International Trends in Prepaid

Transcription

1 International Trends in Prepaid Chris Truelson SVP Product Development TSYS Prepaid, Inc. October 19,

2 Overview TSYS is the largest payment processor in the world More than 7,000 global team members Multi-language, multi-country, multi-currency support Acquiring business serves more than one million merchants More than 15 billion transactions per year Serving more than 300 clients in 75 countries 2

3 Overview TSYS Prepaid Leader in prepaid account processing with over 40 million managed accounts on file World-class client list includes largest financial institutions and Fortune 500 corporations Proprietary processing engine built specifically for prepaid market with Service Oriented Architecture (SOA) Real-time authorizations, loads and services Robust API through SOAP/XML; creates efficient client connectivity Scalable processing hierarchies and custom authorization parameters Open-loop and closed-loop options 3

4 Worldwide Presence The Netherlands Canada TSYS Canada TSYS Europe United Kingdom TSYS Technology Ctr. TSYS Acquiring Solutions TSYS de Mexico USA Mexico TSYS Loyalty/TDM TSYS Corporate TSYS Prepaid Spain Cyprus TSYS Card Tech United Arab Emirates India China TSYS China Japan TSYS Japan Philippines Brazil TSYS do Brasil TSYS Card Tech Malaysia Where TSYS (or TSYS affiliates) does business Locations of TSYS Offices New Offices 4

5 Global Prepaid Trends Prepaid represents a tremendous global opportunity What is most attractive about prepaid to banks? $350 $300 Global Prepaid Spend Volume by 2010 New toolkit for customer segmentation Conversion opportunities from paper to plastics Length of customer relationship for banks cradle to grave Banks have inherent advantages over non-banks that can be exploited Billions of Dollars $250 $200 $150 $100 $50 $0 US/Canada Europe Asia SAMEA LAC Source: 2007 Boston Consulting Group 5

6 Global Prepaid Trends The industry will continue to experience unique challenges What has prevented widespread adoption of prepaid among banks? Tenure of the cardholder Scale and profitability expectations not met Management of diverse distribution channels Scrutiny over program failures reputation risk Increased regulatory pressures $1,000 $900 $800 Projections vs. Reality Forecast? Worldwide Spend $700 $600 $500 $400 $300 $200 Actual?? $100 $

7 TSYS Prepaid Hotspots International Prepaid Strategy Leverage Existing Footprint Focus on Client Potential Sound Business Models Aggregation 7

8 TSYS Prepaid Hotspots The Americas Experience since 1999 Primarily North America with expansion plans to Brazil and Mexico Serving over 20 vertical markets Closed & open loop programs Promotions and incentives Healthcare General reloadable Financial institutions 8

9 TSYS Prepaid Hotspots Japan Development market for prepaid Closed-loop only viable business model currently Significant opportunity to expand through partnerships GP Net Credit processing clients International issuers and program managers 9

10 TSYS Prepaid Hotspots Europe Significant prepaid presence in 10 countries Open and closed loop programs Open loop primarily large financial institution programs Travel card, remittance, online gift voucher, insurance products 10

11 Americas The US prepaid market is forecast to reach $500b by 2010 Open loop, or network branded cards, will grow at over 30% annually, reaching the $274b mark over the same time period 350% 300% 328% Fastest Growing Segments Source: Mercator Advisory Group, Inc. 250% 200% 150% 100% 80% 65% 62% 52% 52% 51% 50% 0% State Unemployment Insurance Open Gift Cards Payroll FSA/HSA Tax Deferred Programs Games & Ring Tones Store Gift Card Distribution 11

12 Americas Canada is experiencing its own prepaid evolution 12 major categories and 33 unique business segments* Significant banked population and debit usage is highest in world Biggest share of Canadian market today is in gift card programs Opportunities: Government benefit disbursements Transit Campus card programs Travel Challenges: Payroll 11% Government Benefits 10% Ability to scale programs Decentralized government disbursements Distribution challenges Several segments at the early stages of product lifecycle Canadian Prepaid Segments** Other 4% Gift Cards 75% * Source: Mercator Advisory Group, 2007 ** Source: Mercator Advisory Group & TSYS internal statistics 12

13 Americas Latin America represents one of the biggest opportunties of growth over the next several years Brazil and Mexico have some of the highest population densities in the world Significant populations of unbanked and underserved consumers Remittance between US and LAC at estimated $10B per year Paper-to-plastics conversion opportunities are everywhere, but the market has significant challenges for prepaid newcomers POS infrastructure undeveloped Near monopolistic payments environments from acceptance to issuance Fraud and risk challenges Difficulty in creating scale quickly 13

14 Japan Japan is a growing prepaid market with willing consumers, eager to try new payment advances Market is primarily closed loop today some interest in open loop is occurring with large financial institutions in the region Prepaid phone and metro cards are largest vertical markets for prepaid New payment form factors Contactless Mobile phone Prepaid Cards by Type 2006 Other 23% Gift Cards 1% Transportation 76% Source: Euromonitor Intl., Trade press 14

15 Japan Japan s payment infrastructure and cultural challenges have created hurdles in prepaid growth Preferred method of gift giving is cash or paper voucher Cultural challenges Payment infrastructure challenges in offering open loop Offline acceptance creates program risks Less than 1% of population is unbanked underserved segment is almost non existent Market dominated by two key prepaid providers Edy Card & Suica 15

16 Europe Projected to reach nearly $170b in spend by 2010, Europe is the second fastest growing prepaid market Market of 375 million cards by 2010* UK largest share at 25% Poland and Russia to experience deepest penetration of prepaid Gifting, corporate benefits and travel cards will comprise over 50% of the prepaid market Creative approaches critical Low cost of entry Niche focus Partnerships Gaming, 5% Payroll, 6% Underbanked, 6% Segment Breakdown by 2010 Remittance, 4% Govt Benefits, 5% Online, 13% Insurance, 3% Youth, 2% Transit/Micro, 1% Corp Benefits, 12% Gifting, 28% Travel, 15% Source: Financial Cards Worldwide Euromonitor Intl. * Source: PSE Consulting,

17 Europe Although there are relatively few hurdles that would impede growth, issuers do have unique operational challenges SEPA creates opportunities and challenges around payment infrastructure Initial costs in upgrading platforms but enables economies of scale and faster market entry Chip & PIN Estimated Prepaid Average Spend per Card in ,600 1,400 1,200 1, Benelux CEE France Germany Italy Portugal Scandinavia Spain Turkey UK Source: PSE Consulting / MasterCard

18 Summary The prepaid business is unique and comes with numerous opportunities and challenges globally Estimated to reach over $900b in spend by 2010*, this industry provides enormous upside potential Each market is evolving differently, but there are common trends Large financial institutions are garnering larger and larger shares of the prepaid market Sound existing partnerships are a precursor for successful prepaid market launches Source: Mercator,

19 THANK YOU! Chris Truelson P (678) October 19,