1

Card Acceptance Business In India

2

M-Commerce

Call Center/MOTO

ATMs

POS

Branches

E-Commerce

Card Acceptance channels

3

Presentation FlowPresentation Flow

Card Payments – Trends – Trends

Changing Demographics

Card Acceptance - Key DriversCard Acceptance - Key Drivers

Industry PredicamentsIndustry Predicaments

OpportunitiesOpportunities

SummarySummary

4

Market RequirementsGrowth In Payment Cards in India

CAGR 60%

4M

46M

32M

19M

11M

6.5M5M

5

Growth In Card Spends in India

CAGR:45%

4 Bn

24Bn.

6

Growth In Debit Card Spends in India

7

Growth In Merchant Establishments in India

CAGR: 29%

155 K

80K

•Select merchant focus

•Large non- carded merchants

8

Widening Gap

01 02 03 04 05

10

20

30

40

Terminal per million cards

Cards in million

Year

Card

s in

million

No.

of

Term

inals

per

million

card

1500

3000

4500

6000

7500

9

Top 10 Cities- by MSV

c12 Mn retail Outlets across370 cities

10

New Growth Categories

11

Singapore Thailand Malaysia India Hong Kong AustraliaAirlines 478 105 156 90 148 2,103 Hotels 485 700 356 586 831 2,456 Restaurants 578 422 297 162 2,451 1,948 Travel Agents 249 308 116 151 308 2,105 Department Stores 387 1,256 333 225 1,266 2,571 Retail 1,323 1,216 649 1,401 5,004 11,332 Books & Stationery 61 138 39 64 160 1,332 Auto Services 188 291 191 88 167 3,108 Recreation 192 161 120 31 380 2,480 Building & Renovation 24 206 55 6 57 4,745 Duty Free Stores 92 111 54 4 113 196 Supermarkets 94 199 222 49 577 7,327 Gasoline 176 602 370 241 242 3,090 Telecom 108 438 71 146 334 2,258 Insurance 63 123 594 5 537 3,160 Govt payments 26 - 33 - 45 2,808 Education 47 43 24 7 94 1,746 Medical 523 548 268 115 1,030 4,068 Utilities 34 29 170 3 30 1,319 Transportation 6 7 14 19 14 595 Recurring 58 22 77 2 959 58

TOTAL 5,751 7,234 4,713 3,625 16,419 71,250

T & E

Retail

NTMS

Country’s Cards Spends (2004-05)

12

Overall online spend increased significantly to INR 16,440 million per annum

INR 4,100

INR 5,300

INR 7,900

INR 10,800INR 11,120

INR 16,440

1H 2002 2H 2002 1H 2003 2H 2003 1H 2004 2H 2004

Total annual online spend (in millions)

INR 4,100

INR 5,300

INR 7,900

INR 10,800INR 11,120

INR 16,440

1H 2002 2H 2002 1H 2003 2H 2003 1H 2004 2H 2004

E-Commerce - Market Size in India

• Four fold increase in sales volume

• Growth in cross border transactions

• Huge potential for debit card acceptance

13

Emerging Trends

Volumes -INR

Gro

wth

- %

e-ticketing

In-boundtravel

B2B

Shopping

Govt. payments

15

30

45

60

75

Billpayments

Airline

Source: Visa Analysis

14

0%

5%

10%

15%

20%

25%

30%

35%

40%

45%

50%

Books

Clothe

s/sho

es

Mus

ic

DVDs/Vide

o Cas

sette

s

Electri

cal a

pplia

nces

Med

ia su

bscr

iption

s

Compu

ter g

ames

Airline

ticke

ts

Digita

l con

tent

Educa

tiona

l sof

twar

e

Cosm

etics

/Per

fum

e

Compu

ter p

eriph

erals

Jewell

ery

Trave

l (ot

her)

Gift vo

uche

rs

Flower

s

Health

care

pro

ducts

Food

and

groc

eries

-20%

-15%

-10%

-5%

0%

5%

10%

15%

20%

1H 2004 2H 2004 % change in last six months

B2C- Key Growth Categories

Visa Analysis

15

Presentation FlowPresentation Flow

Card Payments – Trends – Trends

Changing Demographics

Card Acceptance- Key DriversCard Acceptance- Key Drivers

Industry Predicaments Industry Predicaments

OpportunitiesOpportunities

SummarySummary

16

Highest proportion of population below 35 years (70%) in India

Per cent of population, 2003

7

23

35

35

>60

35-59

15-34

0-14

10

30

35

25

23

36

26

16

8

26

37

29

A “Young” population . . .

Highest proportion of population below 35 years (70%) in India……

17

. . .which means a bigger opportunity

365

240

73

3650-14

15-35

35-59

>60

2003

391

295

87

449

2009 E

Total Population in million

1,044

1,221

130 mn plus people get added to working population

18

Building an affluent middle class…Number of households** (population), millions

1995 - 96 2001 - 02 FY2009(E)

“Rich”: > Rs 0.5 Mn CAGR: 15%

“Upper Middle”: Rs 0.3 – 0.5 MnCAGR: 10%

“Middle Income”: Rs 0.1 – 0.3 MnCAGR: 2%

“Lower Income”: < Rs 0.1 MnCAGR (-8%)

1.2 (7) 2.6 (15) 7.0 (40)

32.5 (186) 46.4 (265) 91 (525)

54.1 (312.2) 74.4 (429) 85 (490)

77.0 (444.3) 57.2 (332) 30 (177)

Household Income Class

55 million families (320 million people) added in the middle income group

NCAER McKinsey Estimates

19

What does all this mean………………

Increasingly affluent, with bulging middle class

The youngest population in the world

Increasing literacy levels

Higher adaptability to technology

Urbanization is a continuing trend

Increasing "consumption" mindset in India

Changing consumer demographics

20

Presentation FlowPresentation Flow

Card Payments – Trends – Trends

Changing Demographics

Card Acceptance- Key DriversCard Acceptance- Key Drivers

Industry PredicamentsIndustry Predicaments

OpportunitiesOpportunities

SummarySummary

21

Key DriversKey DriversKey DriversKey Drivers

Credit/ Debit CARDS

SMART &

PREPAID

B2BSEGMENTS

Private Label & Loyalty

Value Added Services

Card Acceptance –Key Drivers

22

Channels- Key Drivers

POSE-

Commerce

M-Commerce

•Growing Internet users

•Inbound Tourism

•Remittance

•Utility Payments

•E-Ticketing•High mobile penetration

•Mobile Operators

•Micro Payments

•Large card base

•Low cost of EDC

•New Cities

•New Segments

•Reducing MSF

23

Presentation FlowPresentation Flow

Card Payments – Trends – Trends

Changing Demographics

Card Acceptance- Key DriversCard Acceptance- Key Drivers

Industry PredicamentsIndustry Predicaments

OpportunitiesOpportunities

SummarySummary

24

Industry PredicamentsManaging Merchants

Loyalty & Stickiness Cash Economy Surcharging

Managing Competition

Lowering service fees Intense competition

in Metros

Managing ROI

High cost of acquisition

Managing spreads High Capex & Opex

Managing the environment

Fraud Management Parallel Cash

Economy

25

Presentation FlowPresentation Flow

Card Payments – Trends – Trends

Changing Demographics

Card Acceptance- Key DriversCard Acceptance- Key Drivers

Industry PredicamentsIndustry Predicaments

OpportunitiesOpportunities

SummarySummary

26

Credit & Debit Card

AcceptanceThru

POS & PG

B2B Payments – Instruction Card, Air

Deccan

E-Purse –

HP Smart1

Banking Inquiry – Balance Inquiry

Proprietary Payment

products – HP Smart1

Custom Payment

platform – EMI

MOBILEPAYMENTS

MICRO PAYMENTS

NET PURSE

UTILITY PAYMENTS

GOVERNMENT AND CIVIC PAYMENTS

BANKING THROUGH

POS

CURRENCY DEPOSIT /

WITHDRAWAL / EXCHANGE

INSTITUTIONAL PAYMENTS – IP

CONNECTIVITY IN MALLS

PROPRIETORY PAYMENT DEVICES – PCs / Cash Registers

Opportunity Map

Internet card

27

Way Forward

Terminal penetration in mid & small sized cities

Enabling Govt. Depts. on card platform

Rural Push- Kisan card, Micro Financing

Small & Medium Enterprises

Emergence of new platforms- mCommerce

In Conclusion

•Rapid Terminal penetration in mid/small sized Cities

•Enabling govt. dept. on card platform

•Rural Push- Kisan card, Micro Financing

•Small & Medium enterprises•Emergence of new platforms- m-commerce

28

Thank You