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The benefits of electronic payments for economies Victor Ndlovu Country Manager SubSaharan Africa Na

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Title: The benefits of electronic payments for economies Victor Ndlovu Country Manager SubSaharan Africa Na


1
The benefits of electronic payments for
economiesVictor NdlovuCountry
ManagerSub-Saharan AfricaNairobi05 November
2009
Visa Confidential
2
Disclaimer
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
3
Visa Inc. Overview
Visa Confidential
4
What 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.
Visa Confidential
5
The 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

Visa Confidential
6
A 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
Visa Confidential
Visa Confidential
7
Visa 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
Visa Confidential
Visa Confidential
8
Transaction flow
Visa Confidential
8
9
Visa 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

Visa Confidential
10
Visas role in the payments system
Visa Confidential
10
11
Rules 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

Visa Confidential
12
Economic benefits of electronic payments for
economies
Visa Confidential
13
Evolution of payments
  • Historical evolution of payment systems

Barter
Paper
Plastic
Coins
Visa Confidential
14
Payment 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

Visa Confidential
15
Benefits 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.

Visa Confidential
16
Accounting 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.

Visa Confidential
17
Quantifying 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.

Visa Confidential
18
How electronic payments helpGovernment,Consumer
s,Banks andMerchants
Visa Confidential
19
Government 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
20
Central 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

Visa Confidential
21
Boosting 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
Visa Confidential
22
Consumers, 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
Visa Confidential
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23
Consumers
  • 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

Visa Confidential
24
Electronic payments Vision for East Africa
Visa Confidential
25
An 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
26
An 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

Visa Confidential
27
Strategic initiatives to drive growth
Prepaid
eCommerce
Money Transfer
Mobile
Visa Confidential
28
Prepaid 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

Visa Confidential
29
Mobile 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
Visa Confidential
  • 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)

30
Money transfer opportunity
Visa Confidential
31
eCommerce 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
32
Summing 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
33
Thank you
Visa Confidential
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