A Conversation with Visa on Consumer Debit Growth Connie Davis FIS Global Retail Payments Greg Borchardt Visa Consumer Debit Products May 2017
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Agenda Consumer Debit Update Consumer Debit Growth Opportunities 3
Debit Landscape Key Themes Debit has been growing in the 7% to 8% range the past few years Key economic indicators are projected to be favorable which may contribute to stronger growth in 2017 Gas should contribute to debit growth in 2017 Consumer preference for Debit continues to be strong across all age segments Penetration and activation rates have moderated; increasing usage is the key to future growth Small Ticket and ecommerce continue to be areas of significant opportunity Millennials are the key to future growth, and are driving ecommerce spend
Key Economic Trends The U.S. economy is expected to grow at a modest pace in 2017 U.S. Bureau of Economic Analysis (BEA); Moody's Analytics Forecasted; as of 2/6/11 U.S. Bureau of Economic Analysis (BEA); Moody's Analytics Forecasted; as of 2/6/11 U.S. Bureau of Economic Analysis (BEA); Moody's Analytics Forecasted; as of 2/6/11 U.S. Bureau of Economic Analysis (BEA); Moody's Analytics Forecasted; as of 2/6/11
Debit Spending Continues to Grow A healthy annual growth rate of 7-8% is projected for Debit $3,500 15% $3,000 $2,500 $2,000 11.5% 10.5% 7.5% 7.3% 6.9% 7.1% 8.2% 12% 9% $1,500 $1,000 $500 2.9% 6% 3% $0 0% Payment Volume Year on Year growth Source: United States World Cards Intelligence, Country Report January 2017, US Debit Volume is $B
Steady Increase of EMV Chip Transactions 100% 90% 80% 70% 60% 50% 40% 30% 20% 10% 0% 96% Credit 77% Debit 46% Activated locations Source: MARS Details. Credit and Debit adoption rates based on payment volume. Adoption rates exclude manual key entry transactions.
POS Experience has Become Increasingly Important Proliferation of PIN devices and change in POS experience are driving a shift towards PIN Prior to EMV, many small merchants did not have PIN pads Consumers are less clear about how to opt-out of PIN on EMV terminals
Shift from Signature to PIN 80% 70% 60% 50% 40% 30% 20% 10% 0% 51.3% 0.5% 68.0% 55.9% EMV deployment with the Common AID, is contributing to a shift of Debit PV to PIN All Transactions EMV Transactions Source: Visa Inc. Note EMV transactions are chip on chip transactions. All transactions include chip and non-chip transactions in the F2F channel
Question #1" 10
Today Debit is the Most Frequently Used Payment Method Across Nearly all Age Segments Share of transactions 37% 36% 34% 34% 31% 32% 36% 27% 29% 30% 29% 25% 20% 17% 15% 12% Age 18 24 25 29 30 34 35 39 40 44 45 49 50 54 55 59 2005 2015 Source: U.S. Visa Payment Panel Study 4Q04 3Q05 and 4Q14 3Q15 Base: Card owners
Debit Card or Checking Account Debit is a primary reason for establishing a checking account Getting a debit card is the leading reason why Millennials established their primary bank account (50%) Debit is a key link to the world of digital commerce To pay bills To get a debit card Convenient access to my money 41% 47% 45% To get my salary deposited in this account 39% To receive funds via direct deposit 29% 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. Source: Consumer Payments Tracker 2015; Debit Report U.S.
Millennials are projected to be the largest generation by aggregate income by 2020, driving 30% of total consumer spend" 13
Aggregate Income by Generation Aggregate Income by Generation Personal Income (in trillions of 2005 dollars) Millennials Gen X $8.3 $6.4 Projected Spend Distribution for 2020 Gen Z 30% Millennials $5.1 $3.9 28% Gen X $2.4 $0.9 Gen Z Baby Boomers $2.2 $1.1 32% Baby Boomers Silent 2010 2015 2020 2025 14
Visa Debit Landscape is Rapidly Evolving ecommerce is displacing F2F Visa Debit sales volume and has been Visa s fastest growing Channel the past two years Share of Visa Debit Sales Volume* 75% 65% 55% 67.8% 63.0% 58.4% 45% 35% 25% 18.0% 21.4% 26.4% 15% 4Q'14 4Q'15 4Q'16 Face to Face ecommerce *Other channels are MOTO and Recurring; 4Q16 MOTO share was 9.1% and Recurring share was 6.1%.
Visa Debit Channel Growth 4Q16 Exempt and Non-Exempt Issuers 4Q16 Visa Debit Non-Exempt Issuer Channel Growth Channel Tran Volume Share Sales Volume Share Tran Volume Growth Sales Volume Growth Average Ticket Non-Exempt issuers are growing faster than Exempt issuers in most channels, especially ecommerce FACE-TO-FACE 73.5% 55.0% 1.9% 2.0% $26.6 ecommerce 18.4% 28.8% 36.3% 22.9% $55.5 Mail Order/Phone Order 3.5% 9.5% -0.4% 1.5% $97.6 Recurring 4.6% 6.6% -6.7% 12.4% $51.3 Total 100.0% 100.0% 6.3% 7.9% $35.5 4Q16 Visa Debit Exempt Issuer Channel Growth Channel Tran Volume Share Sales Volume Share Tran Volume Growth Sales Volume Growth Average Ticket FACE-TO-FACE 81.7% 66.5% -0.3% 0.2% $28.8 ecommerce 12.2% 20.3% 15.6% 12.6% $59.0 Mail Order/Phone Order 3.1% 8.3% 0.2% 2.3% $96.2 Recurring 3.1% 4.9% -14.7% 2.4% $55.7 Total 100.0% 100.0% 0.9% 2.8% $35.4 Source: Visa Consumer Debit transactions, excludes Interlink and Prepaid. US issued cards only. Growth rates are normalized for large issuer conversions.
Question #2" 17
Agenda Consumer Debit Update Consumer Debit Growth Opportunities 18
Consumer Debit Growth Strategies Prioritize your scarce resources on the biggest opportunities Focus on increasing Visa Debit usage in 3 key segments ecommerce & Recurring Bill Pay Key COF merchants and in digital wallets Small Ticket transactions Optimize Debit Portfolio Performance Penetration, Activation and Usage (PAU) Authorizations and Fraud performance Utilize Visa Tools and Best Practices Penetration & Activation Best Practices Branch Best Practices Visa Marketing Collateral
Visa Debit Sales Volume Growth 4Q16 Exempt and Non-Exempt Issuers Focus marketing efforts on high growth Channels and Segments Source: Visa Consumer Debit Transactions, excludes Interlink, Prepaid. US issued cards only. Emerging Segments is composed of: Government, B2B, Toll and Bridge Fees and Other Emerging. (*) All Other Segments is comprised of : Direct Marketing and Remaining Merchants, including social buying sites, ticket marketplaces, professional services, etc.
Being Top of Digital Wallet is Crucial Drive top-ofmerchant behavior for key COF merchants and subscription services Share Share of of all button button impressions Promote issuer friendly digital payments that favor card-spend and preserve issuer brand Develop a holistic Connected Card strategy Share of all Share of all Clickthru rate Share of Focus on card-on-file clickthrus merchants Contribution Clickthru rate Checkouts and Button clicks to conversions subscription services Drive top-ofphone behavior for key digital wallets Standard button Dynamic button Encourage cardholders to sign up for tap and pay solutions to establish your card as top-of-phone Develop an effective mobile app strategy Standard Button 98.0% 3.2% 92% 84% Dynamic Button 2.2% 25.0% 8% 16% 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
Strengthen Security Message to Promote Online Usage Only 55% of active debit cardholders use their card in the ecommerce Channel Monthly debit ecommerce purchases 45% None 1 17% 19% 2-3 4+ Source: US Payment Panel, Full Year 2015 19% Recommended strategies Strengthen provisional credit Simplify Zero Liability and provisional credit messaging Communicate security features esp. for ecommerce and mobile transactions Offer fraud and purchase alerts Focus on proactive safety measures to protect and prevent fraud Leverage EMV re-issuance to highlight security features
Cash-to-Card Migration is a Significant Opportunity 50% Cash spend & transactions by dollar band Recommended strategies 40% 30% 20% 10% 0% 57% of transactions are below $15, representing 14% of spend 70% of transactions are below $25, representing 26% of spend Offer transaction based rewards tied to small ticket transactions Educate cardholders on benefits of using debit card vs. cash Include a small ticket offer with EMOB strategy Focus on medium and heavy debit users to maximize ROI Spend Sources: SEC filings, Oxford Economics, Nilson Reports, Analysis b Visa Business and Economics Insights; Cash excludes credit card, offline debit card and online debit card cash advances. 1 Visa Cash to Debit Small Ticket Study 2015.; Sec Fillings
Turnkey Marketing Materials are Available to Help Issuers with the Small Ticket Opportunity Market expansion opportunity ~$100B 1 Transit $10 Parking $20 Unattended Retail $75 $0 $20 $40 $60 $80 1 Aite How American Pay their Bills 2013-2016 ; Cardable opportunity: market opportunity excluding bank online bill pay, direct debit from customer DDA, and card payments Only opportunities greater than $100B were considered
Tools to Optimize Portfolio Performance Benchmark and identify the areas of greatest opportunity Consumer Debit Scorecard PAU Sensitivity Model Identify penetration, activation and usage improvement opportunities Quantify portfolio improvements
Use Visa Debit Tools and Best Practices Penetration & Activation Best Practices Bill Pay Marketing Resource Guide
Visa is Committed to Opening up new Marketplaces Offering Cardholders more Utility and Better POS Experiences $ Debt repayment Rent Assisted living Government & tax Charity Insurance Education Placeholder text >$2.1 trillion 1 >$1.0 trillion 1 1 Aite How American Pay their Bills 2013-2016 ; Cardable opportunity: market opportunity excluding bank online bill pay, direct debit from customer DDA, and card payments Only opportunities greater than $100B were considered
Summary Focus your resources on the biggest opportunities Benchmark your portfolio Quantify PAU opportunities Target Millennials for ecommerce growth Target medium & heavy users for Small Ticket growth Target heavy users for Recurring Bill Pay growth Focus on increasing usage Implement Visa Debit Best Practices to optimize your portfolio
In Closing If everything seems under control, you're not going fast enough. Mario Andretti
Thank you Connie Davis FIS Global Retail Payments Greg Borchardt Visa Consumer Debit Products
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