payment cards 2007 ukraine
DESCRIPTION
First Data International Prepaid Trends. Payment Cards 2007 Ukraine. First Data’s EMEA footprint. 20 years in Europe and 11 years in the Middle East Clients in 34 countries, over 6,500 employees across the region Strong and growing presence in CEE. Middle East. Africa. = Operations. - PowerPoint PPT PresentationTRANSCRIPT
© 2006 First Data Corporation. All Rights Reserved. This document contains unpublished, confidential and proprietary information of First Data Corporation. You may not disclose, copy or use any part of these materials for any purpose without the express written consent of First Data Corporation.
Payment Cards 2007
Ukraine
First Data InternationalPrepaid Trends
2
First Data’s EMEA footprint
= Operations
= First Data presence (offices/clients)
Middle East
Africa
20 years in Europe
and 11 years in the
Middle East
Clients in 34
countries, over 6,500
employees across
the region
Strong and growing
presence in CEE
3
Acquisitions and alliances
2002 2003 2004 2005 2006
Merchant alliance joint ventures
Recent acquisitions
HBOS(Bank of Scotland Merchant Services)
International Card Services
(EMScard)
Banca Nazionale del Lavoro (BNL POSitivity)
Austrian Payment Systems Services
EuroProcessing International
Card Processing business of Fineco
Bank, Italy
Delta Singular Outsourcing
Services
Telecash
GZS
2007Polcard
4
• Consumer finance processing• Merchant acquiring• ATM and POS device management• Acquirer processing
Our Services
5
A sample of our EMEA wide client base
Albania
Austria
Czech Republic
Greece
Germany
Hungary
Israel
Portugal
Romania
Saudi Arabia
Serbia & Montenegro
Slovakia
South Africa
Spain
UK
Italy
Kuwait
Latvia
Lithuania
Netherlands
Pakistan
Poland
Globally
6
• Multiple platforms to cope with the changing prepaid market
• Selection of existing prepaid programmes (teen, dual credit, prepaid, mall, gift)
• FDI annual stored value activity:• 1.2bn processed transactions• 300m plastic cards supplied• 20 countries • 2 billion accounts • $5bn stored value funds • 250 brands• 88,000 locations
• Markets:• Mass Retail & Speciality Retail• Grocery• Pharmacy • Sporting Goods/Athletic Apparel• Restaurant/Foodservice/Quick Service Restaurants (QSR)
First Data’s pre-pay credentials…
7
First Data’s Stored Value Clients
8
• The newest and fastest growing area of the payments card industry
• Not a single product or industry
• Source of spend spread across a diversity of segments and channels.
• Paper based stored value schemes are already a $38bn market in Europe (1):
• Gift vouchers• Luncheon vouchers• Food token savers• Travellers cheques• Insurance claim• Corporate incentive vouchers• Government benefits
(1) First Anopolis, Mercator Advisory Group
Stored value
9
Moving to plastic
Replacement applications enhance the transaction, improve security andsimplify clearing and settlement, for example:
• Gift certificate -> Gift card• Travellers cheque -> Travellers card• Expenses claim -> Expenses card• Luncheon voucher -> Luncheon card• Insurance claim cheque -> Insurance claim card
Development applications use plastic to include new types of applicationin the electronic payments environment for example:
• Youth payment card• Internet payment card• Gaming card• Payroll card
10
Issuers and consumers like it…
• Branding:• Enhance the brand experience through the payment mechanism
• Budgeting:• Provide a natural limit to spending within a category
• Convenience:• For gifting or spending
• Security:• Advantages over cash
• Socially Inclusive:• A card that everyone can have
11
Applications limited only by imagination
Single Use
Re-loadable
Closed Loop
Open Loop
• Travel card• Luncheon card• Campus card• Utility bill card• Christmas savings card• Telecom card• Fuel card• Sports and leisure
• Youth card• Sub-prime/poor credit• Traveller card (forex)• Remittance card• Payroll card• Sharia banking card• Budget account card• Gaming card• On-line purse• Corporate expenses• General benefits card
• Gift card (Store brand)• Emergency benefits card • Insurance claim card• Healthcare claim card• Holiday vouchers
• Gift card (ICS brand)• Emergency benefits card• Loan card• Corporate benefit• Corporate incentive
12
Europe US
20
18
16
14
12
10
8
6
4
2
0
Value of Prepaid Transactions in 2005 (US$bn)
Soure: Europe – The Electronic Money Association “The Impact of the ElectronicMoney Directive on the E-Money Industry in Europe – based on a translation ofMonthly Euro values into US$
Source: USA – The National Retail Federation
Rapid European growth
140
120
100
80
60
40
20
0
2005 2006 2007 2008 2009 2010
European Union Market Value (€b)
Source: Mastercard Milan CPE Conference Presentation
13
Importance of stored value by 2010
Volumes of Payment Instruments
0
5,000
10,000
15,000
20,000
25,000
30,000
35,000
2005 2006 2007 2008 2009 2010
mill
ions
Cheques Credit Cards Debit Cards Prepaid
Value of Payment Instruments
0
200,000
400,000
600,000
800,000
1,000,000
1,200,000
1,400,000
1,600,000
1,800,000
2,000,000
2005 2006 2007 2008 2009 2010
€ m
illio
ns
Cheques Credit Cards Debit Cards Prepaid
Source: PSE Consulting, 2006
By 2010
7% of cards3.5% of payment value
14
Multiple categories
European Prepay Market Share by Value spent in 2010
Travel13%
Gifting21%
Youth2%
Under/Unbanked5%
Payroll6%
Remittances4%
Gaming15%
On-line13%
Insurance3%
Corp Benefits10%
Govt Benefits5%
Transit/Micropay3%
Source: PSE Consulting, 2006
Top 5 Applications by 2010:
• Gifting: 21%• Gaming: 15%• Travel: 13%• On-line payments: 13%• Corporate benefits: 10%
15
European Prepaid Volume - ATV Comparison 2010
Travel
GiftingPayroll
Remittances
Gaming
On-line
Corp Benefits
Youth
Under/Unbanked Govt Benefits
0
20
40
60
80
100
120
140
0 100 200 300 400 500 600 700
Transaction Volume (m)
Ave
rage
Tra
nsac
tion
Val
ue (
€)
Insurance (€350)
Transit/ MicroPayments
(795)
1
2
3
4
1
2
3
4
Segment Turnover
€2.4bn
€29.8bn
€41.7bn
€4.9bn
A highly segmented market opportunity
Source: PSE Consulting, 2006
16
ISSUER REVENUE MODELISSUER REVENUE MODEL
Issuance Fee
Transaction Fee
Reload Fee Cash
Shortage Fee
ATM Withdrawal
International ATM
Cancellation Fee
Paper Statement
Re issuance Fee
Service Fee
Foreign trx fee
PIN re issue
Lost/Stolen Replacement Fee
Courier Fee
APPLICATIONAPPLICATION
A substitute for:
Money transfer services
Sending cash
FUNCTIONALITYFUNCTIONALITY
Open loop
Reloadable & non reloadable
Expiring & non expiring
ATM – cash access
Embossed
KEY CARDHOLDER BENEFITSKEY CARDHOLDER BENEFITS
Ease of application
Servicing available 24x7x365
Wider distribution than money transfer market
Access to international customer base
Fast safe way of sending money
No need to immediately drawdown all cash
Not restricted to one money transfer outlet
Easier to use than money transfer services
More Secure than sending cash
Lower overall cost
Widens distribution by utilising local debit schemes
Remittance
17
ISSUER REVENUE MODELISSUER REVENUE MODEL
Issuance Fee
Transaction Fee
Reload Fee Cash
Shortage Fee
ATM Withdrawal
International ATM
Cancellation Fee
Paper Statement
Re issuance Fee
Service Fee
Foreign trx fee
PIN re issue
Lost/Stolen Replacement Fee
Courier Fee
APPLICATIONAPPLICATION
A substitute for:
travellers cheques
travel money
FUNCTIONALITYFUNCTIONALITY
Open loop
Reloadable & non reloadable
Expiring & non expiring
ATM – cash access
Embossed
KEY TRAVELER BENEFITSKEY TRAVELER BENEFITS
Easier to use then T&C
Secure
Lower overall cost
Multiple card means no waiting an delays if card is stolen or lost
Concierge and value add services including lost passport service
Ease of application
Servicing available 24x7x365
No need to collect from a branch
Universal payment method: familiar to home country
Less hassle: no need to ‘cash’ travellers cheques or carry passports/I.D when out
and about on holiday
Reduced risk: no need to carry cash
Reduced costs: avoid credit card/travellers cheques fees/less favourable currency
conversion rates
Travel
18
ISSUER REVENUE MODELISSUER REVENUE MODEL
Issuance Fee
Transaction Fee
Reload Fee Cash
Shortage Fee
ATM Withdrawal
International ATM
Cancellation Fee
Paper Statement
Re issuance Fee
Service Fee
Foreign trx fee
PIN re issue
Lost/Stolen Replacement Fee
Courier Fee
APPLICATIONAPPLICATION
A substitute for:
Regular payment by
cheque/cash
Payment for temporary
workers, labour or
contractors
FUNCTIONALITYFUNCTIONALITY
Open loop
Reloadable & non reloadable
Expiring & non expiring
ATM – cash access
Embossed
KEY CARDHOLDER BENEFITSKEY CARDHOLDER BENEFITS
Ease of application
Servicing available 24x7x365
Fast, efficient service
No need to physically present employee with pay packet
Reduces cash and administrative handling
Payment on demand anytime for one off expenses etc
Easily converted to cash if required (quicker than cheque)
Lower costs to recipient than cheque cashing services
Secure easy access close to cash
Immediate access to wages, no need to wait for cheque to clear
Linked to loyalty to reward use
Payroll
19
ISSUER REVENUE MODELISSUER REVENUE MODEL
Issuance Fee
Transaction Fee
Reload Fee Cash
Shortage Fee
ATM Withdrawal
International ATM
Cancellation Fee
Paper Statement
Re issuance Fee
Service Fee
Foreign trx fee
PIN re issue
Lost/Stolen Replacement Fee
Courier Fee
APPLICATIONAPPLICATION
A replacement for:
Paper gift voucher
Staff incentive
Distribution incentive
In-store promotions
FUNCTIONALITYFUNCTIONALITY
Open & closed loop
Reloadable & non reloadable
Single use
Expiring & non expiring
Embossed & anonymous
Loyalty functionality
No ATM
KEY CARDHOLDER BENEFITSKEY CARDHOLDER BENEFITS
Low fee to encourage usage
Ensures all spend remains in store
Combine with loyalty for CRM opportunities
Merchandise throughout store as value not added until activated
No secure shipping charges
Portability – ease of use in multiple retailers
Socially inclusive
Exciting designs make more appropriate gifts aligned with gift occasion
More modern than paper vouchers
Gift
20
ISSUER REVENUE MODELISSUER REVENUE MODEL
Issuance Fee
Transaction Fee
Reload Fee Cash
Shortage Fee
ATM Withdrawal
International ATM
Cancellation Fee
Paper Statement
Re issuance Fee
Service Fee
Foreign trx fee
PIN re issue
Lost/Stolen Replacement Fee
Courier Fee
APPLICATIONAPPLICATION
A substitute for:
Cash
Other electronic payments
FUNCTIONALITYFUNCTIONALITY
Open loop
Reloadable & non reloadable
Expiring & non expiring
ATM – cash access
Embossed
KEY CARDHOLDER BENEFITSKEY CARDHOLDER BENEFITS
More secure than cash
Internet, mail order and other electronic only channels.
Carries more status than cash
Financially inclusive – available regardless of credit record
Easy to apply and receive
No failed credit checks
Socially inclusive
More modern than traditional alternatives
Access wider services online etc
Gives control over spending
Use abroad
Transaction anonymity
Instant redemption
General Prepaid
21
1600
1400
1200
1000
800
600
400
200
0
CEE
Fra
nce
Germ
an
y
Italy
Port
ug
al
Scan
din
avia
Sp
ain
Tu
rkey
Bri
tain
Ben
elu
xEuropean Prepaid Average Spend per Open-loop
Card in 2010 by Value (€ )
Source: Mastercard Milan CPE Conference Presentation
30%
20%
10%
0%
-10%
-20%
-10% -5% 0% 5% 10% 15% 20%
Volume and Value of “Pay Now” Cards
Change in Average Value of Transactions (CAGR 1999 – 2003)
Ireland
France
Germany
Italy
PortugalSweden
Spain
Turkey
Britain
Belgium
Finland
Greece
Netherlands
Denmark
Norway
Austria
= 20m cards
Ch
an
ge in
Fre
qu
en
cy o
f Tra
nsacti
on
s
Source: Datamonitor Western European Cards and Payment Databook 2004
Expected high correlation between debit and prepay
22
Cash remains important in EU
23
…And even more important in the new member states
24
There may be a link between cash usage and stored value
100
90
80
70
60
50
40
30
20
10
0
Neth
erl
an
ds
UK
Fra
nce
Italy
Sw
itze
rlan
d
Den
mark
Fin
lan
d
Belg
ium
Germ
an
y
Share of Cash as a Payment Instrument
Source: European Central Bank and Florida State University 2000
25
Cash versus stored value
Positive features of cash:
• Universal: pre-pay is not• Requires no infrastructure: pre-pay requires infrastructure• Ease of use: so is pre-pay• Anonymity: possible with pre-pay• Budget management: possible with pre-pay• Good for p2p transactions: so is pre-pay• Convenient: pre-pay is more convenient• Government backed: bank and card scheme backed• Contingency to other methods: so is pre-pay• Immediate and final transaction: requires settlement
26
Negative features of cash:
• Cost: pre-pay costs can also be high• Non traceable: transaction records• Poor security: better on pre-pay• Transport: not required• Hard to use remotely: good for remote payments• Dirty: personal• Associated with tax evasion: KYC and AML• Associated with crime: KYC and AML• Heavy and bulky: easy to carry
Cash versus stored value
27
Hot…
• Geography (cash and debit):• UK• Germany• Italy• CEE• Middle East• Pakistan• South Africa
• Application (market size and margin):• Migrant remittance (B2C or B2B)• Travel card (B2C or B2B)• Payroll card (B2B)• Corporate incentive (B2B)• General use (B2C)• Gifting (Very high volume)
Not…
• Geography:• Benelux• Scandinavia• West and Central Africa• North Africa• Spain and Portugal
• Application:• Transport (low margin)• Youth card (Low value/high transacting)• Insurance (Low volume/specialised)
What’s hot and what’s not…
28
Conclusions
• Rapid growth:• Euro 100bn market by 2010• 7% of payments and 3.5% of cards by 2010
• Strong link between debit card usage and stored value
• Potential link between cash usage and stored value
• Top 5 applications:• Gifting• Gaming• Travel• On-line• Corporate
But….
29
Success depend on…
• Wide acceptance:• Merchants and consumers need to be persuaded of value• Needs perceived advantage over existing payment mechanism
• Critical mass of cards in issue:• Consumers need to adopt the card in volume• Features and benefits need to be clearly articulated and understood
• Sustainable safety and security:• Adequate measures need to be implemented• Constant vigilance needs to be maintained