“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
Presentation Identifier.3Information Classification as NeededVisa Europe
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)
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Cost of cash to society0.5% European GDP
€ 50 Billion
CentralBanks
RetailBanks
RetailCash
€ 32 Billion € 13 Billion€ 5 Billion
Incoming/ recycling process
Outgoingprocess
Means
€ 5.9 Bil
Staff
€ 9.7 Bil
Transport
€ 1.0 Bil
Inventory
€ 4.4 Bil
Means
€ 4.3 Bil
Staff
€ 2.8 Bil
Transport
€ 1.4 Bil
Inventory
€ 2.5 Bil
€ 21 Billion € 11 Billion
Source: EPC
Presentation Identifier.5Information Classification as NeededVisa Europe
Cash – The Business Opportunity
UK cash market 27.2 bn transactions for £268 bn
• 20.7 bn of these transactions are for less than £10
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Cash – The Business Opportunity
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
Presentation Identifier.8Information Classification as NeededVisa Europe
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
Presentation Identifier.9Information Classification as NeededVisa Europe
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.
Presentation Identifier.10Information Classification as NeededVisa Europe
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
Presentation Identifier.12Information Classification as NeededVisa Europe
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
Presentation Identifier.13Information Classification as NeededVisa Europe
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)
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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
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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
Presentation Identifier.17Information Classification as NeededVisa Europe
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(?)
Presentation Identifier.18Information Classification as NeededVisa Europe
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…
Presentation Identifier.19Information Classification as NeededVisa Europe
Pre auth off-line
spending
Pre auth50
Stored Value account
Prepaid£50
How does it work
Counter 30
E-money
£30
EMV transaction £30
EMVClearing Message
£30
Offline auth 30
Presentation Identifier.20Information Classification as NeededVisa Europe
Pre auth of-line
spending
Pre auth50
Stored Value account
Prepaid£50
How does it work
E-money
Lunch£10
Presentation Identifier.21Information Classification as NeededVisa Europe
Pre auth of-line
spending
Pre auth50
Stored Value account
Prepaid£50
How does it work
E-money
Travel card£15
Pre auth fundexceeded
-5
On line auth £15
Decline
40
Presentation Identifier.22Information Classification as NeededVisa Europe
Pre auth of-line
spending
Pre auth50
Stored Value account
Prepaid£50
How does it work
E-money
E-moneyTop up
£40 On line auth £15
Transaction Authorized EMV Script to
synchronize counters
15
£15
Presentation Identifier.23Information Classification as NeededVisa Europe
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…
Presentation Identifier.24Information Classification as NeededVisa Europe
Questions
Thank You