Visa Europe : eCommerce strategy

EXPAND & MAINTAIN VISA’S LEADERSHIP

IN eCOMMERCE

AGENDA

• eCOMMERCE & PAYMENT INTRODUCTION

• VISA: STATE OF THE ART

• eCOMMERCE: SCOPE & STAKES

• ePAYMENT: GROWTH DRIVER & ECOSYSTEM

• VISA CENTRIC: RISK & MITIGATION

• RECOMMENDATION & CONCLUSION

INTRODUCTION: eCOMMERCE SCOPE

• e-Commerce’s definition by the US department of Commerce:

" e-commerce is the online transaction of business, featuring linked computer systems of the vendor, host, and buyer. Electronic transactions involve the transfer of ownership or rights to use a good or service."

• e-Commerce market & evolution:

- Global e-commerce sales are growing at

more than 19% a year

- Worldwide retail web sales will reach

nearly one trillion by 2013

Source : Goldman Sachs, Sales in billion of dollars

INTRODUCTION: ePAYMENT SCOPE• e-Payments are online payments dedicated for eCommerce activities

• e-Payment is divided into two main categories: - Bank payment

- Alternative payment : 10% in transaction volume of Bank market Share (Capgemini analysis 2011)

• But e-Payment has to be approached ‘locally’ (by country) to understand specificities: FINLAND Vs FRANCE

ONLINE PAYMENT REFERENCE

Source : CyberSource Global Payment options 2011

AGENDA







VISA EUROPE: STATE OF THE ART

• 11.4 Bn processing transactions: issued, cleared & settled

• 99,999% service quality and 100% availability

•Target: increase brand and consumer awareness as the safest payment system

‘THE’ TRUSTED PAYMENT SYSTEM INNOVATION

• 26 millions of contactless cards issued

• 100 millions invested in R&D in 2011 accelerate the contribution of electronic payment in Europe

• Target: develop and simplify : mobile, online & contacless payment

LEADER

• Everyday €1 of every €5 is expended on a Visa Card

• 438 millions of debit & credit cards in circulation in 2011 for 1.14 trillions expended in PoS

• Target: increase eCommerce, Card

& PoS market share

VISA INNOVATION: ONLINE & MOBILE

• Online: V.me - Make online payment with VISA expertise with or without a Visa card

- Multi-platform solution: available on computer, mobile and tablet

- Competing now with Paypal (soon in France)

• Contactless: - Visa payWave is the easiest way to pay for low-value

- Nice city experimentation

- Currently building an ecosystem with local actors of transport, ticketing, etc...

• Mobile & partnership: - Google Wallet involvement

- Visa Wallet integrated in the V.me solution

- Expansion of V.me to mobile an in-store payment using near field communication

VISA’S POSITION IN eCOMMERCE

Client SearchSupport eMerchant

PSP

Alternative

eWallet

Flow Bank Delivery

Partnership

Consumer workflow:

presence:

SMS, alert

direct or indirect solutions:

PartnershipOlympic games

AGENDA







eCOMMERCE: FOCUS ON EUROPE MARKET

• 40% of the European population buy on-line, but already 70% in some countries (France, Germany,...)

• eCommerce in 2012: 16% growth expected in Europe, 22% in France

• eCommerce in Europe is worth over €307 billions

Source : Nielsen Online, December 2011

eCOMMERCE: EUROPEAN GROWTH PERSPECTIVES

• eCommerce in Europe currently limited to 3.4% of retail sales

• Only 57% of Europe’s internet users buy on-line vs 66% in the US and 94% in South Korea

• Only 14% of European companies sell their goods or services online

• eCommerce is still a local industry: only 6% of European businesses sell cross-borders

Source : European Commission January 2012

eCommerce in Europe has still a great potential of growthEurope is currently the largest eCommerce market in the world

eCOMMERCE: SWOT ANALYSIS

• Companies expand their customer base to a global level

• The target consumer has huge possibilities

• Direct consumer communication

• Customer & eCommerce need to trust each other• Web retailers live and die by organic search engine placement• The closer consumer is of payment, the acquisition cost increases

• Take orders around the clock on every day• Retail sales have seen double digit growth each of the past 8 years• Sell products to a global market

• Hard competition due to a relative easy entry into the market• Some consumers are leery of doing business online out of concerns of fraud• Some consumers prefer not to give any personal information

AGENDA







ePAYMENT: ALTERNATIVE PAYMENT& LOYALTY PLAN

• The entry of prepaid (non-bank) specialists into the payment ecosystem will improve and satisfy the overall quality of service for the customer experience

• Main alternative means of payment are: - Pre paid & loyalty cards- eWallet- P2P transfer

• Alternative payment market will reach 70 Billions€ in Europe in 2015

• Mastercard Europe & Accor have created a specific company to target this market: PrePay Solutions

Source: Limonetik 2011

ALTERNATIVE PAYMENT PERSPECTIVES

LIMONETIK SOLUTION FOR EMERCHANTS

ePAYMENT: SOCIAL PAYMENT• 901 millions members

• Facebook credit have been launched in 2009 and recently Facebook gave up this credit system

• Simplify the consumer experience is the leitmotiv of this change, Facebook will accept local currency

• A new solution of subscription will be soon be settled

• Is it a first step to anticipate lower value payment & NFC/eWallet ?

ePAYMENT: NFC MARKET

PROS

• Benefit from an ecosystem and its branding (e.g., Cityzi logo)

- High level of security on payment

• Similar to traditional smart cards

CONS

• Very limited audience

‒ phone, sim card, and subscription are all specific

• Cannot be done rapidly

‒ dependence upon consortiums/partnerships

• Risk of confusing users (tap to pay vs tap to get info)

• Technology cost quite elevated

GLOBAL NFC HANDSET SALES: % OF TOTAL

Source: Strategy Analytics 12 2011

ePAYMENT: NFC PERSPECTIVES

• Operators (Orange / SFR / Bouygues)

• Provides specific NFC phones

• A preinstalled Cityzi app allow access to services

• Provides specific SIM card

• Charges small expenses on telephone bill

• ST2N: buy tickets and validate Payments above 10 euros need a subscription too

• Banks: payment applications similar to traditional debit card

CIC m-carte Visa

BNPP « KIX »

• Couponing / Loyalty programs Collective scheme (e.g. Carte Magique) Chains (e.g. La Croissanterie)

USER SUBSCRIBESTO INDIVIDUAL SERVICES

USER SUBSCRIBES TO CITYZITHROUGH HIS OPERATOR1 - 2 -

ePAYMENT ECOSYSTEM

CONSUMERS

MERCHANTS

Source : Payfirma Payment ecosystem 2011

AGENDA







VISA: GEO/DEMOGRAPHIC RISK• A major risk is to underestimate the

growth of eCommerce in emergent markets

• This increase is strongly correlated to the penetration of PC/mobile

• Example :

UnionPay (China) is now the largest payment card company in the world, issuing three of every ten cards worldwide

VISA: OPERATORS RISK

• Internet + initiative in France allow all fixed and mobile operators to provide inBill payment for low value amount (under 10€)

Initiatives of the operators are varied but bounded geographically

• Ireland: Vodafone launched in-bill app payment which encourages downloads. Mobile operator lets Nokia,BlackBerry and Android users pay for apps via their invoice

• Push the SIM centric approach for NFC to keep customer value by proposing NFC services of third Service Provider

VISA: SECURITY VS USER FRIENDLINESS RISK

• The process of collecting and processing online payments is confusing. There are many parties involved and the fees can be difficult to decipher

• 3D Secure initiative : create an additional client authentication providing a payment guaranty for authenticated transactions and blocking chargeBack

• Verified by Visa and MasterCard SecureCode cause higher abandon rates

The payment procedure has to remain a compromise between the accepted risk and the user-friendliness

VISA: THE eWALLET-GATE

Client SearchSupport eMerchant

PSP

Alternative

eWallet

Flow Bank Delivery

Consumer workflow:

eWallet example from payment workflow:

75% of ePayment actors are launching their own eWallet

Apple already knows 200 millions iTunes users with Card identification

eWallet wil l be released in 2 0 1 2 i n Europe

Google Wallet is an app that makes your phone your wallet with Citi, MasterCard, Sprint & Visa

Apple has recently announced the futur the creation of an eWallet in iOS6

Because banks know their client, e W a l l e t o r complementar y s e r v i c e s a r e launched

Clear positioning on ePayment with the launch of the kindle

AGENDA







eCOMMERCE RECOMMENDATIONS

STAYCONSUMER

CENTRIC

BRING VALUE TOeMERCHANT

DEVELOPmCOMMERCEECOSYSTEM

DIVERSIFY

MID TERM ECOSYSTEM

To maintain their relationship with customers, global operators are seeking to become trusted enablers

Content&

ServicesAdvertising

Access&

Traffic

TrustedEnablers

LONG TERM

What will be ePayment/mPayment in 5 years ?

What are future authentification means ?

How to handle new Actor / Risk ?

What if the younger generation no longer need bank account ?

STAYCONSUMER

CENTRIC

BRING VALUE TO

eMERCHANT

DEVELOPmCOMMERCE

ECOSYSTEMDIVERSIFY

RECOMMENDATIONS

• Push your easy solution to integrate : V.me to the market with support & communication

• Propose more guarantees/services for eMerchants

• Offer more attractive rates than PayPal

• Create a one click registration

• Propose more services for consumers

• Reward consumers for their adoption and loyalty to use the new V.me solution

• Create partnership or joint venture with a major prepaid European actor (like playSpan acquisition in the US)

• Climb the value chain up to delivery with partnership

• Strength relationships with manufacturers

• Build your ecosystem of services

• Regularly invest into A & B Series fundraise payment solution (Limonetik)

• Launch as soon as possible an operation with successful mCommerce eMerchant: Vente-Privee.com , Groupon

THANK YOU

ANNEXES

MARKET OVERVIEW

• Business to business (B2B)

• Business to consumer (B2C)

• Consumer to business(C2B)

• M-commerce

• l-commerce or location base commerce

• Business to employees (B2E)

• Collaborative commerce(c-commerce)

• Consumer to consumer (C2C)

Classification by the nature of transactions: a wide range of models

ePAYMENT MAPPING

Bank as trusted party Non-Bank as trusted party

Plat

form

Cen

tral

GLOBALISATION TECH

NO

LOG

Y

Peer

-to-

Peer

Dec

entr

al

FRENCH USER’S: DIGITAL PROFILE

Where they used the smartphone

Source : Oct 2011 Google

Uses

Source : Oct 2011 Google

eBay APPROACH VIA ITS PLATFORM PLAY

Source: eBay CEO John Donahoe, Innovate Developer Conference, Oct. 12, 2011

eBay generates now about 50% of its business in Europeits fastest growing region