Edenred Sa · EURONEXT:EDEN
Edenred Sa — Investor Day (November 2011)
29 slides from Edenred Sa's investor day presentation, November 2011
Slide 1: Shift to Digital Strategy
Shift to Digital Strategy
Slide 2: Contents
Shift to Digital Strategy Contents • Introduction • The Digital Value Chain • Edenred Digital Strategy • Financial Impacts • New Growth Opportunities 2
Slide 3: 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 4: 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 5: Contents
Digital Strategy Contents • Introduction • The Digital Value Chain • Our Digital Strategy • Financial Impacts • New Growth Opportunities 5
Slide 6: 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 6
Slide 7: Digital vs. Paper Value Chain: Program Launch
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 8: 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 9: Digital vs. Paper Value Chain: Program Management
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 10: 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 11: 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 12: 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 13: 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 14: 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 15: Contents
Shift to Digital Strategy Contents • Introduction • The Digital Value Chain • Edenred Digital Strategy • Financial Impacts • New Growth Opportunities 15
Slide 16: 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 17: 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 18: 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 19: 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 20: Contents
Shift to Digital Strategy Contents • Introduction • The Digital Value Chain • Edenred Digital Strategy • Financial Impacts • New Growth Opportunities 20
Slide 21: 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 22: 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 23: 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 23
Slide 24: 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 25: 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 26: 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 27: Contents
Shift to Digital Strategy Contents • Introduction • The Digital Value Chain • Edenred Digital Strategy • Financial Impacts • New Growth Opportunities 27
Slide 28: 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 29: 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