Communication with beneficiaries to increase engagement Maximise client R.O.I 136
Slide 137: Example – Offers
Example – Offers Clothing and fashion – up to 20% Electrical products – up to 17% Food and drink – up to 10% Holidays and travel – up to 10% Supermarkets – up to 5% And many more 137
Slide 138: Example – Branding
Example – Branding MWO Landing Page Any logo can be placed here Profile-led offers 138
Slide 139: Example – Communication
Example – Communication Communication support for client 139
Slide 140: Example – Communication
Example – Communication Beneficiary email example 140
Slide 141: Conclusion
Conclusion Edenred A C B Fast and easy to implement Use of digital technology allows us to address ABC strategy Edenred helps ABC save/make money: win-win relationships Brings Edenred’s diverse businesses under one roof 141
Slide 142: Conclusion
Conclusion Section 4
Slide 143: Conclusion
Conclusion Invent 3 Invent 2016 Develop new solutions for Clients thanks to 2016 digital Create new solutions for Affiliates and Beneficiaries thanks to digital Conquer 20122012 Conquer 2 Organic Strategy 2012 Focus on growth in the core business Digital Strategy Accelerating the digital tra