Cashless Cities and Digital Payments Opportunities and Challenges in Supporting the Shift to Digital Commerce

Transcription

1 Visa Inc. Cashless Cities and Digital Payments Opportunities and Challenges in Supporting the Shift to Digital Commerce Eduardo Perez Senior Vice President, Regional Risk Officer, Latin America and Caribbean Cambridge, MA December 9, 2017

2 Disclaimer Case studies, comparisons, statistics, research and recommendations are provided AS IS and intended for informational purposes only and should not be relied upon for operational, marketing, legal, technical, tax, financial or other advice. Visa Inc. neither makes any warranty or representation as to the completeness or accuracy of the information within this document, nor assumes any liability or responsibility that may result from reliance on such information. The Information contained herein is not intended as investment or legal advice, and readers are encouraged to seek the advice of a competent professional where such advice is required. 2

3 History of Money The role and form of money continue to evolve B.C. A.D s s 2009 First coin minted Shipping and trading industry adopted usage of checks Paper money accepted as legal tender Electronic money for retail transactions Cryptocurrency invented 3

4 Today s Environmental Trends Trust Globalization vs. Localization Technology and Innovation Inclusive Growth 4

5 Evolving Payments Ecosystem Payments landscape reflects global macro developments More Digital More Acceptance Points New Payment Form Factors More Players More Consumers Increasing Government Involvement 5

6 Where Does Visa Fit In? Connecting payment system stakeholders through our network Issuance Acceptance 3B+ cards 13,000+ issuers 3,000+ acquirers 44M merchant locations Strategic Partners Governments 6

7 Impact of Macro Trends We must adapt to the future: a step-change in the global digital economy 7

8 Greatest Opportunity is to Grow the Pie Expanding digital payments to new people and places 1 Conversion of Cash 2 Shift to Digital 3 Expanding Access Cash & check replacement by electronic payments Growth in new digital form factors New acceptance categories / points IoT Commercial Geographic expansion Growth in issuance 4 PCE Growth 8

9 Conversion of Cash & Check Remains a Large Opportunity Total cash and check globally was $17T as of end-2016 Global Cash and Check USD, 2016 Europe $3.5T CEMEA $2.4T North America $3.2T LAC $1.8T Asia Pacific $6.1T Source: Visa analysis of data from Oxford Economics, Nilson Report, Euromonitor, Haver Analytics, UK Card Association, Central Bank of the Russian Federation, Norges Bank, Swiss National Bank, Bank of Thailand, Reserve Bank of Australia, Federal Reserve, Statistics New Zealand, Saudi Arabian Monetary Agency, Central Bank of Ireland 9

10 Cash Usage in Latin America Remains Relatively High Increasing card usage can bring economic benefits Share of Total Consumer Expenditure 100% 80% 60% 40% 20% 0% Consumer Expenditures by Payment Type Regional Comparison: Average Increase in GDP from Increased Card Usage, % (weighted by GDP) Latin America 0.20 Oceania 0.12 North America 0.12 Europe 0.10 Middle East 0.09 Asia 0.06 Africa 0.05 Card Cash Others (Check, bank transfers, etc.) Source: Visa analysis of data from Moody s Analytics, Inc., Visa Perspectives on Accelerating Global Payment Acceptance 10 Source: Moody s Analytics, The Impact of Electronic Payments on Economic Growth (Feb 2016)

11 Using Cash Has Costs Impacts consumers, businesses and governments Source: Digital Evolution Index, The Fletcher School at Tufts University, Harvard Business Review, Bhaskar Chakravorti Ravi Shankar Chaturvedi and Benjamin Mazzotta,

12 Digital Payments Help Reduce These Costs Moving along the digital readiness spectrum can help grow adoption Source: Digital Evolution Index, The Fletcher School at Tufts University, Harvard Business Review, Bhaskar Chakravorti Ravi Shankar Chaturvedi and Benjamin Mazzotta,

13 Bank Accounts Provide a Foundation Strong relationship between bankarization and digital payments usage 70% Relationship between Bankarization Rates and Digital Payments (2014). Canada Total Card Expenditures as a Percentage of PCE (2014) 60% 50% 40% 30% 20% 10% 0% Peru Correlation: 0.75 Colombia Mexico y = 0.013e x R² = % 10% 20% 30% 40% 50% 60% 70% 80% 90% 100% India Chile Brazil Percentage of Adults with an Account at a Formal Financial Institution (2014) Hong Kong, China China Netherlands South Korea Sweden US Japan Ireland France Austria Sources: World Bank Findex 2014, Euromonitor Card Spends and PCE data Notes: Bankarization rates are measured as the proportion of adult population with an account at a formal financial institution. Data accessed from the World Bank Findex. Digital payment usage refers to the total card expenditure as a proportion of total private consumption expenditure. Data analyzed from Euromonitor. 13

14 Cashless Cities: Realizing the Benefits of Digital Payments Cashless Cities: Realizing the Benefits of Digital Payments. (2017). Roubini ThoughtLab. Study Commissioned by Visa. Available at 14

15 Study Covers 100 Cities Categorized according to their level of digital usage and readiness Cash Centric 1 Digitally Transitioning 2 Digitally Maturing 3 Digitally Advanced 4 Digital Leader 5 Lagos Representative Cities Low usage of digital payments Low levels of readiness High unbanked population Cities in Latin America and Caribbean Buenos Aires Brasilia Santiago Bogota San Jose Santo Domingo Kingston Mexico City Monterrey Panama City Lima San Juan Montevideo Caracas Sao Paulo Bangkok Sao Paulo Tokyo Chicago Stockholm Low usage of digital payments Moderate levels of readiness High unbanked population High usage of digital payments Low levels of readiness High unbanked population High levels of readiness Cultural inclination toward cash Developed infrastructure and fairly high levels of readiness Maintains considerable cash usage Low unbanked population Highest usage of digital payments Highest levels of readiness Nearly fully banked population 15

16 Benefits and Impact Scenarios Cover broad range of stakeholders and achievable outcomes Benefits Scenarios Consumers Business Government Achievable Cashless Scenario* Catalytic Impacts 16 Custom Levels *Defined as the entire population moving to transact like the current top 10% digital payment users.

17 Potential Direct Net Benefits and Economic Impacts Total spread across all 100 cities Potential direct net benefits across 100 cities per year for payments industry stakeholders (Achievable Cashless Scenario) Total net benefits* $470 billion Total consumer net benefits $28 billion Total business net benefits $312 billion Total government net benefits $130 billion *This translates to an average of 3.08% of GDP per city Total additional economic activity# $12 trillion Potential Economic impacts for 100 cities when moving to achievable levels of cashlessness over 15 years ( ) (Achievable Cashless Scenario) GDP 19 Average annual basis point increase Employment 5 Million jobs supported over 15 years Productivity 0.14% Increase in baseline CAGR Wages 0.16% Increase in baseline CAGR 17 #Between 2017 and 2032

18 Latin America Realizing the Benefits of Digital Payments 18

19 Mexico City Potential benefits of increasing digital payments usage Mexico City could gain over $12 Billion in direct annual net benefits Mexico City could add over $142 Billion in economic activity over the next 15 years Consumers Business Government GDP Growth* (basis points) New jobs supported # Bump up in baseline productivity growth* Bump up in baseline wage growth* $700 Million $7.8 Billion $3.7 Billion 9 basis points 2.3% increase in employment 0.03% 0.05% *These are estimated increases in average annual growth rates for each year from # The employment data represents the total number of new jobs supported between 2017 and

20 Latin American Cities Average impacts: achievable cashless scenario Potential Direct Annual Net Benefits for an Average City in Latin America* Potential Catalytic Impacts over the next 15 years ( )* for an Average City in Latin America Consumers Business Government GDP Growth New jobs (basis points)# supported# Bump up in baseline productivity growth# Bump up in baseline wage growth# Cash Centric Digitally Transitioning Digitally Maturing $342m $4b $2b 8 86,400 N/I** N/I** $1.5b $164m $809m 7 20, % 0.02% $630m $4.4b $1.6b 25 62, % 0.7% Regional Average $318m $3.1b $1.5b 10 57, % 0.1% *These are impacts for an average cash-centric, digitally transitioning, digitally maturing, digitally advanced and digital leader cities # GDP, productivity and wage growth impacts depict the bump up in annual baseline growth rates. These impacts are projected to carry over annually for the next 15 years. The employment data however, represents the total number of new jobs supported between 2017 and **Negligible Impact 20

21 Barriers to Adopting Digital Payments Limited Access to Digital Payment Products Inadequate Digital Infrastructure Cultural and Habitual Attachment to Cash Security and Privacy Perception that Costs of Accepting Digital Payments are Higher than Cash 21

22 Trust and Security Are Critical Visa s strategy: build in security from the start Protect Data Safeguard payments data PCI Standards Encryption Harness Data Stop fraud before it occurs Detection Disruption Exchange Authentication Devalue Data Render data useless EMV chip Tokenization Empower Consumers Engage cardholders in payments security Alerts Digital controls 22

23 Actions to Grow Digital Payments Calls to action for consideration Government Benefits Tax Policies Public-Private Partnerships Transportation Policies Acceptance Development Funds Financial Literacy 23

24 More Resources visa.com/cashlesscities 24