“Wave and Pay” Visa Contactless VISA EUROPE Guido Mangiagalli Consumer Market Development Visa...

transcript

“Wave and Pay”

Visa Contactless

VISA EUROPE

Guido Mangiagalli

Consumer Market Development

Visa Europe

Presentation Identifier.2Information Classification as NeededVisa Europe

Agenda

Contactless business opportunity

Visa Europe contactless strategy

Visa e-money

Cash – The Business Opportunity

Europe 361 bn cash vs 60 bn non-cash transactions 85%

• Cost of cash to society 0.5% GDP (Europe €50 bn)

Cost of cash to society0.5% European GDP

€ 50 Billion

CentralBanks

RetailBanks

RetailCash

€ 32 Billion € 13 Billion€ 5 Billion

Incoming/ recycling process

Outgoingprocess

€ 5.9 Bil

€ 9.7 Bil

Transport

€ 1.0 Bil

Inventory

€ 4.4 Bil

€ 4.3 Bil

€ 2.8 Bil

Transport

€ 1.4 Bil

Inventory

€ 2.5 Bil

€ 21 Billion € 11 Billion

Source: EPC

UK cash market 27.2 bn transactions for £268 bn

• 20.7 bn of these transactions are for less than £10

50% of all low value cash transactions are accounted for by just eight spending categories:

• Top-up groceries

• Spending at confectionary, tobacconists and newsagents outlets

• Payments in pubs and bars

• Fast food restaurants

• Taxis

• Mobile phone top-up

• Transportation

• Off-license sales

Visa contactless activities

Visa Contactless Payment Programs

Launches in Asia Pacific

• Malaysia – after a successful pilot in 2004, began initial rollout of 500,000 cards and 4,000 merchants in February 2005

• Taiwan rollout began in October 2005

• Korea and Thailand rollout imminent

Launch in United States

• Chase has issued millions of cards to date

• Over 20,000 merchant locations

• Began in Atlanta in May 2005 and expanded to major metro areas of seven other states

• Visa Contactless Mini Card announcement

Opportunities in Europe

• Key market commitments to pilot in 2006 and deploy in 2007

Contactless Benefits for Consumers

• Convenience and speed• No more fumbling for cash• Reduced card orientation issues

• Consumer remains in control of card – further extends use of customer activated payment

• Appeal of new technology

Consumer Feedback from pilot in MalaysiaCardholder Protection: “With Visa Wave, it does not leave your hand. So it is less likely to get cloned”

Convenience: “There is no need to swipe the card. It’s convenient.” “No signatures necessary.”

Appeal of Technology: “It’s keeping up with the technology. It’s like using Bluetooth…”

International Acceptance: “Visa. This is what we use when we are out of Malaysia”

Consumer Feedback from pilot in MalaysiaCardholder Protection: “With Visa Wave, it does not leave your hand. So it is less likely to get cloned”

Convenience: “There is no need to swipe the card. It’s convenient.” “No signatures necessary.”

Appeal of Technology: “It’s keeping up with the technology. It’s like using Bluetooth…”

International Acceptance: “Visa. This is what we use when we are out of Malaysia”

Source: Visa Wave consumer research conducted in Kuala Lumpur in September 2004. Focus group interviews with two groups of consumers aged 25-30.

Contactless Benefits for Merchants

• Increased ticket size of approximately 20-30% compared to cash

• Reduced transaction time by as much as 25% faster throughput

• Increased frequency of purchases

• Reduced cash handling and operating costs

• Improved terminal reliability–particularly for fast food, gas stations, movie theaters, parking garages, and vending machines

Merchants directly relate revenue to transaction speed

Former McDonald's CEO Jack Greenberg:“Unit sales jumped 1% for every six seconds saved in drive-through lanes.”Card Technology – January 2004

7-Eleven CIO Keith Morrow:"We saw lots of positive indications from that pilot." Customers using the cards shopped at the stores more frequently than they had before, and spent more during each trip. "We've been very aggressively pursuing this for more than two years." CIO Insight – June 2005

Visa Europe contactless

EMV Migration

Europe

125m Visa cards in issuance as at end September 2005

• 41% of all Visa products

50% of POS transactions cleared through VisaNet in August came from chip-enabled devices

UK situation

120 Mil all brands

• 98% penetration

Approximately 1Mil POS and ATMs

71% Visa transactions are Chip and Pin

Europe Contactless

Chip & PIN will boost the deployment of offline/unattended acceptance infrastructure

Visa Europe is developing a contactless payment card solution to target face-to-face low value payments

• Transactions below €15

• No PIN

• Always offline

• Fast (less than a second)

Presentation Identifier.14Information Classification as Needed

How Does it Work?

Both card and terminal can do contactless qVSDC

• below card and terminal transaction limits (€15)

• offline contactless funds available on card (€50)

Offline authorised with no PIN

• from offline contactless funds

automatic revert to contact qVSDC

• insufficient offline contactless funds

offline contactless counters reset at any online authorisation

Presentation Identifier.15Information Classification as Needed

Contactless qVSDC

Leverage EMV infrastructure

Flexible yet simple

• Minimal card and terminal changes

• No Visa system changes

• No required Acquirer host changes

• Issuer host changes limited to card personalisation

Contactless qVSDC transaction speeds less than 0.5 sec.

E-money

Lessons learned

Make a completely new solution for low value payment is not an easy task

• Visa Cash

• Mondex

• Moneo…

Octopus Hong Kong

• Third parties payments represent ~10% total spending

–Are these payments profitable(?)

Visa E-money proposition

A prepaid Chip-based platform• Leverage EMV technology • Off-line and on-line capability• e-purse like customer experience but Network based• Contactless for for low-value payments

– below £10, offline, no PIN • No need for proprietary reloading systems

– F2F, Internet, Mobile…

• Compliant with European e-money directive – Re-loadable, Anonymous/ KYC…

Pre auth off-line

spending

Pre auth50

Stored Value account

Prepaid£50

How does it work

Counter 30

E-money

EMV transaction £30

EMVClearing Message

Offline auth 30

Pre auth of-line

spending

Pre auth50

Prepaid£50

How does it work

E-money

Lunch£10

Pre auth of-line

spending

Pre auth50

Prepaid£50

How does it work

E-money

Travel card£15

Pre auth fundexceeded

On line auth £15

Decline

Pre auth of-line

spending

Pre auth50

Prepaid£50

How does it work

E-money

E-moneyTop up

£40 On line auth £15

Transaction Authorized EMV Script to

synchronize counters

In closing…

EMV infrastructure investment provides the foundation for new Visa value-added services• E-money• Contactless

– Add offline authorisation and no CVM requirement

Real opportunity to• Displace cash• Enable “new” acceptance environments• Increase card usage and transaction spend• Leverage customer relationships

New Visa payments form factors• Mobile phones…

Questions

Thank You

“Wave and Pay” Visa Contactless VISA EUROPE Guido Mangiagalli Consumer Market Development Visa...

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