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Faster Payments 2018
The Faster Payments Reality for DisbursementsMike West
VP, Visa Direct Digital Disbursements, Visa Inc.
Talie Baker
Senior Analyst, Retail Banking & Payments Practice, Aite Group
Visa Inc. & Aite Group. All Rights Reserved.2
The Faster Payments Reality for Disbursements
Market Size, Landscape and Trends
Industry leading research & insights
• Payers
• Consumer Receivers
• Business Receivers
Faster Payments using the card networks
• How it works
• Client examples
• Best Practices
• Benefits
Visa Inc. & Aite Group. All Rights Reserved.3
Market Size, Landscape
and Trends
4 Visa Inc. & Aite Group. All Rights Reserved.
Alternative Lending
On Demand
Contract Staffing
Merchant Settlement
Marketplaces
Affiliate Marketing
Lotteries & Gaming
Healthcare
Education
Government
Loyalty, Rebates, Trials
Travel & Entertainment
Faster Settlement Check Replacement
Faster payments opening up new use cases
Estimated Size: $10T
InsuranceSMB Invoicing
Expense Reimbursement
Digital Content
Source: Visa Facts and Figures, McKinsey & Company (2017)
5 Visa Inc. & Aite Group. All Rights Reserved.
$25B
Affiliate Marketing$25B
AlternativeLending
$1.5T
Contract
Staffing
$77B
Marketplaces
$700B
Merchant
Settlement
Faster Settlement Check Replacement
Significant opportunity to drive payments growth
$1.8T
Government
$3.9T
SMB
Invoicing
$406B
Expense
Reimbursement
$1.3T
Healthcare
$157B
T&E$638B
Insurance
$384B
Lotteries
& Gaming
$61B
Loyalty,
Rebates, Trials
$37B
Education
$70B
Online
Content
Total dollar volume of disbursements is up 48% since 2014
$584B
On Demand /
GIG Economy
Source: Visa Facts and Figures, McKinsey & Company (2017)
6 Visa Inc. & Aite Group. All Rights Reserved.
“GIG Economy” and Insurance verticals are driving volume growth and demand for faster payments
Vertical Growth Rate %
Marketplaces +121%
Alternative Income +124%
Contract Staffing +40%
Insurance +193%
Government +101%
Source: Visa & Aite Group, Funds Disbursements Research, Estimates 2017
7 Visa Inc. & Aite Group. All Rights Reserved.
Payers Consumer Recipients
Business Recipients
Cross-border disbursements are also growing
25% 5% 19%
Percentage of Disbursements By Geography 2017
While most disbursements are domestic, more Payers are originating cross-border funds
disbursements and more NA consumers and Businesses are receiving.
US Cross Border
75% 95% 81%
Source: Aite interviews with 30 North American executives Q4 2017, Aite Group survey of 2,379 North American consumers Q4 2017, and Aite Group survey of 154 North American merchants Q4 2017
8 Visa Inc. & Aite Group. All Rights Reserved.
Disruptive trends
1 P2P disrupting banking
2 Messaging platforms becoming commerce platforms
3 Marketplaces using payments to disintermediate banks
4 “Platforms” enabling entirely new business models
5 Faster payments creating new competition
Visa Inc. & Aite Group. All Rights Reserved.9
Industry leading
research & insights
Visa Inc. & Aite Group. All Rights Reserved.10
Industry leading research & insights
1
0
Payers:
Interviews with 30
executives at major
companies in the U.S.
and Canada making B2C
disbursements.
• Insurance
• Healthcare
• Contract Staffing
• Marketplaces
• Contract Staffing
• On Demand
• Alt Lending
Consumer recipients:
Quant study of 2,379
U.S. and Canadian
consumers aged 18-65
who received funds
disbursements in the last
12 months.
Business recipients:
Quant survey of 154 SMB
merchants in the U.S. and
Canada with annual
revenues between
US$100K and US$10M.
Visa Inc. & Aite Group. All Rights Reserved.11
Payer perception on faster payments
Payers who
believe
recipients want
faster
payments
Payers who do not
believe recipients
want faster payments
Payer reasons to offer real-time payments
3
4
4
5
6
27Customer Experience
Improve loyalty
Product Differentiation
Streamline Processes
Reduce Exceptions
Competitive Advantage
Insights: Payers
Improving the customer experience is the most important reason to offer real-time payments
Source: Visa & Aite Group, Funds Disbursements Research, Industry Executive Interviews, Q4 2017 (n=30)
3
27
Visa Inc. & Aite Group. All Rights Reserved.12
What real-time options are being evaluated?
Outsource
disbursements
Do not outsource
disbursements
Do you outsource your Disbursements process?
Insights: Payers
Most Payers are looking to provide customers choice and view disbursements as a core process
Source: Visa & Aite Group, Funds Disbursements Research, Industry Executive Interviews, Q4 2017 (n=30)
5
25
4
2
3
4
5
8
13
None
Blockchain / Crypto
Zelle
All Options
Real time credits
Same Day ACH
Push to card
Visa Inc. & Aite Group. All Rights Reserved.13
26%
17%19%
38%
None 1 to 3 4 to 10 Over 10
# Disbursements per household last 12 months
Types of Disbursements received in last 12 months
* Consumers indicated a strong preference for options to deposit funds directly to their bank account
Insights: Consumer Recipients
3%
3%
4%
6%
10%
15%
17%
25%
30%
37%
48%
74%
Other
Zelle
Interact eTransfer
Loyalty Points
Push to Debit Card
Prepaid Card
Card Refund
PayPal
Gift Card
Cash / Voucher
Paper Check
Direct Deposit*
*
**
Source: Visa Funds Disbursements Research, Aite Group survey of 2,379 North American consumers, Q4 2017
Visa Inc. & Aite Group. All Rights Reserved.14
# Business days before funds availability when
receiving a disbursement today
Source: Visa Funds Disbursements Research, Aite Group survey of 2,378 North American consumers, Q4 2017
6 out of 10 Consumers
would opt-in for real-time
payments when available Fast: 36% Slow: 64%
Insights: Consumer Recipients
Likelihood of adoption for real-time payments
Consumers demanded faster payments but education is required
to improve comprehension, preference and usage
21%
15%
21%
12%
31%
Same Day 1 Day 2-3 Days 4-6 Days > 7 Days
Visa Inc. & Aite Group. All Rights Reserved.15
12%
14%
25%
28%
31%
Other
Check
Cash
Debit card
Credit card
Percentage of total payments for my business
Source: Visa Funds Disbursements Research, Aite Group survey of 154 North American SMB businesses, Q4 2017
Insights: Business Recipients
Average Non-Cash Payment settlement time
Same Day
1 Business Day
2 or more
Business Days
44%
Total Card Payments
29%
25%
80% of businesses indicated improving Cashflow as the #1 reason to
adopt real-time payments for business disbursements
Visa Inc. & Aite Group. All Rights Reserved.16
Likelihood of adoption for real-time payments
Source: Visa Funds Disbursements Research, Aite Group survey of 154 North American SMB businesses, Q4 2017
Insights: Business Recipients
SMB’s who would switch to a new Merchant
Acquirer who offered real time payments
Small Businesses are likely to switch to a new Acquirer in order to receive faster payments
9 out of 10 businesses
would opt-in for real-time
payments when available
Would switch
to a new
Acquirer
Would not
switch to a
new Acquirer15%
85%
Visa Inc. & Aite Group. All Rights Reserved.17
Faster Payments using
the card networks
| Investor Day | June 201718 Visa Inc. & Aite Group. All Rights Reserved.18
Push to Card = Faster Payments using card networks
Source: Visa Facts and Figures, McKinsey & Company (2017)
Billions of cards enabled
for real-time paymentsMillions of connections
already established
Immediately capture
the shift to digital
B2B
P2P
G2C
B2C
44MMerchants
16KFinancial
Institutions
3BCards
| Investor Day | June 201719 Visa Inc. & Aite Group. All Rights Reserved.19
Significant Opportunity in Digital Payouts
Note: All brand names and logos are the property of their respective owners, are used for identification purposes only, and do not
imply product endorsement or affiliation with Visa. All brand names and logos are used only as a reference example
Many companies already using Push to Card programs
Lyft “Express Pay”
Allstate “Quick Card Pay”Square “Instant Deposit”
Uber “Instant Pay”
| Investor Day | June 201720 Visa Inc. & Aite Group. All Rights Reserved.20
Source: U.S. Visa Direct Monthly Dashboard March 2018.
Note: All brand names and logos are the property of their respective owners, are used for identification purposes only, and do not imply product endorsement or affiliation with Visa. All brand names and logos are used only as a reference example Actual fund availabilityvaries by financial institution. *Visa requires U.S. issuers to make funds available to its cardholders within a maximum of 30 minutes of approving the transaction.
Visa Direct enables companies to deploy new Push to Card payments experiences
2015 2016 2017 2018
Launch Rollout Scale Grow
$ Visa Payment Volume
21 Visa Inc. & Aite Group. All Rights Reserved.
Reach
Send funds to
billions of cards
worldwide
Security
Tokenization, AML,
OFAC, Compliance,
Limits, Risk
Management
Speed
Real-time with
funds available
within 30 minutes¹
Convenience
Use existing cards
and card payment
infrastructure
Visa Direct Real-time Payments PlatformDisbursement Programs
Visa Direct: Business BenefitsEnables digital customer experiences for disbursement programs
¹ Visa requires U.S. issuers to make funds available to its cardholders within a maximum of 30 minutes of approving the transaction.
22 Visa Inc. & Aite Group. All Rights Reserved.
How it Works
Businesses / Payer
CUSTOMER EXPERIENCE
Cardholder / Recipient
NETWORK CONNECTION
PROCESSING & SETTLEMENT
Acquiring Bank
Card Issuing Bank
Businesses / PayerAcquiring
Bank
• Use customers own debit card to deposit funds in minutes
• Card eligibility, risk and fraud verification
Pay customer: $250
• Payment Authorization
• Fund Settlement Account
• Reporting / Recon
• Transactions processed in real-time
• Daily Net Settlement
Payment Instructions
Messages Messages
23 Visa Inc. & Aite Group. All Rights Reserved.
Easy integration to your Payments Platform UX
1. Add push to card to your Treasury or Payments Platform
2. Collect recipient card details to make real time payments to consumers or SMBs
24 Visa Inc. & Aite Group. All Rights Reserved.
Push to Card improves customer choice and drives higher conversion from paper checks
Push to Card vs. Check Push to Card vs. ACH vs. Check
Consumer Disbursement Preferences
Source: Visa Digital Disbursements: Consumer Preferences Survey, 2017
86%
14%
Deposit to Card Request a Check
61%
33%
6%
Deposit to Card Bank ACH Request a Check
25 Visa Inc. & Aite Group. All Rights Reserved.
Summary
1 Strong Consumer demand for faster “deposits”
GIG Economy, P2P, Marketplaces, Insurance claims
2 Businesses want faster payments and are willing to switch banks
Ability to attract new business customers and deepen loyalty
3 Start implementing a faster payments strategy NOW
Get to market fast, test and learn, don’t get left behind
4 Add Push to Card to your Treasury or Payments Platform
Card networks provide simplicity, speed, security and scale – easy implementation
5 Push to Card enables digital customer experience transformation
Create Amazon or Uber-like payment experiences for your customers to drive
higher conversion and engagement