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Payment Cards 2007 Ukraine

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.

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Payment Cards 2007 Ukraine

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  1. First Data InternationalPrepaid Trends Payment Cards 2007 Ukraine

  2. 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 = First Data presence (offices/clients)

  3. Acquisitions and alliances EuroProcessing International Delta Singular Outsourcing Services Austrian Payment Systems Services GZS Card Processing business of Fineco Bank, Italy Recent acquisitions Telecash 2002 2003 2004 2005 2006 2007 Polcard HBOS (Bank of Scotland Merchant Services) International Card Services (EMScard) Banca Nazionale del Lavoro (BNL POSitivity) Merchant alliance joint ventures

  4. Our Services • Consumer finance processing • Merchant acquiring • ATM and POS device management • Acquirer processing

  5. A sample of our EMEA wide client base Albania Austria Czech Republic Greece Germany Hungary Israel Italy Kuwait Latvia Lithuania Netherlands Pakistan Poland Portugal Romania Saudi Arabia Serbia & Montenegro Slovakia South Africa Spain UK Globally

  6. First Data’s pre-pay credentials… • 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)

  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 Stored value (1) First Anopolis, Mercator Advisory Group

  9. Moving to plastic • Replacement applications enhance the transaction, improve security and • simplify 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 application • in 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 • 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 Re-loadable • Gift card (ICS brand) • Emergency benefits card • Loan card • Corporate benefit • Corporate incentive • Gift card (Store brand) • Emergency benefits card • Insurance claim card • Healthcare claim card • Holiday vouchers Single Use Open Loop Closed Loop

  12. Rapid European growth Value of Prepaid Transactions in 2005 (US$bn) European Union Market Value (€b) 140 120 100 80 60 40 20 0 20 18 16 14 12 10 8 6 4 2 0 2005 2006 2007 2008 2009 2010 Europe US Soure: Europe – The Electronic Money Association “The Impact of the Electronic Money Directive on the E-Money Industry in Europe – based on a translation of Monthly Euro values into US$ Source: USA – The National Retail Federation Source: Mastercard Milan CPE Conference Presentation

  13. Cheques Credit Cards Debit Cards Prepaid Cheques Credit Cards Debit Cards Prepaid Importance of stored value by 2010 Volumes of Payment Instruments Value of Payment Instruments 2,000,000 35,000 1,800,000 30,000 1,600,000 25,000 1,400,000 1,200,000 20,000 millions € millions 1,000,000 15,000 800,000 10,000 600,000 400,000 5,000 200,000 0 0 2005 2006 2007 2008 2009 2010 2005 2006 2007 2008 2009 2010 Source: PSE Consulting, 2006 By 2010 7% of cards 3.5% of payment value

  14. Transit/Micropay 3% Govt Benefits 5% Travel Corp Benefits 13% 10% Insurance Gifting 3% 21% On-line 13% Youth 2% Gaming Payroll Remittances Under/Unbanked 15% 6% 4% 5% Multiple categories European Prepay Market Share by Value spent in 2010 • Top 5 Applications by 2010: • Gifting: 21% • Gaming: 15% • Travel: 13% • On-line payments: 13% • Corporate benefits: 10% Source: PSE Consulting, 2006

  15. A highly segmented market opportunity Source: PSE Consulting, 2006

  16. Remittance

  17. Travel

  18. Payroll

  19. Gift

  20. General Prepaid

  21. Expected high correlation between debit and prepay European Prepaid Average Spend per Open-loop Card in 2010 by Value (€ ) Volume and Value of “Pay Now” Cards 30% 20% 10% 0% -10% -20% 1600 1400 1200 1000 800 600 400 200 0 = 20m cards Belgium Sweden Portugal Norway Ireland Netherlands France Spain Change in Frequency of Transactions Britain Finland Italy Denmark Austria Germany Greece Turkey CEE -10% -5% 0% 5% 10% 15% 20% Italy Spain Britain France Turkey Benelux Portugal Germany Change in Average Value of Transactions (CAGR 1999 – 2003) Scandinavia Source: Datamonitor Western European Cards and Payment Databook 2004 Source: Mastercard Milan CPE Conference Presentation

  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 Share of Cash as a Payment Instrument 100 90 80 70 60 50 40 30 20 10 0 UK Italy France Finland Belgium Germany Denmark Switzerland Netherlands 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. Cash versus stored value • 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

  27. What’s hot and what’s not… • 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)

  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

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