Title: The benefits of electronic payments for economies Victor Ndlovu Country Manager SubSaharan Africa Na
1The benefits of electronic payments for
economiesVictor NdlovuCountry
ManagerSub-Saharan AfricaNairobi05 November
2009
Visa Confidential
2Disclaimer
Certain of the statements contained in this
presentation contain estimates or forward-looking
statements regarding Visa's future performance
and results of operations. These statements
involve risks and uncertainties. Actual results
may differ materially from these estimates or
forward-looking statements, and historical
results should not be considered as an indication
of future performance. Trademarks which appear in
this presentation belong to their respective
owners.
Visa Confidential
3Visa Inc. Overview
Visa Confidential
4What is Visa?
What We Are
What We Are Not
- Branded payment services company
- Largest retail electronic payments network in the
world - Processing and product technology provider
- Credit card issuer
- Lender
- Exposed to consumer credit risk
Payments technology services company for
financial institutions and merchants
Based on payments volume, total volume, number
of transactions and number of cards in
circulation.
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5The Visa Inc. organization
- Global public company (NYSE V)
- Headquartered in San Francisco
- Major US operations in McLean, VA Denver, CO
Miami, FL and San Francisco Bay Area - 5,500 employees worldwide
- Four operating regions
- North America (NA)
- Asia-Pacific (AP)
- Central and Eastern Europe, Middle East and
Africa (CEMEA) - Latin America and Caribbean (LAC)
- Visa Inc.s clients are issuing/acquiring
financial institutions and merchants - Visa Europe is a separate entity
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6A 50-year history
2008
1997
Visa lists on the New York Stock Exchange under
the ticker symbol V and raises 19.7 billion
in the largest initial public offering in U.S.
history
Total payments volume passes 1 trillion globally
1987
1976
Visa introduces multi-currency clearing and
settlement, increasing transaction efficiency
1958
National BankAmericard Inc., an association of
financial institutions, changes its name to Visa
and introduces the first debit card
Bank of America launches BankAmericard, the first
general purpose card program, in California
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7Visa is at the center of payments
Data for four quarters ended March 31, 2009
16,300 financial institutions
58 billion transactions
Issuers
Acquirers
1.7 billion cards
Includes payments and cash transactions
Card processors
Merchant processors
28 million merchant outlets
2.7 trillion in payments volume
4.3 trillion in total volume
Cardholders
Merchants
Visa is the largest retail payments network in
the world
Source Visa Inc. for four quarters ended March
31, 2009 As reported by client financial
institutions and therefore may be subject to
change includes merchant outlets in Visa Europe
territory
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8Transaction flow
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9Visa global payment system
- Payment system switching, authorising,
clearing, settlement, dispute resolution - Supply value-added services, data management and
security - Cater for new technologies and innovation
- Fraud management - protect users
- Reliable high performance network
- Interoperability with other payment systems
- Comply with international standards
- Visa invests heavily in system enhancements
- Value add services fraud protection, security
checks, etc. - VisaNet supports rules and regulations and
monitors compliance by members
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10Visas role in the payments system
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10
11Rules and regulations
- To ensure the systematic and transparent
operation of the system by clarifying the roles
and responsibilities of all participants - Three layers of rules required
- national regulation
- payment scheme rules and
- banking differentiators
- National regulators ensure stability and
efficiency and - Pro-actively manage all inherent risks
- Payment scheme ensures that everyone operates
according to commonly agreed rules - Banks determine fees, rates, products and
additional unique features all within the rules
set by regulators and payment scheme
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12Economic benefits of electronic payments for
economies
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13Evolution of payments
- Historical evolution of payment systems
Barter
Paper
Plastic
Coins
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14Payment cards
- Payment cards are the high-tech alternative to
cash - Offer many benefits
- Convenience
- Flexibility
- Speed
- Security
- Ability to operate all over the world and on
the Internet - Chip technology has brought electronic payment
systems to the next level
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15Benefits of a cashless economy
- Electronic payment systems
- Lower transaction costs
- Improve financial transparency (fighting
shadow economies) - Increase government efficiency
- Stimulate consumption
- Bring people into the banking system (boosting
GDP growth) - Increase access to capital (supporting SMEs and
entrepreneurs) - Visa is committed to increasing cashless payment
for the benefit of governments, banks, merchants
and cardholders.
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16Accounting for the costs of cash
- Cash is never free
- Cash/paper based systems have variable costs
per payment costs are high and stay high - An electronic payment system can be a third of
the cost of an equivalent cash/paper-based
system - Electronic systems liberate aggregate cost
savings of around 1 of GDP - Humphrey, D., Kim M and Vale, B. 1998.
Realizing the gains from electronic payments
costs, pricing and payment choice. Norges Bank
working papers. 1998/1. - Global Insight. The virtuous circle
Electronic payments and economic growth. June
2003.
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17Quantifying the effect research results
- Global Insight estimated that growth in
electronic payments added US6.5 trillion to real
consumer spending in the US alone over the past
20 years. - They estimate that increasing the existing share
of electronic payments by 10 will generate an
increase of - 0.5 in consumer spending and
- up to 0.5 GDP growth
- An Econometrix study in South Africa concluded
that there is a positive correlation between
electronic payments and economic growth - Global Insight. The virtuous circle
Electronic payments and economic growth. June
2003. - Econometrix Playing your cards right for
economic growth. 2005.
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18How electronic payments helpGovernment,Consumer
s,Banks andMerchants
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19Government Electronic payments increase
government efficiency
- Governments can reduce the cost of travel and
procurement processes by 50-70 or more using
electronic payment systems - Eliminates
- Purchase orders
- Payment
- Reconciliation and reporting
- Mountains of Paper Work
- To Create
- One comprehensive electronic spending and
analysis system
Global Insight. The virtuous circle
Electronic payments and economic growth. June
2003.
Visa Confidential
20Central and local governments
- Key drivers for governments
- Reduce disbursement costs of pension and other
government payments in this market - Reduce costs for beneficiaries
- Facilitate other electronic payments
- Platform for extended banking facilities
upliftment - Formalise payments infrastructure
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21Boosting the economy
- Challenges
- Informal Economy
- Bank Liquidity
- Government Spending
- Slow GDP growth
- Support for SMEs and Entrepreneurs
- Solutions
- Transparent, formal economy
- Greater participation in the banking sector
- Efficient spending and recording systems
- Faster GDP growth
- Increased access
- to credit
Modern Electronic Payment System
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22Consumers, merchants and banks
Acquirers
Merchants
Cardholders
Encourage new acceptance Provide value for money
in return for MSC Assist with technical
issues New technology Build relationships and
support promotional programmes
Assist with business cases, case studies and
research Signage support Education and
technical support
Ensure high street acceptance and usage
Acceptance in new markets
Travel and entertainment promotions
Ensure that the Visa infrastructure evolves in
accordance with product needs
Infrastructure
Performance Management
Work with Issuers and Acquirers to improve
cardholder and merchant satisfaction and increase
revenue
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23Consumers
- Key drivers cardholders
- Safer than cash
- Protection of funds if cards are lost or stolen
not the case with cash - Simple, easy and convenient No need to spend a
day in the pension queue - Facilitates budgeting
- Creates banking track record used when applying
for loans - Facilitates electronic payroll
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24Electronic payments Vision for East Africa
Visa Confidential
25An electronic payments vision for East Africa
- Needs
- Affordable access
- Stimulate economic growth
- Visa offers
- Tipping point technology e.g. GPRS
- Access to banking - through suitable local
solutions and financial literacy - Regional currency clearing and settlement at
local prices no forex costs
Visa Confidential
26An electronic payments vision for East Africa
(continued)
- What worked in the rest of the world
- Reducing government costs UK
- Promoting tourism vital information
- Increasing tax revenues and reducing grey economy
Korea - Banking the unbanked every 1 deposited results
in 15 of credit added 8 million debit card
holders in India (Visa case studies, Singapore,
2006) - Delivering benefits Moscow Social Card
- Uniting the world through sport Olympics,
Paralympics and 2010 Soccer World Cup
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27Strategic initiatives to drive growth
Prepaid
eCommerce
Money Transfer
Mobile
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28Prepaid opportunity
- Prepaid addresses consumer segments and payment
sectors not served by other products - Underserved general purpose reloadable
- Government benefits disbursement
- Branch and retail travel and gift
- Corporate disbursements incentive, rebates,
vouchers - Healthcare health savings, healthcare
reimbursement
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29Mobile opportunity
With 4 billion devices, mobile may be the worlds
first ubiquitous technology
4 Billion Mobile Devices
2.1 Billion TVs
1.7 Billion Visa Cards
1.6 Billion Internet Users
1 Billion PCs
218 Million iPods
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- Source iPods Apple.com (July 2009) PCs
Gartner (April 2008) Internet users
Internetworldstats.com (Dec 2008) Mobiles
International Telecommunication Union (Jan 2009),
GSMA (Feb 2009)
30Money transfer opportunity
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31eCommerce opportunity
- Marketplace Situation
- Forrester reports global ecommerce sales are
growing gt20 annually and will approach US1
trillion by 2010 - Security and convenience are key consumer
concerns in the ecommerce channel - Customer loyalty (powered by permission-based
marketing) remains the top merchant priority,
making data acquisition and appropriate customer
profiling highly valuable
Sources Visa Forrester, The State of Retailing
Online 2008 Marketing Report, Updated August,
19, 2008
Visa Confidential
32Summing up
- An efficient electronic payments infrastructure
- Is a prerequisite for economic development
- Is essential for expanded economic trade
- Brings people into the banking system
- Liberates capital and liquidity
- Provides convenience, security and efficiency for
buyers and sellers - Once it is in place, the momentum builds.
Visa Confidential
33Thank you
Visa Confidential